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.
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