Measuring search engine marketing

When Clickshift takes over a search campaign, the clients often want to see an immediate result on our dashboard. They do - and the immediate result is almost always worse than where they started! WTF?! Why do people hand off campaigns to us?

It’s a problem of observation, inherent any time you make major changes in your search campaign. You immediately see all of the costs of the campaign, but you don’t immediately see all of the revenue. Not everyone buys the same day they click on an ad. Adam Riff has a good piece on this sales cycle, and how to measure it. (If you’re not measuring it, you are way underestimating the effectiveness of your marketing campaigns and way overestimating the performance of your other online channels.)

The observation problem is especially true when you use marketing optimization software like ours. We report only the revenue you can attribute to us, and if you have a reasonable click-to-purchase latency, that revenue will be lower at first – even if we exactly match your previous performance on our first day. (With most software, there’s some learning time, so although the performance far exceeds manual methods, doing so on the very first day of a campaign is quite rare.) Overall, your business doesn’t perform worse, but the daily measurement that most people do with search campaigns misses the conversions you’ll get tomorrow from the ads you bought today. If you only track first session purchase, this doesn’t matter (but you also leave a lot of money on the table!)

Below, I’ve used some client data to show how, even if over 50% of users convert in the first session, it still takes at least 10 days for ROAS (return on ad spend) observed after a change to reach 80 percent of the original ROAS (and again, this is assuming performance is identical on day 1, and it usually isn’t).

• “Percent of sales each day” is a measure of the sales cycle curve. How many transactions happen within 1 day of click? 2 days? Here, the client saw 56% of sales in the first session, 6% the next day, etc. (Mathematically: “Sales on day N” / “Total sales during period”).


• “Purchases that are ‘unobserved’” shows the ongoing sales from the previous ads, not attributable to the new campaign or vendor. These are sales that are still happening, but usually aren’t being reported in your search analytics, especially after a campaign change.


• “Observed ROAS vs. baseline” – given these other curves, this is how the ROAS of the new campaign looks over time, even if, from day one, it exactly matches the performance of the previous campaign.

On the graph, I used number of sales instead of revenue – the consideration curve gets wider when you use revenue (higher priced items have longer consideration cycles), which makes the ROAS performance look even worse initially.

If you measure a campaign out of the gate without understanding these latencies, you just make the downward spiral of search engine marketing much steeper.

Sorry for all the math. At least there was no law!

Related Tags: search engine marketing, online advertising, consideration cycle

Avoiding boneheaded mistakes

I made a work trip to NYC last week. When I checked into the Hotel Pennsylvania, the room they gave me was already occupied. Thankfully, no one was there at the time. What if I had walked in on someone in the shower? We both would have been upset, and the hotel would have had major problems. That’s a giant mistake. Shouldn’t assuring the room is empty be a standard step in their check-in process?

As a startup CEO, mistakes like that really bug me. I’m constantly striving to have more leverage in my time and pushing everyone else to do the same. We don’t have enough time or people to solve every little issue, so we need to pretty aggressively prioritize what we do. We try to do that by thinking about:

1. Can this issue kill (or seriously maim) the company? If so, it obviously needs attention first. A variety of things fall into this bucket at Clickshift. At a hotel, it seems like making sure you check people into available rooms would be in this category.

2. Are the clients happy? As a startup, our goal is to build a long-lasting, thriving business. If our clients are unhappy, we’ll never be able to grow.

3. Will our processes scale? We’re building a software company, so scalability is important. Our team learned a lot of lessons about that at flyswat. If we were building a services company, we wouldn’t care so much about this, but we’re not.

4. Will any of it matter? We can be great on 1-3, but if we move too slowly, someone else will eat our lunch anyway. That’s life as a startup. If we don’t run fast, all the rest of it will be irrelevant.

Simple prioritization should be easy, but for some reason it’s usually not (especially when data is involved). So we end up with boneheaded mistakes like checking guests into occupied hotel rooms.

Related Tags: startups, venture capital

The downward spiral of search marketing

The great thing about marketing on the internet, especially in search, is how accountable the dollars are. You can spend a few dollars, see what happens, and then decide whether to keep spending there. If you set it up right, you can calculate an ROI on every dollar you spend. “Half the money I spend on advertising is wasted; the trouble is I don't know which half” doesn’t have to be true on the web.

Unfortunately, it’s really difficult to “set it up right”. Some of the most sophisticated clients I’ve seen track sales generated by every keyword, and then they update bids constantly to make sure they get the ROI they want. That’s a good start and way ahead of most internet marketers. Most sites have a median click-to-purchase latency of at least a few days, though, so future sessions need to get attributed to previous keyword purchases – with the right tracking system, that’s an easy step, but most analytics packages don’t do it automatically. More subtly, the purchase of some keywords has an impact on OTHER keywords you purchase. A keyword can be unprofitable by itself but still have enough of an impact to make your campaign more profitable overall. Basically, every search term you buy increases your “branding” and makes the rest of your search terms perform better. Search is the rare place that lets you actually quantify this effect.

Some recent research suggests that you can “leverage non-brand search terms to drive searchers toward brand terms later in the searching and purchase consideration process.” Our own data show some pretty amazing correlations – more detail in another post.

At Clickshift, we’ve seen how ignoring these cross-keyword (and cross-channel – the same thing happens when you buy banners!) effects leads to a downward marketing spiral. A client analyzes his search campaign first by segment then by keyword, and he keeps cutting words and bids so that each keyword (or each keyword’s first session after click!) is profitable. But with many of those cuts, he degrades the whole campaign, making many other words marginally less profitable. Then more words end up below the profitability line, more cuts are made, more words fall off, and on and on. In the end, you’re left with a campaign where every keyword is profitable – but you make less money overall. Perfectly good intentions led to a nice downward spiral. Your campaign looks good – every word is profitable – but you’re missing out on a lot of extra upside.

With good search engine marketing discipline you can avoid the downward spiral. Make sure to keep track of cross-keyword and cross-channel effects!

Related Tags: search engine marketing, online advertising, statistics