How to Compete with New PPC Advertisers

By Kaitlyn Smeland Dhanaliwala | Apr 10, 2008
More Articles by Kaitlyn

In 2008, online sales are expected to increase by about 17%. And that’s in the midst of a slowing economy in which many households are expecting to have to tighten their belts.

According to the Ecommerce Times, online sales will rise to $204 billion in 2008. Although many consumers expect to shop less often this year, they also expect to do a larger portion of their shopping online. While some consumers find online shopping to be a good way to find bargains, others simply enjoy the convenience of home delivery.

Along with increased online sales, the article also forecasts an increased interest in SEM as retailers new to online distribution also become active in search. Forrester Research reports in “The State of Retailing Online 2008” that 90% of retailers already take advantage of PPC advertising, and 79% say they will invest more heavily in PPC this coming year.

Now, I think the general consensus lately is that the SEM industry is not likely to suffer in the worsening economic landscape. Last month, Search Engine Watch reported on the SEMPO 2007 State of the Market Survey. According to the survey, marketers expect to continue increasing their levels of spend on SEM, often at the expense of other offline media like TV, newspapers, and direct mail. Besides the fact that marketers are finding search effective, another reason for increased spending is likely that with thicker competition in general, keyword costs will naturally increase across the board.

However, merchants completely new to PPC may further drive up bids in part due to novice strategy, such as bidding very high for the top ad position from the start. Although it might be a short-term tactic, Neil Kugelman, CEO of online jewelry retailer, notes in this month’s Internet Retailer that he is already seeing evidence of this in his own PPC account. He says, “Usually we see that kind of competition for keywords at Christmas, but we’ve seen some terms go up 20% since Christmas.”

So what alternatives might there be for merchants to cope with an increasingly competitive PPC advertising environment? For one, Kugelman is investing in affiliate networks as well as turning back to offline media like airline magazines and geo-targeted TV and radio spots.

But in addition, a high level of optimization for efficiency of PPC campaigns will be key:
• Look for less expensive, more specific keywords which might not garner as much traffic but which convert better- if you have them, invest more heavily in those.
• Regularly run search query reports to keep an eye on the terms that your broad match keywords are getting you clicks on.
• Maintain a good Quality Score to keep your minimum bid as low as possible. Keep landing page content relevant, and maintain decent click-through rates.
• If your company has limited distribution, experiment with the different targeting options available in your PPC platform to make targeting more precise.

Knowing all the PPC features at your disposal will help you remain competitive as new entrants accumulate.

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