Which Half of Your Google Search Advertising is Being Wasted?

Which half is being wasted – branded vs non-branded keywords

We all know the 19th century adage “I know half the money I spend on advertising is wasted; I just don’t know which half.” Online click trackable advertising promised to change that. It seems it has. It turns out that “branded keyword” advertising is not effective for well-known companies. Companies with known brand names would do well to re-allocate the money they are spending on search engine marketing to other areas. In a recent HBR blog, Professor Fisman referred to a preliminary study by eBay that calls into question the effectiveness of Google advertising for big well-known brand names. In an elaborate and controlled experiment conducted by eBay, its researchers found that when Google (or Yahoo! or Bing) search advertising was discontinued for a sample of its potential audience, traffic to the site continued to perform as well as it did in areas in which Google “brand keyword” (defined as any keyword that is simply the company or product name or includes the name of the company such as “eBay shoes”) advertising was still being used. This study underlines the value of a brand for a company with a large following and an often-visited site with frequent content updates as is typical for established corporations. These companies are throwing away resources that they could better utilize in other areas, for example, in content development strategy and in social media presence.

How do non-branded keywords fare?

Interestingly enough, the eBay study did consider “non-branded” keywords such as “shoes” used for eBay and found the effect of advertising to be positive but small. The effect was again positive but small for “new user” acquisition when the researchers segmented their results based on use characteristics such as purchase frequency and recency.

As the eBay study outlines, Google recommends the following to calculate your ROI on ad spend:

“Determining your AdWords ROI can be a very straightforward process if your
business goal is web-based sales. You’ll already have the advertising costs for
a specific time period for your AdWords account in the statistics from your
Campaigns tab. The net profit for your business can then be calculated based
on your company’s revenue from sales made via your AdWords advertising,
minus the cost of your advertising. Divide your net profit by the advertising
costs to get your AdWords ROI for that time period.”

However, there is one consideration that is left out of this recommendation from Google on calculating ROI of its search ads. That is that those who click on the ad are using it for navigational efficiency and would find their way to your site in the absence of the ad by clicking on organic search links or by simply typing in the name of the website. In the short term, as the study shows, the ROI of Google search ads for well-known brand names is negative.

How are other companies faring?

My sampling of the top S&P 500 companies shows that one third of these companies are still spending on “branded keyword” search advertising on Google even though their site appears at the top of organic search results, right beneath their own advertising. Table 1 lists a sample of companies with known brand names that use branded keyword advertising on Google. This study by eBay would suggest that these companies could be using these resources to spend elsewhere. However, this could illustrate how the companies are buying ads for the wrong keywords. For example, people who search for Safeway already know about it. Typing the word “Safeway” brings up ads for Safeway followed by a link to its site at the top of organic search engine results. However, when you type the word “groceries,” what show up at the top are ads from Walmart and Amazon. Safeway shows up nowhere with advertising when its existence is threatened.

Key Lessons

Based on this research, some key questions for companies to ask themselves are:

a. Do we need to advertise on Google or other search engines since our brand name is already established, especially using our own brand name as a keyword?
b. Could we reduce the resources spent and only deploy it when we do not show up at the top of the search results?
c. How do we re-deploy our resources if we are going to continue using Google search advertising? Are there better keywords to use or other things we are doing as a company that we would like our target market to know about? For example, in the sample I examined, I found that Brown Forman Corporation was spending on Google ads, but I did not include this company in my 1/3 group of wasteful spenders since they were spending on a specific ad for “ourthinkingaboutdrinking.com,” a site that discusses responsible drinking.

The results of this study also illustrate how investments in branding efforts can pay off in many other ways such as spending less on search engine marketing and re-deploying it to build an audience on social networks. I would still caution bigger brand names to monitor their search engine presence. As the authors of the eBay study found, shutting off branded keyword advertising simply substituted those clicks with clicks on organic unpaid search links. This means, branded keyword advertising costs not only in financial resources but also the opportunity cost of losing those clicks that would come automatically to the natural organic unpaid search links in its absence. That in turn would boost the ranking of those organic unpaid links further. With recent changes by Google, shifting resources from search engine marketing to content development would ensure that the unpaid link of these branded company websites stay at the top of organic unpaid search results without the expense of search engine marketing. Such a shift would also help these companies stay relevant to a customer base that is looking more for self-education than for advertisements.

By Sujata Ramnarayan, Ph.D. and Author of Marketing in a World of Digital Sharing

Book Giveaway For Marketing in a World of Digital Sharing: Are you drowning in social media noise and chaos?

by Sujata Ramnarayan

ENTER TO WIN

Why marketers need to lead with data and insight

Gartner Group predicts that by 2016, 80% of marketing technology spending will come out of the marketing departments. What are marketers spending on? It falls in three areas:
- Marketing automation tools such as for monitoring social media conversations, sales force automation, and CRM
- Social media and mobile technology investments to serve customers better such as crowd-sourced recommendations or location based targeting
- Data analytics for predicting from big data in real time in order to be more agile
In a world in which customers and prospects are spending more and more of their time online interacting through different devices almost all day, it is important for marketers to focus on the following goals and use the new technologies to that end. The goals are
- Get insight in real-time
-To interact with customers in real-time, based on data in real time
-Provide a unified customer experience across different platforms that the customer is using
Doing the above is a challenge today for many as data integration and a unified customer experience across platforms are both lacking. Solving these challenges requires IT’s help and cross-functional coordination, along with analytical skills. An innovative customer experience calls for leveraging insights from data derived from using appropriate “marketing technology.”

- By Sujata Ramnarayan

Are you passing the Customer Qualification Process?

Businesses continue to think of the funnel as a sales funnel with leads entering and being qualified, and hopefully reaching the end-point of becoming a customer. A recent study shows that this process is changing. Companies need to change their perspective because it is the potential customers that are qualifying suppliers. So, are you in the “Customer’s Buyer Funnel?” Customers are nearly 60% of the way through the sales process before engaging a sales representative. What is helping them along the way is the research they are conducting by visiting your websites and other available sources online.

What this means is that the content you provide and the social conversations about you on the web are being used by the prospective customer to qualify YOU! Most companies admit that they do not have a segmented or coherent content strategy in place to serve these prospects. The second important aspect to this is that those prospects that contact a sales representative have completed 60% of the sales process and are serious prospective buyers. Is your Marketing and Sales process equipped to enter the “Customer Buyer Funnel?”

By Sujata Ramnarayan

Pay $7 for a cup of coffee? – Very Likely!!!

Starbucks is going super-premium. The company that got people to pay $4 for a product they had paid less than a dollar for is adopting a new long-term strategy. It has introduced a $7 cup of coffee in 50 of its Northwest stores made from a hard to grow coffee bean -the Costa Rica Finca Palmilara. It plans to roll out this product nationally next year. Starbucks might be on to something here again! It has been pressured at the low end with McDonalds and Dunkin Donuts introducing better tasting coffee. At the high end, there are more rivals such as Stumptown Coffee Roasters from Oregon, Blue Bottle Coffee Company from California, and Intelligentsia from Chicago.

The company badly needed something to differentiate itself and it seems like it has hit upon it. Preliminary tastings and tests show that this coffee, which is equivalent to reserve wine, is a sell-out. Its limited edition reserve of this coffee was sold out in 24 hours online. At a recent taste test, this is how coffee specialist Leslie Howard, described its taste – “Lush, tropical, hints of white, not yellow, peach; A little bit of pineapple, herbal complexity, super-clean, vibrant, sparklingness.” This is just the tip of the iceberg on its reviews. Coffee consumption has been growing in the United States and globally, with specialty coffee consumption showing strong growth as well. Over 50% of adults in the U.S. drink coffee every day and a quarter of coffee drinkers report drinking a gourmet coffee the previous day. These trends bode well for a $7 cup of coffee.

The story behind this coffee is equally interesting. This coffee bean actually comes from a place called Gesha in Ethiopia. After it was discovered by botanists in the 1930s, it eventually made its way to a Costa Rican Agricultural Center where it remained un-discovered until many decades later. In 2003, Daniel Petersen of Esmeralda Estates noticed this coffee tree that looked different from others. Since he was looking for something to submit to a coffee competition, he decided to give it a try. Until then, this coffee had always been harvested and mixed with others. Daniel harvested it by itself and discovered something dramatically different in its taste. He was not the only one to discover its uniqueness. At the coffee competition, the entire jury was enchanted by its taste and aroma. The coffee commanded the highest price at the auction. It turns out that this particular variety of coffee, which actually comes from Ethiopia, and was re-discovered in Costa Rica, has won every single coffee taste competition since the year it was re-discovered. Looks like Starbucks is differentiating itself effectively, once again!