Rising Search CPCs Cutting Out SMBs

Suzy Sandberg

Search engine marketing emerged as the inexpensive buy for small- to-medium-size companies with tight budgets that want to advertise online. Now the SMBs could get pushed out of the market, as the cost per click (CPC) for specific keyword terms continues to rise.

Big-box retail marketers getting smarter about online campaigns increase budgets for paid-search ads and organic listings to compete for the top space on search engine queries and mobile devices. Demand rose 43% in July 2010 among retailers for keyword terms, followed by a similar 44% increase in June, respectively, compared with the year-ago months, according to a PM Digital study released earlier this week.

Clicks and conversions also showed slight increases, but the average order size slipped 2%. It doesn't seem to bother big retailers as long as they dominate the first few pages of search query results for major apparel and general merchandise keyword terms, according to Suzy Sandberg, president at PM Digital.

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Consumers need to go two or three pages deep past Zappos and Wal-Mart before getting to smaller merchants. Sandberg began to see lower rankings and higher CPCs for specific keywords in December. That's when big-box retailers took a firm position at the top of search query results for these terms. "Many retailers like Target and Wal-Mart Stores have conducted clicks-to-bricks studies and empirically know when $1 spent online equals a higher amount spent by consumers in the store," she says.

Maybe that's because big-box retailers have begun to see the benefits of online campaigns by linking them to in-store sales, increasing the amount they spend online and driving up CPCs.

Yahoo Advertising suggests that 72% of back-to-school shoppers indicate they will seek out offers and promos from their local retailers.

"The metrics are getting layered into budgets, which allows retailers to spend more," Sandberg says. "There's a lot of co-op dollars starting to flow, which they use to fund paid-search campaigns. The ones that don't get the co-op dollars are the direct-to-consumer retailers that can't compete at the same level."

Marketers might want to loosen metrics and become more creative in how they evaluate performance. Traditionally, it has been one-click equals a percentage of revenue, but now marketers need to attribute a certain amount to advertising, Sandberg says.

Some companies believe new customers are more valuable than those who have purchased goods or services from them in the past. It also might mean taking a portion of the budget, rolling it into the advertising spend without matching it with a return on investment (ROI).

How about a button to suppress seeing the big-box retailers in search results? suggested one source.

Google reported during the Q2 2010 earnings call that the cost-per-click for paid-search ads -- which includes clicks related to ads served on Google sites and the sites of our AdSense partners -- rose 4% in the quarter, compared with the year-ago quarter.

Clix Marketing Founder David Szetela confirms seeing retail CPCs rise steadily during the past five years, making it more difficult for smaller retailers to compete with deep-pocket advertisers and savvy agencies. "It's still possible for advertisers of any size to find niches and techniques that give them an edge, even in crowded, competitive fields," he says.

Most advertisers still don't adhere to best practices in their display advertising via Google AdWords and Microsoft adCenter, which Szetela covers in his first book, "Consumers Now," and a big chunk in his most recent book, "PPC SEM: An Hour a Day."

"Search engines roll out new features at a dizzying pace, and the small business who can quickly implement the new capabilities can often get the jump on bigger, slower competitors," Szetela says. "Google recently launched 'remarketing,' a variant of behavioral targeting. Small advertisers can use this to bump their largest competitors out of choice ad spots on big sites like The New York Times and Wall Street Journal."

Google Thursday launched the Google Small Business Blog, a place where small- and medium-sized businesses can gain information, tips and other news about Google products and initiatives that specifically interest them.

While the site will offer templates for creating video ads on Youtube, tips for employees using Gmail, and ways to respond to business reviews on Place Pages, it's not clear whether SMBs will find secrets and information about successfully placing bids for keywords in AdWords paid-search ads.

paid search chart

1 comment about "Rising Search CPCs Cutting Out SMBs".
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  1. Dylan Rebillot from Krux, August 9, 2010 at 10:19 a.m.

    I think this is where SMBs can really begin to leverage the power of the mid to long-tail. On top of that, there are several Digital consulting businesses that are springing up who can help in these areas. Essentially bringing the big company capability for fractions of the cost as long as the SMB is willing to play.

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