Number One? Not Always the Top Ad Strategy

Dec 21, 2006 4:12 AM  By

(Searchline) San Diego-based search marketing firm Engine Ready recently came out with a look at the impact pay-per-click ad position has had on the clickthrough and conversion performance of a diverse selection of its managed accounts in the last year. While the data do not rise to the level of a formal study or index, Engine Ready marketing vice president Brian Lewis thinks the project holds some interest as an informal look at ad position, bid strategy, and performance.

“The days of campaign success relying solely on good bid management are long over,” Lewis says, largely thanks to the introduction of quality scoring, the changing competitive climate, and advances in ad scheduling and the ability to target by geography, demographics, and other valuable criteria. In these conditions, it may not always make good strategic sense to aim to be the top sponsored listing on a term.

To take a closer look at that notion, Lewis and the Engine Ready team compiled a year’s worth of ad position, clickthrough, conversion, and cost-per-action metrics for a basket of the firm’s clients conducting marketing campaigns on Google AdWords. The sample size amounted to more than 190 million ad impressions and more than 2 million clicks from clients working in a wide range of industries, including b-to-b and consumer companies, aiming for both lead generation and direct e-commerce.

The Engine Ready findings seem to confirm the notion that for many search marketers interested in conversions rather than clicks, the PPC sweet spot might actually be farther down than the top slot. The first ad position did indeed turn out to have the highest clickthrough rate (CTR) for the data set under scrutiny: 3.0%, falling off significantly to 0.9% for the second spot and 1.0% for the third.

But at position 4, the ad’s CTR rose back up to 2.3%, much better than positions 2 or 3. Lewis suggests that this might be because Google very often runs three ads in the blue-shaded “one box” above the natural search results, then move ads four and up to the right rail–a position that can actually be more prominent than the lower one-box slots.

When it came to conversion rates, the high point was a 7.8% rate at ad position 7, while the lowest rate in the Engine Ready sample–1.6%– came in the third ad position. On average, conversion rates were better from fourth position down than in the top three ad slots.

Lewis says those findings tend to support the hypothesis that searchers who click on ads lower down in the PPC rankings are closer to a buying decision than those clicking on the first ad they see, who are more intent on compiling research for a purchase, including general product information and comparative data.

Lewis says the conversion disparity underlines that marketers need to be aware of the clues that search phrases provide about where prospects are in the buying cycle. “I’m currently in the market for a laptop, and as I’m doing research, I’ll just type in ‘notebook’ and click on the first listing to get started,” he says. “I won’t bother to specify a model or brand. But as I learn more and get ready to buy, Iím more likely to be drawn by an ad that mentions the HP 6120.”

Marketers should thus be coordinating their ad creative and their placement strategies to make sure that those ready-to-buy searchers are seeing ads that appeal to their specific product interests, not simply headlines that offer “Best deals on notebooks!” Those broad appeals are more effective for searchers early in their research phase and thus might work better in high ad positions.

One Engine Ready client operates in the debt consolidation industry, Lewis says, but found that its ads converted particularly well at those lower positions when the creative copy was split into messages about specific attributes such as “debt consolidation” and “debt settlement,” linked to appropriately granular keyword campaigns.

For example, he says, that debt consolidation client saw conversion rates of 21.7% with ads linked to “debt consolidation service” in ad positions ranging from number 6 to number 9, and relatively high conversion rates of 10% in those same slots with “credit debt consolidation.”

“So in very highly competitive service-related keyword phrases, we experienced significant success in positions as low as number 7,” Lewis says.

The Engine Ready project found that the cost per acquisition was most favorable at the second ad position, where CPA was $38. By contrast, acquisition costs averaged $60 for the first, third, and fourth ad positions in the campaigns examined and actually rose to $84 for slot 5.

Interestingly, the second best CPA in the project was posted by ad position 7, where it cost on average $50 to get a customer to do something. “No one’s really managing for ad impressions now because PPC impressions don’t cost anything,” Lewis says. “But it may be worth looking at how effectively impressions in different ad positions lead to conversions, because those impressions are the starting point for any sales.”

Finally, Lewis thought it would be productive to take a look at a metric not often examined in search analytics: conversions per 10,000 impressions, to get a sense of the relationship between the number of times an ad is served in a particular position and its power to drive actions among viewers.

As it turns out, the fourth ad slot is powerful here, producing on average 12 conversions for every 10,000 views for Engine Ready’s clients. That was significantly higher than any other ad positions tracked; the next contender was the number 7 spot, with 7.6 conversions per 10,000 views, followed by position 1, where the conversion/impression rate was 5.5 in 10,000.

Rather than turning up broad rules that can be applied to any marketer’s PPC ad positioning across any industry, Lewis says Engine Ready’s inspection of its compiled client data suggests the importance of understanding the unique “PPC personality” of specific industries and markets. The kind of products and services being marketing can affect the significance of position, as can the buying behavior of prospects, strategies used by competitors, the seasonality of a given industry and marketers’ determination to own a specific keyword for branding purposes. And of course conversions depend on a lot more factors than just ad position, he points out–including optimized headlines, creative, and landing pages.

But Lewis thinks the Engine Ready client data, informal and selective though it may be, points to the possibility that PPC sweet spots live at the fourth and seventh ad positions, where optimum conversion rates tend to produce optimal return on investment.

“We intend to look at this data again in six months, and we’ll be watching for indications that show those same trends,” he says.