Top Paid Search Mistakes—And How to Avoid Them
 By Alexander Kesler, president and co-founder, inSegment Inc.

Paid search is one of the top lead and sales generating techniques for many online marketers. But, not optimizing your pay-per-click (PPC) campaigns, not bidding on enough keywords, and not properly tracking your ROI can hurt your results. Here's a look at why those mistakes happen and how to avoid them.

1. The “Set It and Forget It” Mistake – Not Optimizing PPC Campaigns
Similar to the way a website’s structure and design must be constantly optimized through testing, so must PPC advertisements. Many companies make the mistake of putting together a PPC campaign, turning it on, and letting it run for a month or more before checking its performance. This is the surest way to waste a month’s advertising budget without seeing a positive return on investment (ROI).

The need for PPC optimization is a result of both the dynamic nature of the competitive PPC environment, and the fact that searchers don't always interpret ad copy the way it is intended to be interpreted by the writer. If searchers misunderstand the meaning of an ad’s text, click the ad, visit the destination site, and immediately click the back button—the cost of the ad was wasted. Since no sales will result from these kinds of visits, they drag down ROI significantly. One can imagine that if such issues are not resolved quickly, a great deal of advertising budget can be wasted, especially if the misfiring ad is allowed to run for a month or more.

In addition, the dynamic nature of the PPC environment is such that an ad that ranks first on one day, may rank last the next day—or anywhere in between. This is because an ad’s rank is determined by many factors outside the advertiser’s control, such as changes in competitors’ bids; changes in competitors’ relevance or click through rate; changes in search engine ranking algorithms (i.e. the way Google calculates Quality Score); or changes in user behavior.

All of these changes can be caused by various unpredictable external factors—what the changes share in common is that they can occur rapidly and without warning.

That is why frequent monitoring and optimization is the only way to guarantee that a PPC campaign consistently performs well. A/B split testing or multivariate split testing are forms of such optimization. The take-away message is that PPC campaigns need constant attention and active management.

2. The Lonely-Keywords Mistake—Bidding on only a Few PPC Keywords
In PPC campaigns, keywords (also called “search terms”) are an advertiser’s friend, and the more, the merrier—with the exception of expensive keywords which don’t bring in enough sales to pay for themselves. When building a PPC campaign, it is paramount to include every possible keyword that a potential customer might use to find your product.

Every highly-targeted search term (i.e. “corporate antivirus software trial” vs. “antivirus”) that is omitted from the campaign, represents a searcher who might see your ad for a less-targeted search term instead. Although the user will view the same ad in both cases, if she clicks the ad that appears for the generic search term—“antivirus,” in our example—the click might cost the advertiser hundreds of times more than if the ad had been displayed for a highly-targeted term.

This method of cost-minimization is why it’s important to bid on all of the obscure, lengthy, multi-word search terms that potential customers might use. These highly-targeted “long tail” search terms represent high-value customers who can be brought to your site inexpensively. A PPC campaign with too few keywords is unlikely to capture enough long-tail searches, and hence, the campaign displays a majority of ads that are expensive when clicked. Some of the best campaigns out there have many tens of thousands of keywords, and we have certainly not seen any successful campaign with less than 300-500 keywords. To minimize the cost per click, the strongest PPC campaigns will likely have upwards of one thousand keywords, and may easily have several thousand. Capturing all of the long-tail search terms your potential customers might use will ensure low ad spend and high ROI.

3. The “How Much Did that Sale Cost?” Mistake—Not Tracking Marginal Advertising ROI
Every company should understand the concept of ROI, but it is shocking to witness the number of advertisers who neglect to apply the concept to their advertising campaigns. The idea is simple, and can be understood best through example.

If one out of every 10 searchers that clicks one of your PPC ads buys your product, for you to make a profit on the sale, the product’s profit margin must be greater than the cost of all 19 of the clicks required to find a buyer. This is the reason that high-competition, high-traffic keywords aren’t always a good idea. For a software (or any other) PPC advertising campaign to be profitable, the total advertising cost required to sell one product must be less than the profit margin on that product.

To ensure profitability for your PPC campaign, conversion tracking should be used to monitor the advertising cost of each sale. Conversion tracking is one of the most useful features of popular search engine advertising programs. For example, it is built directly into Google Adwords, and is straightforward to implement. Once conversion tracking is enabled, it will be clear which ads yield an acceptable ROI and which don't, and the under-performing ads can be changed or discontinued. If conversion tracking is not enabled, your company can actually lose money on its PPC campaign if marginal ad spend exceeds marginal profit. Don’t let this happen to you—set up conversion tracking and monitor it daily.

---Source: i-Merchant newsletter July 13, 2010 (www.chiefmarketer.com). Alexander Kesler (Alexander.kesler@insegment.com) is the president and co-founder of inSegment Inc., Needham, MA.