Gaining preferred position on the first page of search engine results requires brands to offer up the highest Revenue Per Thousand Impressions (RPM = CTR * CPC * 1000) for each keyword term. The search engine's expected revenue per ad impression is usually expressed as RPM. The highest bidder on a keyword term doesn't always win the auction. A study released Wednesday from Adgooroo suggests the key to competing in paid-search clicks resides in this equation. It takes us through the process using the most successful bidder, Amazon, as the example.
Amazon is better at converting site visitors to revenue than other retailers using a low-margin strategy to compete for consumer dollars and retain loyalty. The company spends nearly twice as much on Google AdWords compared with the next-largest retailer, Target, but its Zappos subsidiary ranked the third-largest spender, making its estimated combined total spend more than $15 million to reap more than 19 million clicks through ads across the two sites on average per month.
Search engines want to deliver search results that prompt consumers to come back, and serve up ads that consumers will notice and click through to a landing page. The study explains how search engine revenue comes from clicks, so ads yielding revenue to the engine are those with better click-through rates and bids. The engine derives the most benefit from ads with the highest expected revenue per search impression, not the highest expected revenue per click. The click-through rate represents the engine's likelihood of earning revenue when an ad is displayed, and the cost per click represents the payoff when that likelihood results in an actual click.
The most successful way to improve RPM points to click-through rates, according to the study. Retailers can boost CTRs by optimizing ad and landing page relevance -- continually adding new creative pieces, promotional offers, and negative keyword maintenance, according to the report. The study suggests RPMs vary by keyword and vertical, but AdGooroo's research finds that RPM for most U.S. AdWords range between $10 and $50 per thousand impressions for generic keywords, or 1 cent to 5 cents per impression, but can range much higher for branded and specialty keywords.
Adgooroo also suggests that advertisers don't need the highest RPM, but rather become more competitive to gain the first position in the search engine results. While the top position might get the highest click-through rate, that position also proves the most costly.
The report runs through how to offer competitive RPMs, and ways to beat Amazon at paid search. It also details market segments such as children's products, fashion and apparel, and auto parts. For example, there were 2,933 keyword auto parts terms with $100 or more of spend per month on U.S. AdWords during the second half of 2011.
Adgooroo suggests that retail stores and brands looking to compete for terms with Amazon begin with finding keywords that perform less frequently for the retailer, find and focus on better converting terms, identify the keywords where the RPM lags behind Amazon and other competitors, and evaluate the payback of high CPC terms.