Every now and then I like to get out my crystal ball and think about where I see the search industry heading. It’s impossible to predict because every day brings new changes, but there are certain trends that are likely not going away.

The way I see it, there’s an intractable problem between the breakneck pace of innovation in the search marketing industry and advertisers’ abilities to take advantage of the new hotness. I’d love to know if you agree, disagree, or have any thoughts to add in the comments!

PPC Advertiser Challenges

Ad targeting options are becoming so varied and complex that less sophisticated advertisers are missing a lot of opportunities to improve efficiency and are unable to effectively compete. Given the inherent complexities, the vast majority of advertisers will not be able to remain efficient even with more advanced and automated bidding optimization tools at their disposal.

The primary disconnect is lack of conversion data. In a mathematical model where profit margin and Cost Per Conversion is critical, less sophisticated advertisers will either slowly bleed to death or decide to advertise elsewhere.

The Intractable Problem

Here’s the rub – the PPC space is going to be so competitive and saturated that only the smartest mathematicians and analytics gurus will be able to turn a profit. Why? They are the only ones that can effectively manage a PPC campaign to a target Cost Per Conversion that allows for a predictable, manageable profit margin. Everybody else is paying too much for customers and that is not sustainable in the long run.

Sure, more advanced and automated bidding tools are becoming available every day, but the level of understanding and experience to configure and manage them is still high. No matter how smart the black box is, it will still always require a human to make decisions based on the data provided and factor in offline inputs.

Who Should Be Worried?

PPC advertisers have the most to lose by spending money with little to no hope of generating a positive return. That’s a lesson quickly learned (hopefully) and marketing dollars can be reallocated to a more profitable channel.

Secondly, I believe Google, Yahoo/Bing and other PPC advertising engines have to do a better job of keeping a level playing field. Their real-time auction pricing models and profitability depend on having a steady stable of advertisers bidding on as many keywords as possible to drive up prices.

Just as water always finds its level, fewer, more sophisticated advertisers will eventually find the “ceiling” price for a click and would be forced to find operational efficiencies and higher conversion rates to improve their margins.

Am I Right?

Who knows? The PPC industry will be different in 5 years, that’s a given. But if these trends continue to hold, I think that only the smart will survive.

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Just a short self-promotional post to announce that I am now a Google AdWords Certified Partner. The AdWords Certified Partner program is for Pay Per Click consultants that pass a 120-question exam and manage more than $10,000 of client ad spend in the most recent 90-day period.

I still have a few $100 Google AdWords credits if you are 1) a new Google advertiser, and 2) thinking about how to build a profitable Pay Per Click advertising campaign to support your other marketing initiatives.

For those of you keeping track, the Certified Partner program is replacing the Qualified Individual program.

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Tired of boring old pay per click advertising? Are your campaigns running at peak efficiency with no more room for optimization? Maxed out all potential long-tail keywords?

Okay, so the work is never really done and PPC campaigns should never be left on autopilot.

If you’re still itching for a new thrill, check out Google AdWords’ Ad Innovations. It’s a way for advertisers to keep up with the latest and greatest demos and “coming soon” attractions.

From the blog post announcing the launch:

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Google just hooked me up with a bunch of $100 AdWords advertising credits (free money!) to assist new advertisers with getting up and running with a pay per click advertising campaign.

Of course, there are a few caveats (their rules, not mine):

• The credits can only be applied to a new (less than two weeks old) AdWords account. Get yours.
• There is a one-time $5 fee to open a new AdWords account. I am not sure if the $100 credit will cover this.
• You will need to register a credit card with Google to cover any cost overages.
• The new account must be linked to my Google AdWords Professional Account which allows me to manage multiple clients’ campaigns.

If you haven’t tried AdWords to promote your business online, this may be your best chance to try it for free.

Here’s how it works:

1. First, I highly recommend installing a website analytics package on your site. Google Analytics is a nice, free option. This will allow you to track your new visitors’ activity on your site. Need help? I am also a Google Analytics Qualified Individual.
2. Sign up for a new Google AdWords account.
3. Email me your Customer ID number (10 digits, XXX-XXX-XXXX), which will appear in the top-right corner of your account dashboard.
4. I will send you an invitation to link your AdWords account to my Professional Account. This way, you don’t ever have to share passwords or billing info with me and you can control/restrict/cut off my access at any time.
5. When you log back into AdWords, you will see the invitation from me. Once you accept, I will have be able to manage your account remotely (although I won’t, unless you want me to).
6. I will apply the $100 credit and you can start spending your free money!
7. Check out the AdWords Beginner’s Guide to learn the basics.

That’s it. No obligations, no spending requirements. You can de-link your account from mine any time you choose after you spend the $100.

Questions? Don’t hesitate to contact me.

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Good news for Pay Per Click advertisers, you can rest a little easier knowing that your lower-ranking text ads are likely converting at the same rate as higher-ranking ads.

Google set out to answer the question, “How does conversion rate vary by position?” (Note, “position” in this context refers to Average Position, or where your text ad appears on a search results page)

Google’s Chief Economist Hal Varian released these results on the Inside AdWords blog:

We have used a statistical model to account for these effects and found that, on average, there is very little variation in conversion rates by position for the same ad. For example, for pages where 11 ads are shown the conversion rate varies by less than 5% across positions. In other words, an ad that had a 1.0% conversion rate in the best position, would have about a 0.95% conversion rate in the worst position, on average. Ads above the search results have a conversion rate within ±2% of right-hand side positions.

Trust, But Verify: Test It Yourself

If you know me, you know I’m a big fan of testing findings like this. It may work for some but you don’t want to invest money in something that may hold true for your business.

To test Google’s findings, you can isolate your ads’ Average Position by activating the “Position Preference” setting in your Campaign settings:

AdWords Position Preference Setting

Now you can set the position preference on a keyword-by-keyword basis simply by clicking on the Position Preference column. A small pop-up lets you indicate your desired range of positions:

Keyword Position Preference

Finally, set up a pre-period where you measure the conversion rates of your ads in the “any position” setting. Once your conversion rates seem to level out, try setting the Preferred Position to different settings and keep an eye on your conversion rates.

If they don’t change (or stay within a 5% deviation), you have just proven Google’s findings. If your conversion rates do fluctuate, you might try adjusting your ad text or landing page offers. Chances are you haven’t maximized the conversion potential of your site.

(hat tip Marketing Pilgrim)

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Note: You would have already gotten this via email if you were signed up for our monthly client newsletter.

In the coming days and months you will likely hear a lot about the partnership between Microsoft and Yahoo that was formally announced this morning. Here’s what you need to know right now:

Microsoft (Bing) will power Yahoo Search while Yahoo! will become the exclusive worldwide sales force for both companies’ advertisers.

Take a Moment to Breathe…

But hold on, there is no need to act just yet. There are no imminent changes. Yahoo expects to fully implement the combined effort within 24 months following regulatory approval, which it hopes to gain early 2010.

For those involved in SEO: Yahoo has effectively “given up” on competing for search share against Google. Their search infrastructure and algorithms will be replaced by Bing’s. The implications are important to note, as Bing is slightly different than Yahoo or Google. Because Bing is relatively new, the next few months will allow us time to discover more about how they rank websites and refine our optimization strategies before Bing absorbs Yahoo’s current market share.

For those involved in PPC: Microsoft’s AdCenter (self-service advertising platform) will replace the Yahoo Search Marketing interface, but the human sales force will be Yahoo’s. For accounts large enough to have a human sales rep at either firm, chances are you will be hearing from them soon.

For more information, you can read the following:

• Official Press Release
• ChoiceValueInnovation.com (site set up by Yahoo and MSFT)
  
• TechCrunch Analysis

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Note from Andrew: Steph is learning a lot during her internship. She filed this report from a recent visit to Google’s Ann Arbor office to learn about pay per click advertising:

A few days ago, I had the privilege of doing a job shadow at the Google AdWords headquarters in Ann Arbor. The experience and the people I talked to at Google really reinforced what I have been learning at Your Search Advisor.

One of the people I job shadowed was an optimization specialist. She stressed the importance of having specific, relevant keywords. For example, if you’re selling baked goods in Ann Arbor, you may be tempted to choose “happiness” as one of your keywords, since your cupcakes bring others joy. However, the Google search engine would not find your ad very relevant to people typing in “happiness.” You would do much better if you choose something like “Cupcakes in Ann Arbor.”

Something else I found interesting was the formula that Google used to rank its AdWords ads on a search page. Although bidding high amounts and paying more money can help, the quality of the ad and of the website is also extremely important. For example, a company can pay a lot for an ad, but if it is irrelevant or if the website it links to is poorly designed, that ad wouldn’t rank as high as a better quality (though less expensive) ad.

Near the end of the job shadow, I was given a link to a video on YouTube that is very good at explaining how Google ranks its ads. I’d like to share it with you:

Enjoy!

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