Inside the Auction Blackbox – PPC in Quality Score World

Jeff Rohrs of Exact Target is moderating – certian things have not changed in paid search. The big difference today is quality score. Jessie Strichiolla is not here due to illness. Jonah Stein is filling in.

Dan Sundgren – Efficient Frontier

Understanding the quality score mentality. Google is successful because they are obsessed with user experience. It’s Google’s way of assigning a value to an advertiser’s user experience. We need to understand this from a marketer prospective. It’s designed to reward the adveriser for a quality experience. He believes there will be less advertising on the Google SERPs in the future to do this. Challenge for Google is that CTR is the biggest piece of quality score. Sometimes the best CTR ad is not the best performer. Landing page relevance is a big piece of the quality score.

Adrank: The forumula Google uses to figure out where an ad should be placed on a page. Google want’s a diverse ecosystem. They mix large advertisers with local players. Google wants users to get what they are looking for the very first time.

We need to put on our marketing hats and pay more attention to the user experience to succeed in PPC.

Joshua Stylman of Reprise Media

Talks about the other two big guys – Yahoo! and MSN. Google launched QS in 8/05. MSN launched 10/05, and Yahoo 3/07. They all followed the Google model. All three engines have the goal of defining relevancy. Google uses a “guilty until proven innocent model”. If you do not have a good QS, you pay a premium. If your ad is irrelevant, your ad will be deactivated. Doesn’t happen as much on MSN and Yahoo!

Takes the example query of “running shoes”. Compares all the Paid landscapes. Google $1+. Yahoo about $.10, and MSN.$08. It all boils down to market share. Google is a must have, whereas the others are not. They take a hard stance, and you will pay a premium to pay. The other engines have a catch 22. Want penetration to the masses so less likely to deactivate ads because marketers may get worn out. The more advertiser penetration they garner, the more distribution partners they will partner with.

With Yahoo, and MSN – its CPC only. Google uses CPA. Makes it easier to manage bids on Yahoo and MSN.

MSN was the first to offer dayparting and demographic targeting. Speaks the language of large marketers. Great way for advertisers to integrate search and other media. If the demographic targeting is valuable, advertisers will pay for it. It’s a compelling marketers to participate in the auction.

One of his clients is Martha Stewart. The KW “martha stewart living” (the company’s official name) got deactivated by Google. Is it really irrelvant he asks? Shows other examples where keywords that were relevent get disabled. Doesn’t seem to be a logical pattern to what gets rejected and what get approved.

What defines relevancy? Marketers often define relevance as best converting keyword terms. Engines define it as what makes them the most profit.

Jonah Stein of Alchemist Media

Asks if anyone is using CPA yet? Not many hands up. Pay per action – is it the future?

CPA is an experiment by Google as being your superaffiliate. Only available through the content network. Only pay for results – download, subscription, lead or sale. Less risk for advertiser. I’m willing to pay $X for the action. If it doesn’t convert – you don’t pay. Many would say it addresses the issue of click fraud. If only paying for actions, you are not paying for clicks.

There is danger behind that curtain of CPA. Do we want to share the value of our customer with anyone? Do we want to throw it into the black box? Distorts the web. Everyone is a marketer – with conversion as the goal. Increased costs on advertiser side. Not a good impact on the web overall. Because CPA is so simple, increases the amount of advertisers and makes it more competitive. You are turning Adsense publishers into affiliate channels. Many people don’t like ads on certain publishers sites. Makes it hard to control. CPA turns Google into everyone’s “silent partner”.

Quotes Aaron Wall referrering to Google’s invisible hand.

• Google Adsense
• Google Analytics
• Google Conversion tracker
• Google Checkout
• Google Website optimizer
• Now Doubleclick

Gives Google complete transparency. We might get bitten by the hand that feeds us.

PPA is here to stay. It’s a model that makes too much sense to abandon. Can’t turn away the money. Too soon to know if the ROI makes sense. PPA is the biggest threat to the affiliate marketing business.