Winning the Search Bidding Wars

A BATTLE IS RAGING AMONG ONLINE MARKETERS. That battle is for the customer, and the battlefields are the paid-placement search engines. ▪ Yes, e-mail can be an effective weapon (particularly for retention, upselling, and cross-selling), and banner ads can direct some surfers to your side. But when it comes to winning over prospective customers who are seeking what you are selling, you need command of paid-placement search engines such as Overture, Google, FindWhat, and Sprinks, and the price-comparison search engines such as Dealtime, Pricegrabber, and MySimon. ▪ Search engine marketing seems easy enough: You pick your search words, set up accounts at the major engines, bid your cost-per-click (CPC) price, and then take your orders. In fact, it seems easier than testing and renting mailing lists. ▪ But it’s not. The problem is that search media are different from most other online and offline media: It has a limited yet replenishing inventory. There are only so many searches for each word or phrase. The moment a visitor completes a search, the opportunity to capture that searcher is gone; either you got that click, or your competition did. Each marketer is in a constant and relentless bidding war against the competition to obtain and maintain the search listings needed to drive revenue and profit. And all this is happening in a real-time auction environment, often with many thousands of keywords. ▪ Only those who grab the top positions for the important searches at a CPC that is still profitable have a chance of succeeding. Bid too low, and you’ll be pushed out of the top search page positions. Bid too high, and you’ll lose money with every click. ▪ To avoid being a casualty in this battle for customers, you need to follow a three-step campaign:


    Base your bidding strategy on your overall business and marketing objectives, as well as on the fundamentals of your particular business. That means understanding both immediate and long-term profitability of products, categories, and types of customers. Understanding the allowable cost of customer acquisition is important. True understanding expands beyond just the average allowable cost per order (CPO) and cost per action (CPA), to include the high- and low-margin segments of the business.

    You also need to understand the nuances of each search engine. In Google, for example, copy must be compelling. Google rewards ads that have good clickthrough rates, so writing an ad that prequalifies visitors could lower your position, as only the best prospects will click through. In Overture, a bit of prequalification is okay.

    Some campaigns also need strategies adjusted based on specific results. Each keyword listing in each engine will have its own conversion behavior, and that behavior may change based on time of day, day of week, or even position.


    Most online retailers should be running broad search engine campaigns with thousands of terms. Because each listing has to be managed independently and automatically, because each search engine has different rules, and because each listing will have its own conversion behavior and volatility, technology becomes a critical factor. You simply cannot manage any reasonably large campaign by hand without wasting money or, worse, missing opportunities.

    Several vendors have developed campaign management technologies specifically for search marketing. When evaluating vendors, though, don’t focus exclusively on the technology; also consider the account team. After all, having a sophisticated autopilot system is useless without a skilled pilot to manage and adjust settings.


    Some marketers seem to fixate on tactics rather than strategies. What do we mean by tactics? Here are a few, along with why some marketers use them, and why you often shouldn’t. Most of these tactics apply to Overture and other direct paid-placement engines such as FindWhat or Sprinks, and not to Google. Google has its own tactics, which tend to be more strategic due to its automated method of determining position based on a combination of clickthrough rate and CPC bid.

    • Gap surfing: beginning at the top of the auction for any keyword, finding the bottom of the largest or the first bid gap (the difference in bid prices), and then bidding at the bottom of that gap. Pros: low CPC. Cons: may miss opportunities to get large traffic volumes and still come in under your CPO/CPA more efficiently.

    • Dayparting: changing bids or positions based on the time of day. To execute dayparting correctly requires strategy. One must know which listings will benefit from the dayparting by eliminating waste rather than just reducing the CPO, without dropping profitable volume. Pros: can allow you to capitalize on opportunities. Cons: possible loss of profitable volume on some listings if improperly executed.

    • Bid jamming (Overture only): purposely moving one’s bid directly under that of another bidder who has foolishly set a high bid, to “punish” the bidder while continuing to pay one cent above the max bid below. Pros: inflated ego. Cons: someone (even the person jammed) can easily bid jam back, forcing you to pay your max bid, starting a reverse bidding war. Given the risks involved, this tactic in not recommended.

Regarding hired guns

Analytics and search campaign management companies, as well as some interactive agencies, can provide you with the specific paid-search reporting and information you need to determine if your campaign objectives are most appropriate for profit maximization and long-term survival. A firm has a nearly flawless execution when the appropriate strategy is executed using the right technology solution for the organization, with a skilled team regularly reviewing the campaign information.

Smart marketers know their strengths, weaknesses, and core competencies. Through a knowledge and understanding of internal skills and resources, you can determine which tasks you need to outsource to a search marketing firm. Search engine marketing will continue to require specialized campaign management for the foreseeable future, due to the recent addition of contextual search inventory at Overture and Google, as well as consolidation and likely new products being rolled out by MSN. Marketers are building an armory of expertise and getting a foothold in paid-search marketing now. After all, it’s a fight for their life, and they know it.

Dave Pasternack is president and Kevin Lee is CEO of, a Rockville Centre, NY-based company specializing in search engine campaign management.