Paid Search Advertising

How big is paid search advertising? For 2005, Google, whose business is based on paid search advertising, reported total sales of $6.1 billion and operating cash flow of $2.624 billion. That’s for a company that didn’t exist ten years ago.

“Paid search is a great advertising method that can be implemented quite quickly,” says Aaron Kocourek, Director of Search Engine marketing for, a firm that develops and manages search marketing efforts for website owners. “But the success of a keyword campaign can vary by industry. People who are new or inexperienced in paid search frequently make mistakes that cost them a lot of money.”

What is “paid search”?

Paid search, for those new to the topic, is simply a method of advertising. The advertisements are placed on search engines (Google, Yahoo! and MSN are the largest, but there a many others). The ads are in text (no graphics, yet) and limited to a certain number of characters. The ad appears on the search engine when someone types a keyword or keyword phrase that you have “purchased”. You “purchase” the keywords by bidding against others in a competitive process that’s transparent and easy for anyone to view. Generally, the higher you bid for a keyword, the more prominent it appears in the search listings.

Assume, for example, that Josh owns a website that sells soccer supplies. Josh could purchase the keywords “soccer supplies” and then assemble an online ad so that when someone typed “soccer supplies” on a search engine, his ad would appear on the search results page. The ranking (that is, how high it appears on the search page) would be determined by how much Josh bid for the keyword phrase “soccer supplies” relative to all other bidders. The prices for the keywords and keyword-phrases vary greatly by search engine and by industry. These prices are “per click”, and they can be as low as a few cents to as high as $20 or more. That is, for each time someone clicks on your search ad, you’d pay the search engine the amount you’ve previously agreed to pay via the bidding process. In Josh’s case, if he successfully bid, for example, $4 per click for the keyword phrase “soccer supplies”, he’d pay the search engine that amount of money. If 50 search visitors typed in “soccer supplies” and then clicked on Josh’s ad, Josh would pay the search engine $200 (50 x $4).

Search strategies

An entire industry has evolved around search strategies. Practitioners ponder which keywords (a single word, such as “soccer”) and keyword phrases (multiple words, such as “soccer supplies”) to purchase. They ponder the relationship of the keywords to the ad copy to the website landing page. They pick and choose among search engines. They establish website goals (such as sales, or sales leads, or product description downloads) for each keyword or phrase, and then track how each of the words and phrases perform.

Leigh Vosler is Online Marketing Coordinator for Sierra Trading Post, a retailer of outdoor clothing and gear. She’s responsible for Sierra Trading’s paid search campaigns. “It is important to prioritize the active keywords,” says Vosler. “First, buy your company name and key product keywords. Second, add less known product names, misspellings and product description keywords . . . as the advertising budget allows.”

Vosler continues, “Test keywords on the 2nd tier search engines such as AskJeeves, MIVA, LookSmart and others. The bid prices are typically lower on these engines, which allows testing of a more extensive keyword list than a Google campaign.” [Editor’s note: See our interview this month with MIVA’s founder and CEO, Craig Pisaris-Henderson, located elsewhere in this issue.]

Professionals such as Vosler and MachInteractive’s Kocourek have learned many tips and tricks for optimizing a paid search campaign. Aaron Kocourek, “Place numbers or prices in your search-ad headlines; they will attract more attention. Whenever possible, use the keyword phrase with the ad’s headline. Constantly compare your current ads against your competition, then rewrite the ads to stand out from the rest . . . it’s a great way to increase your click-through-rate.”

Leigh Vosler, “It is important to keep an eye on individual keyword expenditures, as they can get out of control. This is especially true if the keyword is too broad, such as ‘tent’. In that instance, it would be better to use ‘Kelty tent’ because this term will drive customers who have narrowed their search down to a specific brand and are more likely to convert to buyers.”

Click fraud

Not every click on a paid search ad is legitimate. Dishonest website operators have been known to purposely click on their competitors search ads to deliberately run-up the per-click cost. Moreover, software programs exist that deliberately mimic the clicking of a paid search ad, thereby increasing the cost of the search campaign.

“The detection and elimination of click fraud is extremely important to us,” says Gaude Paez, Senior Manager of Communications at Yahoo! Search Marketing, one of the largest search engines. “When someone clicks on a paid search ad at Yahoo! Search, that click passes through thousands of filters. These filters include the monitoring of search traffic patterns, the time of click, computer IP addresses, geographical locations and more. Our system combines automated filters and human filters. We work to detect fraudulent clicks before the advertiser does, and we often discard suspicious clicks before an advertiser is billed.”

“That being said,” says Paez, “We always want advertisers to tell us if they detect suspicious clicks. Frequently, that information will help us catch the dishonest operators and, if we find click fraud, we’ll credit the advertiser for the click charge.”

Search mistakes

Both MachInteractive’s Kocourek and Sierra Trading’s Vosler cite common mistakes from many paid search advertisers. “Most people to the paid search send visitors to the homepage instead of the page that corresponds with the keyword,” says Kocourek. “We also see generalized ads, rather than detailed ads, which are more effective.” Vosler adds, “Set up your metrics in advance, and if the keywords aren’t working, change them. This is essential. We monitor, for example, (1) website sales versus paid search cost and (2) clicks versus searchresults impressions for each keyword on each search engine. If our internal goals for either of these two percentages aren’t met, we’ll change or discontinue those campaigns.”

Seth Greenberg is CEO at, a retailer of hobby related products. “Be careful of who you are bidding against. If you are bidding against your manufacturers or distributors who may be selling the same product but at a lower price, you might want to put more efforts into organic (non-paid) search listings and other means of advertising.”

“But,” says Greenberg, “Paid search can be very effective for smaller ecommerce operators. It can allow for early exposure of new products that aren’t yet indexed by the search engines. And, smaller companies can zig and zag easier then larger companies. Smaller firms can frequently adjust their paid search campaigns quicker and more timely.”

Brian Getting
Brian Getting
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