• The first is a company or agency who is aiming to make a profit off of SEM, with a separate P&L; (Profit and Loss) model for online marketing efforts. Companies involved in this SEM model range from mom-and-pop affiliates to multinational corporations. A well executed SEM campaign can create profits in the millions of dollars, or just enough to make the monthly mortgage payment. In most cases, companies or agencies who find certain keywords to be unprofitable will stop paying for that word or phrase, or stop trying to optimize it.
• The second type of SEM player can be the most hazardous to your business model. This is usually a large agency, or a big business, with a huge budget, but little regard for the cost per click. They may have an advertising budget which is focused more on branding than ROI, or they may have a formula that focuses on Lifetime Customer Value, so a loss on the first sale is expected. In many cases, their only directive is to hold the top spot on the sponsored listings, irrespective of the actual cost per click. Sometimes attorneys or Type-A personalities with deep pockets will also insist on always being #1 for a certain term. In some cases you will get multiple bidders for the same set of terms, which will create costs per click as high as $50. Since the average conversion rate is somewhere around 3%, a $50 per click strategy usually is a recipe for bankruptcy. If you’re competing against companies like these, you may have no choice but to seek alternative keywords.

Getting In the Game

How do you compete with established players and big spenders in SEM? First of all, you have to know your keywords. Setting up an SEM campaign usually has a high initial cost because you are going to go after a variety of keywords that don’t pan out, or you will find that your website isn’t converting properly and needs to be modified. No matter how much you try to emulate the business models of established online competitors (who may be doing it wrong themselves), your initial foray into SEM should involve careful observation and measurement. This is generally done by having a keyword list that is highly relevant, ensuring that negative keywords (searches where you don’t want to be seen) are in place, and testing the waters with multiple messages (ads, or “creatives” as you agency will call them). There should be up to a month of testing for most SEM campaigns, since a set of keywords can get a huge conversion rate one day and no conversions the next. Even in simple online retail sales, there is usually a sales cycle between the initial customer click and the purchase, so sometimes it takes several days to build a “pipeline” of interest before you start seeing sales.

The “Free” Search Engine Listings

SEO, which gets lumped into the SEM world, is also an important consideration. Appearing in the “natural” search engine listings can be very cost effective, but the setup and maintenance process can still be very expensive. If you have an established and trustworthy website, you will be better off than if you have a brand new site in a field that has abused the trust of search engines like Google. Search engines value on-page content and links from other websites, which count as endorsements. If other valued, trusted sites online link to yours, then you are likely to get better rankings in the search engines, assuming that your site is properly configured. If your site is not properly configured, or if you haven’t gotten trusted links, an company like Web.com Search Agency can help you. Usually it is best to get professional SEO consulting, since half of SEO involves avoiding the penalties that Bing, Google, and Yahoo have created for sites that abuse the system. Many amateur SEO practitioners unwittingly trigger a penalty by using a tactic that may have been acceptable 6 months ago.

Offline Promotion

One component that often gets ignored in SEM involves offline branding and marketing. As you may have noticed, many large online companies do advertising on radio, television, and in magazines. Ads like these can still play into SEM. When people comment on a commercial for a certain brand, they will also link to the website, which improves the site’s SEO value. The conversion rate on a known site is also higher because it has brand recognition, which is almost impossible to build on a search engine. If you’re selling branded products, and have the manufacturer’s permission to use the branding in your SEO or PPC, then referencing branded keywords is highly recommended.

More Experience = Better ROI

Getting the maximum ROI out of an SEM campaign usually involves a very sharp learning curve for the novice. Often, an “In-House” SEM manager will require the services of an outside agency, or consulting firm, in order to make the best decisions. The advantage of hiring outside help is that you are taking advantage of the agent’s diverse range of SEM knowledge. In almost all cases, the rules for bidding on one set of keywords will apply to another, but an agency will also have experience in building campaigns that get higher quality clicks, and simultaneously filter out the traffic that you don’t want to pay for. Furthermore, agencies often have knowledge of how companies that are similar to yours have made mistakes in the past, and even though SEM consultants are unlikely to share the details of what went wrong (for confidentiality reasons) your campaign is more apt to have safeguards built in that will prevent a similar occurrence.