Paid Search and ROI: A Sure Thing for Marketers this Holiday Season

by Chris Paradysz | November 30, 2009 7:29 am

Invest in search now to put you a step ahead in 2010.

Depending on your definition of ‘investment’ and ‘return’, search this Holiday is being asked to be as solid as investing in dollars in 2005. And, for most, it will deliver. But search’s ability as an investment vehicle today is struggling, better yet, starving for capital.

Many players have narrowed paid search’s scope and potential because of the need to deliver month-over-month revenue and profit consistency, despite the fact that year over year, search has proven it can be a consistent, star performer. And in better economies, it was used to prod the market because of its unique ability to instantly gauge and measure interest in products, services, messaging, brand positioning, promotions and more.

As we sit here on Cyber Monday during a time of year when experimentation can be disproportionately higher (to capitalize on naturally higher yields), do we run the risk of compromising next year’s opportunities for this year’s demand and profits? The answer is yes. But let’s be sure that we understand the expense implications for next year when aggressive growth will be back in vogue and required by management and shareholders. There will be zero tolerance and jobs will be on the line – talk about pressure.

Customer Acquisition Costs

Note: The “10% Growth” scenario above assumes top keyword spend is already at the maximum and that incremental spending would come from less productive, average and marginal keywords.

If we think about the challenge of acquiring 5,000 more customers in 2010 compared to accelerating our search investments in 2009 – from a mathematical perspective – it would cost nearly $291k more to acquire these customers at a cost of $2.25, using the simple example above. That doesn’t include the incremental sales gained from a year’s worth of promotion.

The short of it is this: more experimentation and investment in search right now is a cost effective way to get a big head start on the growth demands that nearly all marketers will face in 2010.

SEM is no doubt a workhorse, but it also needs a multi-dimensional view and strategy to stretch its potential for growing online sales demand. From separate Google campaign buckets and metrics for long-tail keywords to unique bid management tactics, it has a greater long-term profit impact today than it will have in 30 days from now.

Chris Paradysz is CEO of PM Digital.

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