The Ins and Outs of Bidding Wars

December 20, 2010 § Leave a comment

PAID PLACEMENT/PAID INCLUSION BACKGROUND:

Search engines have unique algorithms that take many attributes into consideration including, price, promotional advertising copy, landing page quality, etc.  The search engines algorithm ensures that when someone searches for specific keywords the best match will appear higher within the search results. Different search engines weigh attributes differently but all weigh quality of the website, copy, and destination landing pages high.  Most advertisers who have large paid placement campaigns will focus their time and efforts on the quality of their website, copy, and the landing pages (SEO) since these attributes are weighted high therefore driving down the price and still maintaining a high rank.

Paid placement and paid inclusion is important to advertisers because advertisers can track their ROI in real-time vs. running a TV spot and hoping people watch it, but never knowing for sure. With paid placement/inclusion the advertiser knows for sure who searched for their ad, who clicked on their ad, and who purchased their product.  As web tracking become more sophisticated marketers can actually see where the user clicked prior to searching on the search engine and where the user went after they searched on the search engine. This information is important to know because marketers can understand the users buying behavior which is very valuable knowledge.

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ISSUES:

There a few instances where paid placements isn’t the most efficient way to spend advertising dollars. Many advertisers pay to appear when their brand name is queried. Not only does the advertiser have to pay for their brand name, advertisers have limited control over their brand. Google, Yahoo, and Bing make it very easy for a competitor to bid on other competitors brand names which often times can confuse the consumer or lead the consumer away from one brand to the competitor’s brand. For example if someone wanted to buy a North Face jacket they would search for the keyword North Face. If someone from Columbia Outerwear’s marketing team wanted to, they could bid on the keyword North Face fleece or North Face jacket so when the keyword North Face fleece is queried a Columbia jacket advertisement displays under the North Face brand name. The search engines claim to disapprove these ads however many slip through.

There are also problems with bidding wars which ultimately can hurt the advertiser’s bottom line. For example both The North Face and REI what to own the keyword “outerwear”.  Since both want to own the top spot within Google, both are willing to pay a premium.  Because both are willing to pay top dollar they ultimately end up driving up the cost causing their ROI to be very low.

While there are benefits to paid inclusion and paid placements there are negatives. If all marketers played fairly some of the negative aspects would go away but without search engines enforcing best practices fair play won’t always happen.

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