Search Engine Advertising: Direct Response and Branding Metrics

Excerpted from Search Engine Advertising: Buying Your Way to the Top to Increase Sales, 2nd Edition (New Riders)
By Kevin Lee, Catherine Seda
Dateline: August 6, 2009

You can’t manage and optimize a campaign unless you measure the results. Over the years, the advertising community has split itself into two camps, each with their own set of metrics. Direct response marketers measure sales and leads that turn into sales (or those that don’t). Rarely will you hear die-hard direct marketers use the words branding or brand lift. Similarly, although “awareness” is something a direct marketing campaign generates, direct marketers don’t generally use the measure of awareness as a metric. The direct response marketer has a laser focus on measurable results and the media driving those results. Branders, on the other hand, have a whole set of metrics designed as proxies for success, which attempt to quantify the influence that marketing, PR, and advertising have on eventual purchase behavior. When conversions to leads, sales, or other positive behaviors can be tracked, direct marketers scoff at branding metrics, and branders fire back that direct marketers are too myopic, focusing only on obviously traceable behaviors.

ROI Is in the Eye of the Beholder

As online marketers, it’s easy to get spoiled with the impression, click, and conversion data available at our fingertips. Search marketers are perhaps even more prone to get spoiled because clicks from searches tend to have the highest observable conversion rates. Search campaign reports let you watch those conversions occurring in almost realtime, plus we also have a bunch of additional postclick behaviors you can watch that may or may not be correlated with eventual conversion to leads or sales. You can watch not only every click into your sites from your search engine advertising but also every click thereafter until the visitor leaves your sites.

Every marketer wants to manage search marketing campaigns to maximize profit. Early in a campaign’s lifecycle, this process starts out as a goal of achieving positive return on investment (ROI), which then evolves into a profit metric. Profit is not nearly as easy to measure as observable ROI. This is one reason why it’s hard to imagine that your competitors, who may have locked in top SERP positions using the tactic of bidding significantly higher than you do for clicks, are running profitable campaigns. Instead, you might assume they are spending money on clicks providing a negative return. Your competitors might indeed be crazy, wasting their money on unprofitable clicks, or they might be measuring profitability and ROI differently than you do. In effect, ROI is in the eye of the beholder.

Imagine all the different ways you might choose to measure ROI or attempt to close the data loop to evaluate positive behaviors that correlate to sales, in order to more accurately measure profit from a campaign. For example, you might look at predictors of lifetime customer value, profit per order, offline conversion percentages, and so on.

ROI is this decade’s buzzword. Yet the highest-ROI strategy is rarely a profit-maximizing strategy when it comes to paid search. Bidding less for keywords often improves the ROI at the sacrifice of customer volume. To run a business profitably, you must balance ROI and sales volume. This is called profit maximization/optimization.

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