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Keyword driven ads – less bang for your buck

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In the February/March 2007 issue of BusinessWeek’s Small Biz magazine, Robert Hof writes about the changing face of keyword-driven search advertisements. 

Small text advertisements have been published on the web for several years and all of us have seen them on google.com, yahoo.com, live.com, as well as many others.  The algorithms (pioneered by Google) match keywords (purchased by companies) to search terms used by the user.

In the past, this form of advertisement has been heavily used by smaller to mid-size firms because it allowed them to reach their audiences at a relatively small cost.  The article is primarily concerned with the small baby products store “babyage.com,” which has in the past spent almost its entire marketing budget on search-driven advertisements.  Babyage.com was able to target its audience directly by purchasing keywords such as “stroller” or “toddler toys.”

More recently, within the last quarter of 2006, the price per click on search-driven ads has increased significantly.  This has happened for several reasons: Many larger firms are beginning to make heavy use of this advertising medium, shifting their budgets away from traditional advertising methods, driving prices for keywords up and often forcing smaller firms out of the market.  Babyage.com CEO, Jack Keifer, has said that the rising prices (up by 31% on average in the last quarter) of keywords have forced babyage.com to invest in less often used and more specific keywords (for example the specific name of a stroller,) which ultimately drive less customers to babyage.com.  On top of that, recent developments have shown that the ratio of clicks-to-sales has decreased significantly, the number of clicks has increased (which further drives prices for keywords up) while at the same time sales (generated by the ads) have decreased.


Written by markusw

February 20, 2007 at 1:21 pm

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