With paid placement (and paid inclusion using cost-per-click), return on investment is figured in the standard way: profit divided by the cost of the ad spend. But ROI can be figured for each keyword, assuming that you have the tools to track to sales conversion. Most marketers track what search engines and keywords are driving people to their site, but tracking to conversion is harder. A unique tracking URL for each keyword must be employed.
“Tracking is where the industry is going,” says Danny Sullivan, consultant and editor of the Search Engine Watch newsletter. “First it was about getting listed [for free]. Now it’s about buying your way onto the search engines. People who have experience with that will want to get more value, and that means tracking ROI.”
Knowing your targeted ROI also helps in trying to figure how much you’re willing to spend for a keyword. If one out of every 100 people who click on your link makes an average $100 purchase, and you’re willing to spend 10% ($10) on marketing for each sale, you are willing to spend 10 cents per click.
How much should you pay? Obviously, a car dealer will bid higher than a bookseller. Some words get bid out of control (ego can get in the way) and in that case it will be nearly impossible to make any money on them. (The average price for a pay-for-placement link with Overture in this year’s first quarter was 24 cents.)
If you bid on many keywords, staying on top of them will be a chore. You may want to aggregate the winners and losers in the ROI. For example, 1-800-Flowers bids on both “flowers” and its brand name (among about 100 keywords) on Overture and Google, according to Mary Rider, senior advertising manager. “Flowers” is a very popular, and therefore a very expensive word at about $3 a click. But in search marketing (ironically) a brand name tends to be cheap because few others want to bid on it. So, for 1-800-Flowers, Rider says, the cost of the two words balance each other out.
|
