Search Engine Advertising is the placement of small text advertisements on search engines. Google Adwords and Overture Pay-for-Performance Search are the two most well known players. On Google the text ads appear at the top of the results and on the right hand side under the heading ‘Sponsored Links’. Overture syndicates its ads to other search engines like Yahoo where they appear at the top of the page and are under the heading ‘Sponsor Results’.

Search Advertising is spearheading the recent increase in online advertising spend and its popularity is largely based on its cost per click payment model that the search engines have adopted. That is, you only pay when someone actually clicks on the link to go to your website. Further the cost you pay is set by bidding, so while popular search phrases (eg Rental Cars) can cost several dollars per click, phrases for which there is little competition for can cost less than 10 cents NZ.

Different providers apply different ranking criteria in addition to the amount an advertiser is prepared to pay. For example Google Adwords combines the max CPC set by the advertiser, with the popularity of the ad, and the number of searches which means that your ad can appear above another advertiser if its more popular with searchers. In fact if an ads click through rate is less than 0.5% the ad is automatically deactivated by Google! This relevance equation also means that popular ads pay less to be positioned in the premium placement area at the top of the results.

Text ads are an extremely flexible media and allow for dynamic creative adjustment where the ad content changes dependent on the exact phrase entered by the searcher. This means that a campaign could be using 20,000 different creatives! Automatic A/B testing is also provided where the most effective creatives are increased in frequency and the less effective ones reduced or removed.

The complex and dynamic pricing and placement model can have some strange effects. For example on a fixed budget reducing your max cost per click bid can actually increase the amount of traffic you get. Also bid gaps can result in cost per click increasing by 500% while the traffic only increasing by 10%!
Search Engine Advertising Industry Statistics

Search Engine Advertising is the fastest growing method of marketing websites. According to an eMarketer in December 2003, ‘Paid Search’ in 2003 had grown 123.2% over 2002.

Advantages Of Search Engine Advertising

  • Performance based advertising
  • Traffic is pre-qualified they are actively looking for your product or service
  • High click through rates
  • High conversion
  • Country and language placement filters
  • Real time ad creative and placement control

Disadvantages Of Search Engine Advertising

  • Text only
  • Limited inventory
  • CTR cutoff, ads have to be relevant and popular in terms of clicks
  • Complex pricing, placement and management models

When to Use Search Engine Advertising

  • Essential for any website marketing campaign due to cost effectiveness and quality of traffic generated
  • Medium and long term campaigns
  • Where organic search engine ranking cannot be achieved
  • Pay to out rank the competition
  • Ideal for marketing a wide range of products (e-commence sites)