Introduction to Paid Search

We know that most of our customers are well versed in paid search, but there are many who don’t live in the space and have limited knowledge.  I was asked to write an introductory article to Search and I discovered that there are so many different aspects that go into search advertising: from bidding on keywords to the multiple search engines, it seems almost impossible to know every little thing about the channel.

Every day, billions of people encounter advertisements when they use a search engine.  These ads tend to differ depending on which keywords the user types into the search bar.  These paid search advertisements are getting increasingly important in the marketing and advertising world.

Paid search works on a cost-per-click (CPC) basis.  Companies bid for the most efficient advertising spot on a search engine based on keywords the user types in.  For example, a travel insurance company would want to bid for the top spot for the keywords “best travel insurance companies”.  The company is bidding for how much they will pay for each click their advertisement receives.  CPC prices can be as low as $.01 to as high as $54.91 (for the keyword “insurance”).  Is paying the high price for a top advertising spot worth it?  The top advertisements average 12.2% more clicks than the next advertisement. So in short, yes.

Every time a user searches on Google an auction is triggered based on a formula known as Ad Rank.  Ad Rank is calculated by multiplying the CPC of each keyword by the components that go into  the corresponding ad’s Quality Score, including the expected click-through rate (CTR), relevance and landing page.  Ergo, ads with a higher Ad Rank can pay less on engines for their ads to appear against the same keywords as someone else.

There are many benefits to using paid search.  Your ads receive increased visibility, you get instant results, and there is typically an increase in conversions.  Customers who purchase online are 30% more likely to perform a search and 17% more likely to have clicked on a PPC ad.

Paid search usage is growing at an exponential rate.  Every year more and more companies are jumping on the bandwagon.  Just last year, search ad revenue totaled $18.4 billion, breaking the record.

There are a few search engines where the majority of paid search goes on, the most common being Google.  According to Search Engine Watch, 67.6% of all paid searches happen on Google .  Other major search engines are Yahoo!, Bing, and Baidu.  Google gets an estimated 1,100,000,000 unique visitors a month.  Bing gets an estimated 350,000,000 unique visitors a month.  Yahoo! gets an estimated 300,000,000 unique visitors a month.

I had a conversation with Dave Ragals, Global Managing Director of Search at IgnitionOne, where we talked about how search engines have been adding more advanced products like Google Shopping (formerly known as PLAs) and Ad Extensions.  He explained that with Google Shopping, retailers can now manage their products and inventory with AdWords.  Google Shopping now offers Benchmark Click Thru Rate, Impression Share, Products Tab, and Exclusions.  Imagine Google Shopping ad creation currently as your social circle. You can be part of multiple social circles concurrently, and have different attributes when in each.  But this could change, as, “Google tends to be the leader and Yahoo!/ Bing always ends up following suit,” he told me.  Ad extensions occur when there are numerous links associated with one ad.  For example, say you are looking at a CPO Commerce ad (client). With ad extensions, there can be a link to various pages that are not directly related to your search but may be of interest to you based on your query (see below).


IgnitionOne’s technology is able to figure out where a company should advertise and what the CPC should be, all within a millisecond.  In addition, they can determine which keywords are most effective to bid on. They are able to determine the marginal cost to marginal return ratio for each keyword/position.

The future of marketing is in search.  Every day, more and more companies turn to search to fulfill their advertising needs.  Those who don’t adapt to search will most definitely get left behind.

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