ClickEquations Blog

The deal between Microsoft and Yahoo is very good for the paid search community. It creates a viable #2 competitor with enough market share to matter and a single API for developers to exploit. And Yahoo gets a few dollars for their retirement fund.

Some quick initial thoughts on the impact to each player in the game:

Search Advertisers
Advertisers get a single channel with 20-35% of the search traffic (depending on what and how you measure, and who you believe) which is *nearly* enough critical mass to actually spend time on. The core economic problem that Microsoft, and to a lessor degree Yahoo had before was that they didn’t offer enough inventory to justify the effort of managing let alone aggresively managing large keyword accounts on their platforms. Many advertisers have 20% of their keywords or less running on these engines, and spend 10% or less of their management time on them. Bing and Yahoo still need to attract users or advertisers won’t care. But at their current market share, or better yet if they can pickup 5 or 10%, there’s enough there to be worth the effort to equalize campaign sizes and spend perhaps 30% of campaign management time on them.

Microsoft
Proof that being dumb and rich is a far better strategy than just being dumb. Nothing except their money has justified Microsoft’s existence in this market until recently. Bing seems a reasonable search engine, but the AdCenter platform is pure Microsoft, meaning anything-but-cutting-edge and won’t really offer even the baseline of what the market really needs until version 3.0. They seem to be trying, but in management tools, software and API features, and overall ’state of the art-ness’ the teams over there need to re-triple efforts to deliver a platform and API set as rich as Google’s. If they don’t, users and developers who now have a large enough market share to bother, won’t have enough patience to work around the limitations it takes to do so.

Yahoo
Yahoo can now spend their time and energy on being second or fourth best at a wide variety of internet content and web-app plays, perhaps to eventually sell each of those to richer and dumber rivals. Or maybe the idea was to get out of search so Google would want to buy all their other assets. This is the Sarah Palin move of search – quit and declare victory.

Paid Search Platforms and Tools
For purely selfish reasons, we’re glad to see the Yahoo and Microsoft platforms consolidate. Every feature we add to ClickEquations that had to touch 3 different APIs took two or three times more time (at least) than if it only had to touch one. We can build more cool features to help advertisers faster now. As mentioned above, the AdCenter platform has plenty of Microsoft quirkiness to it, but we’ll hope and assume they listen to the market and evolve. But in the case of API vendors we can do more with less.

Searchers
I believe that search result quality has a long way to go, that the loyalty Google has is to the brand and therefore ultimately could erode quickly. The Bing/Yahoo platform will likely very slowly pick up steam, but MS has to go do some HUGE bus dev deals to buy more distribution (AOL?) and continue to innovate on the results. Over time, they could substantially erode Google share, but the road will be hard and long. In this case, a perfect fit for Microsoft BUT they need to earn it they’re not just going to be able to out-last the competition or wait for them to commit suicide this time.

Google
Enabling very weak competition to become marginally viable doesn’t hurt Google in the short run. The fear of actual competition and even market share loss could very well spur the very smart folks at Google on to deliver even better stuff faster, as competition always does. So in the short and medium terms I’d say this is good for Google (and helps get the Gov’t monkey off their back for a while). In the long run, I’d still bet on Google but Microsoft does have a lot of money and know how to compete.

But mostly, I’m just really happy we have one less API to support.

In the paid search world, Quality Score is the new black. Blogs, forums, conferences, and Twitter are full of discussions of what quality score is and how you can optimize it.

But the real importance of quality score has been a bit hard to pin down. Not any more – we’re going to reveal the exact $$ value of quality score.

UPDATE: Since this post was written, we’ve learned an important new fact about Quality Score – the numbers we’re shown are reported as integers between 1 and 10, but these are not the numbers or scale Google applies to in their formulas. Rather, they’re representative of the actual Quality Score in terms of 1 being poor and 10 being great. Knowing this, it seems unlikely the specific math and results described in this post are correct. The positive and negative effects of good and bad quality score remain true, and hopefully the numbers are roughly proportional. We’ll update this post further when we get more information.

Why Does Quality Score Really Matter?
The prominence of quality score has been based on it’s role in Ad Rank – the formula Google uses to determine the position in which your ad appears. Ad Rank = Bid x Quality Score.

But Quality Score also plays a very important role in determining how much you’re charged per click. This is a separate application of the value which occurs after Ad Rank is calculated.

The recently released Google Video by Google’s Chief Economist, Hal Varian helped clarify this point.

In the video Mr. Varian points out that your cost-per-click is calculated using the formula: Ad Rank of the ad below yours / your quality score.

So if you’re in position #1 with a quality score of 5, and the ad in position #2 has an Ad Rank of 10, your cost-per-click is 10/5 = $2.

So What Is Quality Score Worth?
Knowing this is how cost-per-click is calculated, we’re able to determine the specific impact of any quality score on your cost-per-click.

And therefore the exact cost or savings from any single-digit increase or decrease in your quality score.

Yes that’s right – we can tell you the specific change in your CPC that is due to the quality score you’re getting for each of your keywords.

For example, your QS=10 keywords are enjoying a 30% CPC discount as compared to if they were QS=7 and in the same position. And your QS=4 keywords are paying a whopping 75% premium for their position.

The table below contains the complete list. This details the positive or negative impact quality score is having on the CPC prices you’re paying.

These factors are true regardless of your bid, position or those of your competitors. These are the impacts of Quality Score on your cost-per-click, anywhere, anytime.

As you can see, there are serious savings to be had with high quality scores (8, 9, or 10) and very high penalty costs to low quality scores (6 or below).

How We Calculated These Numbers
We calculated these values by comparing the impact of quality score on the price established at a wide range of Ad Rank values. This analysis showed that when QS was applied as the denominator of the equation, the Ad Rank values didn’t matter – the impact of each step of quality score was consistent. (Check out the raw data). So it was a simple task to compute percentage of impact each different QS had on CPC.

Note that we set QS=7 as the neutral value because using ClickEquations to review a wide range of accounts we’ve seen that QS=7 appears to be the mean quality score across a very large and diverse set of keywords.

In other words, most keywords get QS=7, that’s the typical score. So quality scores better than 7 can be considered better-than-average and thereby beneficial, and quality scores lower than 7 are lower-than-average and detrimental.

Two Important Disclaimers

1) Since quality score is used to first compute the Ad Rank and then to influence the CPC, you wouldn’t actually have the position you do if you didn’t have that quality score.

So it isn’t exactly accurate to say that your keyword is paying 30% less for position 1 at QS=10 than at QS=7, because in most cases you wouldn’t be at position 1 if you did have a QS=7. I think the relative value for each QS remains valid and valuable.

2) Google very likely calculates quality score not as an integer but as a real number (you your QS isn’t actually 6 but rather 6.329498) which means the impact would be more linear and not in the big steps the charts suggest. Thanks to commenters for pointing out that this fact was left out of the original post.

What Does A 1-Point Change Cost You?
Based on the same numbers, this next table documents the economic cost or benefit of having your quality score move up or down by 1 point.

As you can see, if your QS=9, then moving up 1 pt (to QS=10) will give you a 10% CPC discount. Starting from that same QS=9 and losing 1 pt (to QS=8) will result a 12.5% % CPC increase.

A Clear New Reason To Improve Your Quality Score
Knowing that your quality scores are saving you up to 30%, or costing you up to 133%, should further motivate everyone to both know and work to improve your quality scores.

In ClickEquations we have a lot of features that can help you improve quality score:

• We list QS (and the related Min First Page Bid) right next to each keyword so you can watch them carefully.
• Our ClickShare metrics tell you which ad groups and keywords aren’t getting as many clicks as they should – and why – which can help you drive up CTR which is by far the largest driver of quality score.
• Our ClickVariance metric tells you when you’ve got keywords in ad groups which are under-performing based on CTR, so you can move them into their own groups and write more applicable ads, or pause/delete them – thereby driving up average CTR
• Our complete search query detailed reporting lets you add new keywords and phrases that users have proven that they click on
• Our multivariate text-ad testing tool is the best possible way to drive up CTR – often by 2X-5X which skyrockets quality score
• The Quality Score Distribution template in ClickEquations Analyst lets you keep a direct eye on how your entire campaign is doing relative to Quality Score – and we’ve just updated it to show the actual $$ saved and expended due to the quality score cost numbers released in this post.

Click To Enlarge

And A Warning
One small word of caution regarding the existing, and likely to continue, flood of tips on improving quality score. Be very suspect of anything which promises to improve quality score by any method other than improving click-through-rate.

Relevance has it’s place. But both the new Google Video and other recent disclosures make clear that CTR drives quality score. You will not have meaningful impact getting your keywords into your text-ads, grouping keywords in better ways, and many of the other tactics getting over-hyped in some quarters. Relevance plays a supporting role, as does landing page to an even lesser degree, but both are trumped and trounced by CTR. Get great CTRs and you’ll get great QS’s. There is no other route.

Summary
We hope you’re as excited as we are about the discovery of the true economic benefit and cost of quality score.

Another small victory for transparency in the paid search process. Which means another tool to help us manage PPC in High Resolution.

To learn more about quality score, read our complete Quality Score blog post series from several months ago, or check out the replay of our recent Quality Score webinar or our SMX presentation on Quality Score Tips on video.

I don’t believe firms should have any trademark protection in advertising, online or offline, with the exception of cases where an advertiser attempts to mislead a consumer into thinking they’re visiting or doing business with one company when it’s actually another company.

But the use of trademarks to compare or contrast is obviously – to me – legitimate.

It is something that happens naturally in the world every day and cannot be stopped or protected. It can only be stopped and protected in a few un-natural segments of communication and commerce where lawyers can beat sanity into the ground.

The search engines have been one of these places, and trademark holders can file to prevent others from bidding on their brand terms or using these terms in ad copy. Many companies do this, and unfortunately when your competitors block, it’s semi-understandable why your company might block too just to keep the playing field level.

I understand why a company would want to prevent others from competing with them. It’s a nice fantasy.

I even think the search engines, of their own volition, should offer registered trademark holders guaranteed #1 position and some neato ‘certified-official’ icon for their PPC adverts. Just because it sort-of-sucks to have to pay insane prices for your own name. I get it.

But that doesn’t mean others should be stopped from buying the trademarked keyword or using it in their ads.

It’s called ‘free speach’ and if you can understand trademark law it shouldn’t be that hard for you to grasp. Not the technicality, the concept. Anyone can say anything if they’re not hurting anyone else. In this case, if you’re not misleading anyone, you should be able to speak.

So Google has a policy I don’t agree with. That’s their right. (And it’s not the only one).

But should using words in a non-misleading way be illegal? The folks at 1-800-Contacts think so.

That’s right. The same people who could only come up with entirely of generic words as a company name, think that the combination of these terms should be illegal for use as keywords or in advertisements of competitors.

Read about their pathetic actions here. Then call every contact-wearer you know and send them to shop at Lens.com.

You Need Killer PPC Software.

This is the phrase used to begin the announce of our Twitter Contest. Is it true?

During a recent Omniture webinar they claimed (I think it was a Jupiter statistic) that 85% of paid search accounts do not use any tools beyond those provided by the search engines.

If nearly 2 million advertisers can get by with nothing out Adwords itself and perhaps the Adwords Editor, why shouldn’t you?

The Obvious Reasons
The first reason many people think about 3rd party paid search software is the convenience of managing the three major search engines from within a single interface.

Logging into three web sites, navigating three different interfaces, and translating three different sets of terminology gets tiring fast.

The second reason seems to be a desire for some type of automated bid management.

It’s hard to figure out how much to bid, and the problem is compounded by the number of keywords being managed and the rate of competitive and other changes in the market.

The idea of algorithms that put some math on your side of the table is undeniably appealing. A huge amount of data that needs to be constantly crunched and re-crunched – the perfect job for computers and software.

These are both solid reasons – and alone (putting aside the actual quality of most bid management solutions for the time being) could easily justify the effort and expense of moving onto a paid search management platform.

But I don’t think these really capture the most important advantages paid search software currently provides, nor the more exciting benefits which are only now emerging.

Let Me Count The Ways
Paid search marketing campaigns are run to make money.

Their operation requires that you you buy and organize keywords, set bids and write text ads, and then read reports to see what we should change to make it all work better.

Each of those steps – even within this massive over-simplication of the process – takes a lot of time, has a ton of room for error, and can swing your costs or revenues dramatically in either direction.

PPC is a complicated task, both logically and logistically – and you can’t do it without good tools.

The question is whether you want to use the free ones provided by the people who have very little incentive to make you efficient or effective, or the paid ones from people for are only incented if they can do those things.

Now before the comments come in from my friends at Google or Yahoo or MSN (ok, I don’t have any MSN friends) let me clarify and expand that point. It’s not that they don’t build and deliver tools that are designed to both make it easier to use their services and to help you produce better results; I think generally speaking they are trying to do both.

But there are limits. First of all they have to build general purpose tools serving the needs of the full range of users. Most of whom would be generously described as casual users. They don’t want power and complexity and sophistication – they want basic utilitarian capabilities that can be understood and applied quickly and easily.

Secondly, these tools are designed with the idea of making it easier to use the engines to run the ads, and then supplimented with features to help you do so successfully. They’re not designed around the goal running profitable campaigns within the technical constraints of the engines.

This not wordplay. One is task oriented, and one is goal oriented. One is about how you satisfy their needs, one is focused on satisfying your needs. And they’re absolutely not the same.

Which is what’s wrong with the engine tools – it’s easy to complete the task but hard to accomplish the goal.

And it’s why most advertisers aren’t making nearly as much money as they could from paid search.

Let’s get more specific:

Creating and Editing Campaigns
In the nuts and bolts job of building campaigns and ad-groups, the engine web interfaces are fine, with some clear logical/quality differences between the various implementations (ie there are some crazy limitations with both the Yahoo and MSN interfaces.) For one-at-a-time adds and edits they generally work pretty well. The largest limitation they have is with the interface constraints of HTML or even AJAX, which the new beta Google Adwords interface looks to be the first to move beyond.

For both bulk and individual editing, the Google Adwords editor is excellent. It’s the standard to which most third party tools are playing catch up. The interface is fast, the layout intuitive, the features powerful, it’s just a great all around tool. If it supported Yahoo and MSN the third-parties would really have very few advantages in this area.

But this is the core of the utilitarian argument. They engines make money when you expand and tweak campaigns. So they do an excellent job of enabling you to do so.

Reporting clarity
Here the tables turn. The reporting capabilities of the engines are basic and unimpressive. They provide just enough data in their core web interfaces to make simplistic editorial decisions. They offer batch-mode report modules that can provide more data, but without real-time delivery it’s difficult or impractical to use them for serious analysis – unless you have the time to design and request many different reports (each time you want them), export them and then import them into excel, and then sit for hours digesting and interpreting.

The best of the third party tools make you much better informed, both in the midst of their editorial capabilies and with pure reporting and analysis modules. There are simply more reports, a greater ability to customize and save them, and much faster date and data filtering and intra-report navigation. This enhanced reporting enables more review, faster and deeper analysis, and better decision making.

In some cases, the reporting capabilities go beyond better access to the data provided by the engines, with enhanced data collected at the site (regarding user behaviour and conversion), and/or proprietary metrics which offer additional views or insights. Some even provide direct integration into excel for even more advanced charting, analysis, conditional formatting, and one-button updates. All of this enables smarter decisions based on better and deeper information.

But Wait, There’s More
Better reporting and simpler editing are important. They can be huge time savers. And for anyone who spends $10K or more per month and five or more hours or more managing their campaigns these benefits should easily more than justify the cost of paid search software.

But beyond this, what paid search software can and should really do that the engines themselves don’t is to help clarify what should be done and make it easier to accomplish the right changes.

Clarifying opportunity starts with simple alerts that warn you of ‘out of norm’ conditions. It includes advanced data insights such as our ClickShare and ClickVariance metrics and ‘what’s changed’ reports that highlight severe increases or decreases in performance that almost certainly require your reaction.

Getting things done features include keyword suggestions (positive or negative), automatic or suggested campaign re-organizations, multivariate text-ad testing, dynamic match-type assignments, day or geo-parting, cross-engine campaign cloning, and many more.

A range of initial versions of many of these features are available today. What’s it worth to get warned that your campaigns are making money in most states but losing a lot in a few others? How would your campaign improve with an MVT test that boosts your CTR by 350% in your top ad group? And these are just a few examples.

It’s Not If But When
Managing a paid search account without a high-end third-party PPC platform doesn’t make logical or economic sense. If you only use the engine interfaces, you’re agreeing to be disadvantaged in terms of the information you have access to, the pace at which you can make necessary changes, and the range of feasible analysis and improvements.

• You lose by spending money that shouldn’t be spent. In most accounts this is a solid double-digit percentage of your current spend.
• You lose by missing revenue that could have been had. This number is much harder to globally estimate, but it would be a rare account that didn’t have the potential for double-digit improvement due to better structure, CTR, or even bidding.
• You save 2%-5% of your spend – unless your spend is huge in which case you save even less.

Paid search management tools, I need to point out, don’t do these things by themselves. They really just enable better results by enabling deeper understanding and more efficient execution. The ‘battery not included’ in this case is an engaged and intelligent search manager. It’s only in their capable and properly resourced (as in with enough time and even assistance) hands that these tools are advantageous.

It makes sense to work without high-end tools if you only spend a few thousand dollars per month on paid search. There’s clearly no need for a professional tool if you don’t have a professional person using it.

But expecting a full time search manager to wisely carve up and and spend thousands or tens-of-thousands of dollars each month and serve up good or even great returns in this competitive market, with the technical equivalent of a butter knife, is quite a lot to ask.

Which software platform should you buy? How should you decide? That’s a topic we’ll tackle here soon. (Despite my clear bias and preference for ClickEquations.)

It’s a tad early for year-end predictions, but I’ll make one anyway. 2009 will be the year search queries overtake ‘keywords’ as the focal point of interest among PPC managers.

Search queries, by way of definition, are the words and phrases user type into the search box before clicking the ‘Search’ button. They’re often and confusingly called ‘keywords, both in organic search and even within PPC.

In the paid search world we should pay close attention to search queries and the way they’re matched with the keywords we bid on – to determine how we can tune or keyword buys, match types, bids, text-ads, and landing pages.

Most paid search manager don’t have full access to every query for every click they pay for. Yahoo and MSN don’t provide them and Google Adwords provides only a very partial list and not matched at the keyword level.

Providing clear, complete, and detailed search query information is one of the great features in our ClickEquations paid search platform, and a few others provide query access as well.

Recently we’ve talked to a number of advertisers who’ve been mining queries to move to a much higher percentage of exact match keyword buys – a practice we’ve found to increase volumes and lower costs.

And this week Google introduced a new keyword expansion tool which can provide you with lists of actual search queries related to your keywords and your landing pages.

This is a great help. Both as a research tool, as additional insight into the algorithms google uses to contextually relate words and pages, and to get more people to think about the distinction between queries and keywords.

If you find the new Google Search-Based Keyword Tool useful, imagine how great it would be to see nearly every query for every click you’re paying for in your current search campaigns.

Following my post last week on Quality Score, I was invited by Bryan Eisenberg to participate with him as part of his Always Be Testing Seminar Series on Tuesday, November 25, 2008 @ 12:00pm EST.

Bryan and I will present and discuss important information on how understanding and managing Quality Score can transform you paid search programs.

Details are reprinted below, or see the post at the GrokDotCom blog.

Google Quality Score
Exposing the Secret Factor to PPC Success

Bryan Eisenberg, Co-Founder & EVP at FutureNow, and Craig Danuloff, Founder and President of Commerce360 Inc, a full service paid search management firm and developed the ClickEquations paid search software platform.

Quality Score is the PageRank of PPC. It’s a number Google assigns to your keywords which determines how much you have to bid, the position in which your ads appear, how often your ads are shown, and due to recent Adwords change it even determines if you can jump to the top of any search results page.

Understanding and managing Quality Score effects how you choose keywords, write text ads, and build landing pages. Knowing how your decisions impact Quality Score, and how Quality Score interacts with all the other controls you have in your accounts, can help you manage to greater PPC success

In this Webinar you’ll learn:

• exactly why the Quality Score in Adwords is so important,
• how Quality Score impacts the amount you spend and the amount you make from your PPC campaigns
• specific things you can do to drive the Quality Score higher for your keywords.

When: Tuesday, November 25, 2008 | 12:00pm EST

Where: Online, register here to receive your invitation

How much: It’s free, but space is limited so sign-up today!

The internet, as we all know, is the most trackable vehicle for marketing ever created. Everything that goes through these tubes can be perfectly tracked, traced, documented, and reported on.

Ya, right.

They never mention the two little requirements:

1. Every page must be properly tagged.
2. Every inbound/referring URL must be properly tagged.

(In the broader sense there is of course a third issue – I’m leaving aside for now the vast weaknesses of cookies and the role they play in online tracking/accuracy.)

Why Is Tagging So Hard?

By which I mean to ask two questions:

• Why do people find it so hard to add tags? The requirement (in the simplest cases) is to accurately cut-and-paste. (Yes there are more complex cases where parameters have to be passed, for now let’s leave those aside.) Yet in enterprise environments we often see multi-month waiting times, panels and commissions and committees who need to approve them, and all forms of insanity as prerequisite to getting 316 characters in a single text-block added to the universal footer of a website, or 75 characters appended to a URL.
• Why do the environments make tagging so complex? This is the other side of the coin. Web pages and URLs need tags. This may have been a requirement not foreseen in the mid ’90’s when core web technology was developed, but it has one for many years now. Yet neither web servers nor CMS systems nor email managers nor Google/Yahoo themselves have made tagging anywhere near as simple as they could.

Tagging – A System Requirement

While I’ll fully admit to having no understanding or appreciation for ‘IT Depts’ who can’t figure out how to allocate time to update page tags (and testing them thoroughly) on at worst a weekly or monthly basis, the more I think about this problem the more I think the root of the problem is in the technology layer itself.

Software that builds or serves web pages should have the ability to conditionally add ‘tracking pixels’ or ‘code snippets’ or ‘page tags’ or whatever you want to call them to each page, and provide a single management interface for controlling these included codes, defining the conditions on which they’re embedded, and even to make the parameter passing necessary in the most complicated cases, easier.

Software that creates or delivers URLs should similarly have the ability to simply and centrally administer the appending of tracking codes to those URLs.

In Adwords, for example, there should be Account, Campaign, and Ad-Group level parameters for tracking codes you want appended to every target URL. Why should it be necessary to manually insert them (150,000 times) at the ad-group or keyword level?

Let’s face it, they’re universal 99.9% of the time. Didn’t they teach me in High School that computers simplify repetitive tasks?

And Verify Please

On both sides – the site and the URL – these systems should validate and report on the presence and contents of these codes after they’re served.

Sometimes it seems like 25% of the man-hours of the entire online marketing industry is spent find those situations where pages or URLs were missing tags. And almost certainly a percentage of all our reports are incorrect based on places where these tags are missing and nobody detects it.

This Rant Sponsored By

As a marketing and paid search agency we’ve had our fair share of (which is to say more than humanly endurable) issues related to getting tracking pixels on client websites and managing the tracking codes that need to be placed into emails, affiliate promotions, and paid search ads.

Very often weeks or months of reporting was ruined, never to be corrected, by pending or incorrect tracking code issues. I know this is typical and true in online marketing deptments everywhere.

As we’re rolling out ClickEquations we’re now living through another aspect of this problem.

Clients and prospects that want to take full advantage of our system and use our ClickEquations tags, but they just can’t get their organizations or vendors to support them – at least in reasonable time frames. Or there’s a problem dealing with the complexity and delay involved in having all target URLs updated in the engines (although this can at least be automated via the APIs).

We’re working on ways to make tagging easier for our clients, but the universality of the problem suggests that it really needs to be solved down a few layers in the infrastructure.

I think it’s time the amount of pain and trouble this problem is causing got more organized visibility, so the creators of those lower level systems could start feeling the pressure to add the kind of tagging support we all need.

How have tagging problems or complexities impacted your online marketing reporting? How can we fix or improve this situation?

Will you be at SMX in New York this week? Stop by as see ClickEquations in the Exhibit Area.

One morning in San Francisco last week, the happy-time morning folks on one of the TV networks interviewed the whole original cast of Happy Days. Howard Cunningham, Ralph Malph, Fonzie – all of them who aren’t now as rich as Ron Howard.

One question the penetrating journalist just had to ask was about the phrase ‘jumping the shark’. Fonzie and Gary Marshall were quick to point out that the show was #1 for two years after that episode.

I guess they wanted to make it clear that they don’t even understand what ‘jumping the shark‘ means.

But later that day, after the 2nd day of the XChange analytics conference, where many of the WA Gurus and a lot of very prominent Analytics customers gathered to discuss their marketplace, it hit me:

I think high end of web analytics might have jumped the shark too. The money may flow for a while longer, but there are some real problems which may be irreparable.

What I Heard At XChange

With a unique conference format – all sessions except for a brief opening event are round-table discussions between 10-20 attendees – XChange is the perfect place to find out what’s really happening. Everybody gets their say, not just a few selected presenters.

And what they’re clearly expressing is frustration. The world’s most prominent web analytics thinkers and professionals seem to have five issues:

• Data Collection - Analytics can only work if the right data is collected. Yet site tagging is hugely problematic because IT depts are slow and inflexible. Managing web analytics in this environment is like driving a race car where use of the gas and breaks requires a ‘request submission form’ that someone else will consider and implement, fully or partially, at some time of their choosing. You slam into a lot of walls this way. Of course, if you do get the site tagged, the circus that is cookies pretty much obliterates the data integrity anyway. Saying it’s the trends not the numbers only goes so far.
• Data Integration - Even if website-based tracking was perfect, the world is no longer website based. From social media to multi-channel to Flash, Flex, Ajax, Video, and Mobile, web analytics is a guard dog with a 10 mile territory and a 100-ft chain tied around its’ neck. That’s a lot of ground not covered.
• Core Capabilities - Supposed you had all the data you dream of – then you could analyze it as you wished right? Maybe not. There were no ‘I Love My Vendor’ buttons at this show – in fact the session on ‘When and How to Change Vendors’ confirmed only that the top analytics vendors have a lot in common with the airlines – everybody hates the one they use the most. The most common story was of executives wanting the cool reports and features they understood to be promised in the sales demos, and the analytics professionals having a hard time explaining why that was completely impossible.
• Competitive Environment - The party line at XChange was a professed distain for Google Analytics because it’s ‘limited and inflexible’, but they aren’t pleased with the growing lack of alternatives at the high end. Several still going concerns are assumed to be the walking dead, and the remaining green giant has a surprising lack of goodwill that would lead you to believe Microsoft had already bought them.
• Damn Customers - This is where the real trouble lies. Because of the issues listed above, analytics folks haven’t been able to educate or satisfy their customers – the managers, marketers, partners, and technical staff that need to consume the information and insights web analytics are supposed to produce. The stories clearly reveal users who want things they can’t have, don’t understand the things they get, ask for things they don’t need, don’t use the things they’re given, and remain therefore un-enlightened as to the behaviour and performance of their online assets. This is making it very hard for the analysts to tell them that what they really need is more time, more staff, and more money for new tools.

Is there success and satisfaction out there? Yes.

The most advanced of the practitioners are doing wonderful things. The smartest of them have generated huge wins from the tools they have. There are anticdotes aplenty. It’s not impossible.

But it’s not easy. Even those with clear wins aren’t living on easy street. Those without them seem nearly defeated. The barriors are just too high and too hard. The few wins are not worth the enormous costs.

It seems like high end Web Analytics is the new CRM, where companies used to spend hundreds of thousand, or even millions of dollars, only to find their sales staff secretly using ASK on their laptops.

What I Think It Means

And that’s the thought that got me. The high-end packages can out-perform Google Analytics in just about every way you can think of or discuss, except in the ease with which basic data and analysis is delivered.

Which leads to a paradox; the high end package can out perform Google Analytics only if they can be fully and properly configured, solve some very serious data integration problems, actually do most or all of what they promise, and become accessible to a very diverse set of end clients. But they’re failing at these four tasks which leaves most end-users getting only very simple reporting out of very complicated and expensive packages.

Wouldn’t they be better off just getting these simple reports from a simple and cheap (even free) package?

PostScript

I wish it weren’t true. I want the full promise of the high end. And it takes a lot to convince me that something possible is impractical.

But if the collective status of the smartest and best resourced analytics users is as it appeared at XChange, I think I just saw The Fonz water skiing in a leather jacket.

At the Search Engine Strategies Conference in San Jose this week I participated on a panel entitled “Identify, Analyze, Act: SEM by the Numbers”. Below are my presentation slides, and some accompanying thoughts and comments.

Of course, it’s great to see such a high-profile discussion of PPC Analytics. I’d love to dig in and talk about very specific strategies and tactics, metrics and applications, etc.

But with limited time, and with most paid search managers up against some real barriors to applying solid analytics to their campaigns, I decided to use the opportunity to talk about these challenges in the hopes that raising visibility would encourage the PPC community to start requesting the kinds of changes we need from the engines and tools vendors and the ‘best practices’ widely discussed across the paid search community in order to make meaningful analysis easier and more commonplace.

Invisibility
The first challenge to paid search analytics is that a lot of the data you’d want to analyze isn’t readily available.

The prime example, which I’ve covered in detail before on this blog is search query information. Google Adwords and Analytics (or Yahoo or MSN) don’t provide it at a keyword level, and neither to a great many web analytics or even PPC management tools.

Similarly, SKU-level margins which enable SKU-level profit to be calculated to enable ROI to replace ROAS, is not available in most tools. That has been discussed a length too.

But if we’re trying to measure how people who search react to our ads in terms of our profitability, it’s rather amazing that a clear view into their search and our profit isn’t a default condition of analysis.

Deception
Another challenge to PPC managers is data that isn’t what it appears to be – untrustworthy data. Some of it is inaccurate, some of it is simply misleading. None of it helps.

Averages are the backbone of most paid search reports – the average ROI/ROAS for a campaign, the average cost-per-click for an adgroup, the average order value for one engine vs another.

But averages mask as much as they summarize. Averages without awareness of the standard deviation (or dispersion) of their data should be considered of limited value. Yet millions of PPC reports are consumed every day leaving impressions and causing decisions based on the ‘feel’ of these averages.

Similarly, raw performance data is presented in all kinds of PPC reports without regard for the statistical significance or margin-of-error of that data. Snap decisions to turn of text-ads, pause keywords, or inversely let them run can be based on data which would tell a very different story if reviewed slighly later in the process.

Why don’t the tools use conditional formatting or some other method to warn you that ‘there isn’t enough sample sizes to evaluate these numbers yet?’

And lastly I didn’t get the chance to speak on one last but very important point. And there isn’t enough time to go into it in detail here, but just about every revenue or profit number used to report or analyze paid search is ‘wrong’ or at least ’suspect’ based on huge limitations in how keywords/clicks are matched with revenue over time.

Everyone knows that many people visit sites a number of times before they buy, and the question of which visit and driving method gets ‘credit’ for the sale is frequently discussed. Most search and analytics programs use the last-visit standard, although a few allow a first-visit option and some even enable the choice of a linear allocation. On the SES show floor I even learned of one package that does a ‘reverse time-decay’ allocation IF the last keyword is a brand term.

All of these have issues, but what’s more important is that they skew the performance of different types of keywords, and it’s hard to imagine that influence is fully considered when the eventual keyword and bidding decisions are made. (MUCH more about this later).

Unlimited Power and Resources
A few more challenges to taking advantage of search analytics. One is the shear size of the data we’re reviewing. Huge campaigns with hundreds of thousands of keywords, sometimes hundreds of Campaigns and Ad-Groups, and time-marches-on producing a wide range of time frames and performance trends. Plus of course the engines change, businesses have seasonality, competitors keep moving, etc.

Taking this all in, keeping the factors in mind, and driving to meaningful conclusions is not easy.

Within this world, and due to many of these factors, we’re making a near constant stream of changes to our campaigns. But are we making these changes carefully?

When changes are made, the current crop of tools don’t help us to record the time and date of the change, watch what happens over a significant number of days/clicks/conversions, and then remind us to confirm, extend, or roll-back the change. We’re conducting tests without any test plan, test scoring, or final review.

On a related note, most of the changes we’re making – adding keywords, shifting bids, modifying Match-Types, rewriting text ads – have impacts which ripple through our campaigns and certainly reduce the clarity of our reports. If we look at a two week period when 457 changes were made throughout the account in clumps throughout that time frame, what are we really learning about either what happened or what we should do next?

Lessons To Learn
As the above hopefully suggests, the core issues in being more analytical with paid search campaigns are not simply to produce and review more reports.

We have to get clarity and accuracy from our data first, apply sensible practices to the construction and management of our campaigns, and raise the bar for both the tools we demand and use and the way we understand and use the reports they provide.

We don’t need perfect solutions to any of these problems. Those aren’t coming soon and aren’t really necessary. But we should take steps to both understand and factor in these issues as we work to better learn what’s really going on within our accounts and how we can use that information to make better decisions and drive better results moving forward.

We also have to understand these issues and demand that the engines and tool vendors work towards handling them in more comprehensive and reasonable ways. Both sides have ignored these issues for too long.

The Match Type Keyword Trap
To include at least one practical element, I included a slide summarizing the several posts that live earlier in this blog about how to target queries more specifically using Match Types.

Final Thoughts
The feedback after the session was great, although I probably and characteristically bit off more than the time allowed. I hope this exposition helps those who were there and those who were not. As always, I’d be happy to answer questions or discuss it further in the comments.