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Paid Search doesn’t work for big brands but ideal for small & medium enterprises

GoogleIf you are the digital marketing manager of a big brand, then this is going to hit you hard. All the money that you have been spending on Google PPC had little or no impact on your overall traffic and sales. According to  a recent eBay study, for well-known brands like eBay, the efficacy of search engine marketing (SEM) is limited at best because people clicked on eBay’s organic links to reach their website. But when it comes to small and medium enterprises (SMEs), where consumers are ignorant of a brand and its offerings, paid search is the way forward.

 You thought traditional forms of advertising led to a lot of wastage. And that the Internet by charging the advertiser only when a customer clicks on the paid search ad would change all that – well, think again! On search engine marketing the study’s authors quote 19th-century retailer John Wannamaker: “I know half the money I spend on advertising is wasted, but I can never find out which half.”

The authors,  Thomas Blake, Chris Nosko and Steven Tadelis gave the example of people who thought to buy guitars via eBay were finding their way to the eBay website anyway, either by clicking on natural listings (organic) or by going directly to eBay’s site without using a search engine at all. Search ads did generate a modest increase in the likelihood that Internet surfers with little recent history of eBay transactions would end up making purchases on eBay.

For branded (keywords containing eBay) paid-search campaigns , the study summarises: “The evidence strongly supports the intuitive notion that for brand keywords, natural search is close to a perfect substitute for paid search, making brand keyword SEM ineffective for short-term sales. After all, the users who type the brand keyword in the search query intend to reach the company’s website, and most likely will execute on their intent regardless of the appearance of a paid search ad. This substitution is less likely to happen for non-brand keyword.”

For non-branded keywords — the company found a marginal traffic impact after discontinuing SEM but no impact on sales: “Search advertising only works if the consumer has no idea that the firm has the desired product. Large firms like eBay with powerful brands will see little benefit from paid search advertising because most consumers already know that they exist, as well as what they have to offer. The modest returns on infrequent users likely come from informing them that eBay has products they did not think were available on eBay. Active consumers already know this and hence are not effectively influenced.”

Overall, paid search turns out to be a very expensive way of attracting new business. The study’s authors estimate that, at least in the short-run, paid ads generate only about 25 cents in extra revenues for each dollar of ad expenditures. For branded keyword searches, the additional revenues are close to zero. eBay’s study on the effectiveness of PPC for their business, covered in the Harvard Business Review story titled, “Did eBay Just Prove That Paid Search Ads Don’t Work?”, has sparked a huge debate on the efficacy of SEM for large brands.

Although eBay’s argument has stoutly been defended by Google in another study, I wonder why with all the advanced analytics at their disposal, which can track all digital channels till the last step, agencies have never tried to study the conversions closely from point of view of revenue generated for the client; of course, for which the participation of the client is imperative. At least, they could have always suggested this to the client much before and left Google a little less rich.

After all, of the $31.7 billion that was spent in US in 2011 on internet advertising, the top 10 spenders in this channel account for about $2.36 billion, the report said. These companies generally use the same methods and the same consulting firms to design their ad campaigns and there are many reasons to think that the results eBay study presented would generalize to all these large and well known corporations.

Search Engine Marketing or Paid Search ideal for SMBs
eBay’s study goes on to argue: “This would most likely not be true for small and new entities that have no brand recognition, which must pay in order to appear at the top of a search page for any given query, where consumers are nearly totally ignorant of a brand and its offerings”

This establishes the importance of PPC as a marketing tool for small and medium businesses only; not so much for brands known as well as eBay. Well, everyone knows eBay or Amazon (in India Flipkart, Naukri, Make My Trip and Snap Deals) and what they do. Can you say that for your business? Unless you can, paid search would still be critical for you.

 

025Ashok Majumdar, a marketer by profession and a journalist by training, created Sales Rambo, a sales & marketing CRM on cloud for SMEs. He founded Abhiyan Marketing Services (P) Ltd., a creative hot shop & co-founded Ebony & Ivory, an advertising agency accredited  with the Indian Newspaper Society (INS). He started his career with The Times of India and worked for 6 years before venturing out on his own.  
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