Searching for Answers (Part 2)

Dave Eckstein

Just in case you’ve been living under a rock for the past few years, paid search advertising is presenting a new set of challenges to advertisers and the “traditional” media sales team.

It is a viable option in a vastly growing local media space, one that offers ease of use and measurability.  It’s a little strange, however, that ease-of-use and measurability have taken preference over good old fashioned “results”. 

Let’s consider what paid search intends to do — what any advertising is charged with — to provide a clearer path to the next qualified lead for local businesses. It’s that simple.

If I am a jeweler hoping to land my next Tag Heuer shopper from Google, chances are stacked against me if I am a paid-search advertiser, at least versus my “organic search” competition.  When online consumers click on a search engine result (i.e. your typical Google results page) they will click on an organic search position 75% of the time, and on paid positions only 25% of the time.  In other words, 3 out of 4 searchers prefer the left side of Google to it’s “sponsored” right side.

Okay, so only 25% percent of search referrals come from to paid leads.  “I can live with that,” says the local business owner.  Not so fast.  Another 10% of those who do follow these paid leads immediately leave the target site, and … those that do stay spend less time on the target site (less time, that is, than their organically fed peers). Oh, one more thing: fewer of them return to the advertiser’s site after that initial landing.  In the end, only 3% of those leads convert to customers.  (Most of this info was shared in AdAge’s Search Marketing Fact Pack, 2008).

In other words, the numbers are stacked against us in paid search.

Let’s simplify the math a bit.  Assume for a second that your client has to decide between dedicating their limited resources to having a high organic search position (SEO) or a high paid-search position (SEM).  For most local businesses it’s one or the other, if either at all.  The focus on SEO (organic leads) will lead to 4-5 times as many conversions as paid leads.  When done right, SEO costs a lot less per lead.

So businesses that use paid-search must be doing something wrong, right?  Not necessarily.  Just like there are some successful local cable advertisers out there, there are also paid-search advertisers who have found some success.  But they are likely spending more than they have to per customer. 

Paid-search advertisers buy a set of keywords for their business in Google AdWords or other search engine (chances are, it’s Google). After all, advertisers know which battles they need to win most. Right?

Well … not so true.  Fact is, too many businesses are still buying keywords they shouldn’t waste their money on.  It’s a catch-22 for some.  There are really two types of keywords to buy.  Advertisers can purchase the keywords they technically already own (for example, their company, brand, trademark, or other exclusive term).  Those tend to be relatively cheap, as they are the only “bidder” in most cases.  FYI, a shocking 75% of online advertisers who use paid search buy their own trademarked keywords, according to SEMPO. 

The alternative isn’t any better: advertisers can enter the bidding war for the real keywords … the ones that people actually search on in their local market.  These include automotive terms (“used cars austin”), legal terms (“personal injury atlanta”), home contractor services (“plumber sacramento”), financial services (“mortgage seattle”) and other similar products & services. 

Have you checked the prices of these real keywords in your local market?  If not, do so right now.  Take a look.  It’s a real bidding war in some areas.

That lawyer you work with … the one that is spending a nice chunk of change in AdWords every month … what is the logical argument that demonstrates the chance for her to decrease the cost of client acquisition?

Here’s where we can start:  The average cost of keywords in Google’s AdWords program for legal terms runs about $25 per click in the local market.  You can find this out for your own market on Google.  (FYI, testing this in your own market is free, so if you don’t try this, you’re consciously deciding to sell at a disadvantage.)
 

  Keywords Avg CPC Volume
  seattle personal injury attorney $33.80 880
  tampa personal injury lawyer $31.89 320
  dui lawyer pa $28.96 1300
  fort worth personal injury attorney $25.39 320
  criminal lawyer omaha $18.11 58

 

The table above demonstrates the costs associated with paid leads using the legal sector as an example. We can also see the monthly volume that comes with this purchase. (There also appears to be a lot of drunk drivers in Pennsylvania, for whatever reason!)

All joking aside, that lawyer from Tampa could spend over $10,000 a month; the one from Seattle could throw $30,000 into their monthly AdWords budget. Is this an efficient means to generate leads?

Let’s just assume for a second that none of these $25 clicks abandon their mission, all of them return to the site willingly, and that 3% convert into customers.  In other words, let’s assume a blue-sky scenario.  Even in a perfect world, that’s a lead acquisition cost of $833.

Back up the bus one minute for a critical point:  That $833 cost is on a customer who is in a completely different phase of engagement.  They’re further down the funnel.  In other words, by the time somebody is searching online, they are essentially in the market.  That’s a very ripe customer.  Our cost-per-customer must be lower at this stage of the game to make this work.  I can’t spend $833 on the low-hanging fruit.  I’ll probably put myself out of business. When we do the math and take the hundreds of specific searches required to get my one qualified lead with paid search, and multiply it by the cost-per-click, the high disapproval rating from that survey starts to come to light.

Now, the question begs, even if my current campaign is successful, what alternatives to paid search will actually make my advertising more profitable?  In other words, how do we drive down that lead acquistion cost?

Here’s a hint: Local media sites have the firepower to produce organic leads, just by virtue of the volume of traffic that is currently generated.  This approach can serve referrals both from a local television station website and “unsourced” referrals from offline advertisement … all with extreme cost-efficiencies. 

A local media outlet has that ability to generate more traffic on the dollar, both virtual and physical traffic.  We’re still interested in that, aren’t we?

SOURCES: Advertising Age Search Marketing Fact Pack 2008, SEMPO Survey January 2008, Compete / TNS Media 2008, ComScore 2008.

Dave Eckstein does not play shortstop and was never the MVP of the World Series. He is a partner in the firm ESA & Company, based in Red Bank, New Jersey.

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2 Comments

  1. A friend of mine just emailed me one of your articles from a while back. I read that one a few more. Really enjoy your blog. Thanks

  2. I’ve got this blog on my feeder now thanks. I did some number crunching to see what I was paying per customer, and I think I need help with my adwords, or a new plan all togther.

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