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June 4, 2007

Inside the Auction Black Box

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Last session today for me. Once again, our moderator is the talented Jeff Rohrs, whose name I misspelled at least twice earlier today. Joshua Stylman of Reprise Media, Jonah Stein of Alchemist Media and Dan Sundgren of Efficient Frontier will be our panelists this session. Jonah is stepping in for Jesse Stricchiola who is out sick. These fabulous lads will be explaining to our audience of experienced PPC gurus and one very confused blogger exactly what goes on inside the paid search auction. My wrists hurt so we’ll hope that things are succinct.

We’ve got a couple minutes here while they deal with some sound issues. Yay, a break!

Dan Sundgren is up first. He starts off with a quote from David Ogilvy emphasizing how your job as a marketer can add just as much to the product as any

Quality score inherently is about being obsessed with being user experience. Google’s success is based on doing good for the user and the quality score is there way of feeding into that.

To really understand quality score, you need to understand that Google built it to reward a good user experience. He believes that Google will try to put less and less ads on the page, trying to give people what they want, making things cleaner, simpler. It’s counter-intuitive but so is Google.

It’s extra important now to understand Quality Score because as Google grows in ad spaces (video, tv, radio, print) they’re going to extend their auctions to those areas too. The evolution of paid search is toward better user experience and better return. From CPM to CTR and now to CPA.

Doubleclick and Google Analytics have made Quality Score based on more than just CTR. Landing pages quality is a component.

AdRank is the formula Google uses to figure out where an ad should be placed on a page. Google likes fairness, they want the little guy to have a chance to play in the same space as the big guys because the competition is better for business all the way around.

The minimum bid on a keyword changes based on the general quality score for that word. A better quality score can get you higher up in the paid results without paying more per click.

“Our business is infested with idiots who try to impress by using pretentious jargon.” – David Ogilvy. Dan emphasizes that it’s important to drill down. Don’t accept surface answers. It’s a complicated question.

Josh Stylman is up next. He’s going to cover the other quality score engines: Microsoft and Yahoo. He mentions he’s got some differences of opinions here, so this should be interesting. Summer 2005 was when Google introduced the idea of a Quality Score.

Quality score philosophy is about Punishment with Google and Reward from Microsoft and Yahoo. Google will raise cost for low quality and will deactive ads that are too low. MS and Y don’t ask quite the same premium. It’s on average $1.00 more with Google and only $.10 and $.08 with Yahoo and Microsoft.

Part of the trouble of course is that Google has a 65% market share. You have to play with them and that means they can charge more. It’s a premium that you pay to be in the space. By comparison, the lower costs in the other engines reflect their attempts to attract advertisers to them so that they can attract distribution and gain market share.

Google uses many more data points than the other two. In Yahoo and MSN, you really only have to worry about CPC keyworded-targeted text ads. It’s easier to figure out pieces of the blackbox. MSN offers day-parting and demographics, both of which are justification for getting advertisers to increase their CPCs. It’s not necessarily a bad thing, if it’s worth it.

Editorial review can be hit and miss. Because it’s human, there’s not always a logical pattern to what gets rejected and approved. Josh would like to see more automation there.

What defines relevancy? You can make the CTR higher and kill your conversion rate. It’s possible to make sure that everyone wins but you need balance and make sure that there is actually conversation going on.

Jonah Stein is going to be covering CPA. He doesn’t have case studies, since the program is fairly new. What is Pay per action? It’s an experimental model, Google as a super affiliate. You only pay when something happens. It’s a nice risk free model and you never leave prospects on the table. Not only that it’s better on click fraud.

On the other hand…you’re sharing the value of the customer with Google. They get to know how much you think your customer is worth. It distorts the web, turning everyone into a marketing site. And it can increase costs overall as more advertisers get into the space. It turns Adsense publishers into affiliate channels.

The ultimate danger is that it turns Google into everyone’s Silent (or not so Silent) Partner. Aaron Wall calls it Google’s invisible hand–you have to be willing to share a lot of information with them in order to get the best results. They already collect a huge amount of data through a huge variety of channels. Jonah lists them; it takes two slides. I’m pretty sure I see Rebecca writing them all down so check with her later on if you’re interested.

Looking ahead: PPA is here to stay. It’s too soon to know the ROI but the biggest threat here is to affiliate players–Google is cutting into that business model.

Q&A highlights:

How do misspellings and synonyms work if they aren’t on your landing page? Josh: Structure them at the campaign structure level. GYM anticipates that savvy marketers will buy those keywords and you won’t necessarily be penalized for them. Jonah: You’re not necessarily going to get a bad quality score for ads with misspellings. Dan: Did You Mean is really good piece that people are using more and more.

(My battery is dying, I may not finish recapping this session.)

Use your analytics to make sure that you know what you’re doing. Don’t ignore data points. Don’t try to blow out the space and don’t let other companies make you panic. Spend your energy improving your conversion.

People who said ‘Google’s only going to be a search engine’ either didn’t know what Google was doing or didn’t realize what being in search really meant in an era of ubiquitous information.

(There is still about 30 minutes left but I only have five of battery power so I’m going to post this now. Look for more brilliance from this session from the other recappers.)





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