• by Ross Fadner , October 12, 2004

Advertisers that are considering buying sponsored listings on search engines should consider how popular the keywords or key phrases are among users who type in queries--and surprisingly, they should aim for a lower placement on the page for the less popular keywords, according to a new report from aQuantive's research unit, the Atlas Institute.

The latest Digital Marketing Insight report, released yesterday, compares Google and Yahoo!'s Overture rankings. Google and Overture have different formulas for compiling sponsored rank. Overture places sponsored links in specific spots on the page based solely on bid price, while Google combines bid price and click-through rate average to determine placement of its sponsored rankings.

In a counterintuitive finding, the research showed that conversion rates on Google tended to go up as placement on the page went down--but only for lower-volume keywords (keywords or phrases that attract fewer total advertisers). On Google, lower-volume keywords with ranks in spots 8 through 10 produced a 30 percent higher conversion rate than those in rank one, which is normally considered the prime real estate. On Overture, low-volume keywords seemed to convert at approximately the same rate, regardless of rank.

A previous report focused on traffic, finding that advertisers should expect about 10 times the traffic from a number one ranking versus a number 10 ranking. The new study focused on the effect rank has on conversions. The study defined high-volume keywords as those that comprised the top 20 percent of queries on Google and Overture, and low-volume keywords as the bottom 80 percent.

The research also confirmed that the lower the rank, the lower the conversion potential for high-volume keywords. The falls are far more dramatic on Google: after the top position, the second rank has a conversion potential only half as likely--at 54.5 percent--followed by 35.7 percent for the third rank, 28.2 for the fourth positions, and all the way down to 12.2 percent for the 10th position.

The conversion potential drop-offs were more uniform on Overture, with a second position converting potential of 73 percent, followed by 59.6 percent for the third position, 40.2 percent for the fourth, and then 6.0 percent for the fifth. Young Bean Song opined that this is because Google ranks by bid price and click-through rate.

Song, analytics director for Atlas DMT and the Atlas DMT Institute, said: "On a macro level, marketers will make less sales from lower-ranked listings." However, he added that if high-volume keywords in a given sector double or triple, then purchasing lower ranks is more profitable. "The important part of the equation not represented in the study is cost."

According to Song, the lower-volume and lower-rank keyword buys "convert more efficiently" and are also an important component of a search campaign. He said that conversions from low-volume, lower-ranking buys will help justify going after the top spots for high-volume keywords. Management tools, Song said, are the key to campaign optimization.

The data for the study comes from Atlas Search, Atlas DMT's search engine marketing and optimization unit. Traffic representing more than 41 million clicks and 400 thousand keywords during July and August 2004 was analyzed.