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Paid Search Benchmarks

My monthly paid search column at SEL

Wouldn’t it be great if you could measure the success of your paid search program by comparing your numbers against industry benchmarks?

Every advertiser would love to know how their program stacks up against the competition in terms of:

  • The breadth of keyword coverage
  • The quality of the landing pages chosen
  • The effectiveness of the bid management
  • The use of negatives and match types
  • The quality of ad copy
  • The effectiveness of their website in converting traffic
  • The fraction of their business generated by paid search

The trouble is: there aren’t any good objective measures of any of these pieces of the puzzle, and what can be objectively measured across a competitive set isn’t generally actionable.

Please allow me the liberty to use a fictional Q and A session to make this point.


Wouldn’t knowing the size of the keyword list and how that compares to your competitors’ tell you about keyword coverage?

 

 


Not really. We see plenty of cases of gigantic keyword lists producing rotten keyword coverage. Anyone can create a massive list quickly and easily using readily available tools. In most cases, that list will be chock full of holes, will include tons of dangerous gibberish, and tens of thousands of 6, 7, and 8 word phrases that are beyond the long tail and are guaranteed to be “inactive for search.”

If you find that you have 100 keywords and others in your industry have 100,000 you may have a problem, but you probably didn’t need the competitor’s list size to see that problem.


Wouldn’t it be great to have a competitor’s keyword list to study?

 

 


Why? If your list is extensive and theirs isn’t, you’ll learn nothing. If their list is extensive and yours isn’t, your time is better spent building out your list. If both lists are extensive you may find the time spent figuring out how much of the non-overlap consists of valuable additions vs products/brands/sub-categories you don’t carry to be poorly spent.

Thorough keyword list coverage requires a good bit of hard work and thought in addition to great tools. If that work hasn’t been done for you spot checking your own list will make that clear, and the fixes should be focused on what you carry and how those products and services are sought.


How cool would it be to know how many negatives there are in the account, and what fraction of keywords are on what match types for you and your competitors?

 

 

 

Very cool, but not very useful. Like keywords, the quantity of negatives has nothing to do with the quality, and many firms simply glue in thousands of “top negative keywords” indiscriminately to appear thorough. Similarly, we see many instances of keywords on all three match types but with the same bid on each, effectively nullifying the value of segmenting the traffic.


Surely knowing what fraction of keywords have what quality score and comparing those proportions to others would be valuable?

 

 

 

Not really, and don’t call me Shirley. Quality Score does not measure the quality of the copy; it is a mixture of CTR and commercial intent, neither of which necessarily has bearing on the quality of the ad text. Promotional copy will inflate CTR, but you can only use it when you have promotions to tout, and it isn’t even always beneficial to tout them. Low commercial intent queries may have lousy Quality Scores and still perform well from an ROI perspective.


What if we knew how often bids were being changed, or how our share of impressions compares with our competitors? Wouldn’t that tell us something about the quality of bid management that’s happening?

 

 


Some of the absolute worst bid management systems operate as position crawlers changing bids many times a day to stay in a particular position on each keyword. The fact that they change bids as frequently as smart bid management systems doesn’t change the fact that they suck, it just makes them equally busy.

Capturing impression share doesn’t require advanced bid management it just requires deep pockets. Any idiot can buy impressions, and the fact that your competitors are buying more or fewer of them says nothing about the relative quality of the bid management.


I would give my eye-teeth to know what my competitor’s conversion rates look like!

 

 


At the ad level (not just keyword, keyword + matchtype + adtext + syndication setting + geo-targeting), conversion rate could be of some interest, but aggregated to the keyword level it will likely be misleading. Even at the most granular level, what would you learn from the data? Is their conversion rate higher or lower because: the definition of a conversion is different? or the value of the conversion is different? or their selection/price/offer are different? If you’re trying to get a sense of the relative quality of the landing page, or the website’s effectiveness, knowing the conversion rates won’t necessarily tell you that.

Websites with the highest site-wide conversion rates are often owned by the firms who do the least online marketing. If the only folks who find your site are the folks who already know you, you’ll have a terrific conversion rate. Bringing in new prospects will only depress conversion rates, but that’s good as long as they’re brought in cost-effectively.


What if we knew the fraction of total site sales driven by paid search for all of our competitors, clearly that would be a good measure of success.

 

 


First, the fraction of total site sales is as much a measure of other marketing channels as it is of paid search. Companies that are online pure-plays are likely to have a much higher percentage of site sales driven by paid search than companies that also mail catalogs or promote a chain of brick and mortar stores. Brand loyalty and years in business can drive tremendous volumes of sales (online and off) owing nothing to any marketing channel.

It would be very interesting to see a study comparing the fraction of total marketing dollars spent on paid search to the fraction of total revenues (online and off) attributable to paid search (competitive, non-brand only, of course). If all marketing channels are equally productive one would expect those ratios to be pretty close for the measurable marketing efforts.

Watching your own business’s percentage for trends may be worth doing, but can be misleading as well. Young businesses often have to spend marketing dollars to drive almost all of their sales as they have neither word-of-mouth nor a customer base to drive profit. If paid search drives a smaller fraction of sales over time that may be a good sign for the overall health of the business.

Conclusions:

It is human nature to want to know what others are doing, and a certain degree of paranoia that everyone is smarter than we are is an attribute of a good manager. The problem is the objective measures available on the market don’t tell you anything meaningful about a competitor’s search program, and what metrics you can compare are inherently misleading.

The answer to the question: “Am I getting all I can from paid search?” lies in your own account, in your own data and in your own practices. Focusing on those elements you control is the key to building a great paid search program.

Comments
7 Responses to “Paid Search Benchmarks”
  1. Kenny says:

    Read this on SEL, but figured I’d wait to comment on it here. I think you’re spot on as usual on this. I’ve had clients in the past who were OBSESSED with the competition side of things, and well beyond just ego-bidding into first position. It can totally take your eyes off of your own account and it’s multitude of sins. “What’s their ad copy say? Let me just copy that.” Sure, that’s distinct and memorable for CTR, not to mention the fact that you’ve copied something from someone who may know nothing of PPC or best practices.

    It’s not that understanding the space you’re in isn’t useful, but I think that’s about where it ends. Do your homework and keyword research by all means, but: Do they have your budget? Your IT hurdles? Your methods of measurement? Even your same strategy regarding how they use search in their arsenal and how they see it fitting into the overall media mix? Who the heck knows most of the time. I’ve found that campaigns get the best results if you essentially act like you’re in competition with no one but yourself. If you had no other info but your own data within your own budget constraints, how would you maximize performance? To draw reference from the Bible, stop trying to look for the speck of sawdust in your competitor’s program and pay attention to the planks in your own.

  2. Highly insightful as always, Kenny, thanks! Possibly our first Biblical reference :-)

  3. I enjoyed the Q&A George! As always, it’s very insightful and worth reading. Knowing what your competitors are doing is essential, but copying them is a different thing. I always hear the line, “Our competitors have 1000 keywords, why do we have 800 only?).

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