Core Concepts of Paid Search Marketing – John Gagnon

Learn how to determine the value of a click, how to calculate your break-even CPC, and how to setup your first ad campaign.

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Hello everyone welcome to another Stukent Expert Session. My name is Trevor Erikson and we are extremely delighted to have John Gagnon with us who is a BingAds evangelist. He’s a former Google guy, a search campaign manager, and data analyst. John is a paid-search expert and that’s what we’re going to learn from him today. So without any further ado, John the time is yours. Well thanks Trevor and welcome everyone. I’m really excited to talk about paid search and actually really break down the core concepts of what paid media and paid search specifically look like. We’re going to have a lot of fun and I think when you look at the introduction to just digital marketing and paid search, they are so, you can get so into the weeds and just be looking down and go deeper and deeper into the rabbit hole. But today, what we’re really going to do is talk about the knowledge that you already have as business students, as PhD Students, maybe even business owners on the side and really relate all the core concepts and things that you’ve been picking up in real life into this online and digital marketing world. So we’re going to stay at a high level, but should be pretty fun. We’ll go down every now and then. Now you know, truth be told, I couldn’t be more excited for you guys, actually, for me and the industry and where things are headed right now and how much fun we’re about to have and for you, you’ll be in right in the thick of it if you choose the path to go down into online marketing and digital. You know, big Black Fridays is a really big deal in the U.S. We know this. Many of you probably have waited in line for hours to get one hundred dollars off, let’s say, any Apple device or maybe a computer on Black Friday. But what’s happening now in the industry that’s so fascinating is you can imagine a scenario and this is happening right now where, hey if you’re trying to reach that customer they really want to buy something what’s a moment, what are these Moments that matter and so if I were to tell you that somebody was scrolling through Facebook at two three o’clock in the morning of a mall parking lot. Do you think that reaching that person would be valuable. They havenít even done a search yet but they’re looking on Facebook is that a valuable interaction. You know likely they’re in that parking lot waiting to buy something and probably to spend a lot of money on gifts and so it’s a really critical moment to be able to reach and engage average consumers at this time and when you look at digital and Facebook and Twitter and Google and bing and all the other platforms out there, these are the scenarios that they’re built for. So, you know, how rude of me I didn’t necessarily introduce myself and give you a quick bit of background so everyone, my name’s John and I’m a bing ads evangelist. And really what that means is that I’m a huge search nerd. I’m a data geek. I love getting into numbers, talking about online marketing strategy and getting out there, really learning from the experts in so many different countries, companies and countries as well as talking to small business owners and seeing what works and what doesn’t, and sharing it with many of you students but also getting down and dirty with some of the really tactician, practitioner-focused agencies and SEM pros. So my background actually, before working, I’ve been at bing almost six and a half years. Before that, actually, I used to work at Google down in Mountain View so I’m really familiar with both systems. I was running the search campaign as a digital lead internally here at Microsoft, running accounts running a team that was doing the B2B types of management, and of course I spent time as an account manager which is a very typical job that you’ll see in the industry but managing the Microsoft accounts, big time accounts, esurance, Blackrock, Nintendo, a lot of really big accounts, and talking about the strategies, so I’ve seen it all. I do a lot of blogging and writing so you can follow me but I have a really cool job. I have a lot of fun which brings me here to my time with you. Now before we get started, I wanted to ask you a question and so you know, I want you to maybe jot down on a piece of paper what the answer to this question here is. So, how much does an auto insurance company like Progressive, State Farm, Allstate, Geico, how much do they pay per click for the search "auto insurance" on Bing? So somebody goes into bing, searches for auto insurance, cheap auto insurance. You know, somebody clicks on the ad Geico, Allstate, Progressive; how much do they pay? So go ahead and jot that down. So what’s the answer? Fifty bucks, fifty bucks, that’s definitely a really, really, it’s a big sum of money for just the click right, I mean, nobody’s actually bought anything yet. It’s not five cents, ten cents, it’s fifty dollars per click. You know, that is a lot of money. Well today, we’re going to talk about the auto insurance examples and why people are willing to pay fifty dollars for it and then we’re also going to talk about, at a high level, how you value a click, how much is a click worth. Then we’re going to jump into this concept, it’s really fundamental to Search, which is the search funnel, and then we’ll talk about ad copy of messaging strategy, which is important to make that connection. So we’re just going to start there. Now it’s important for us to break down what a search engine is and why do people come to search engines. I mean think for yourself, why do you go to Google, why do you go to bing or Yahoo? When you’re doing a search, usually what you’re trying to do is look for an answer right, make a decision, get from point A to Point B. You’re looking for a product or service, or some information of some sort. Well, this is a perfect opportunity for businesses because for the first time, not necessarily the first time, you can think of the Yellow Pages in the past where people had this long list of numbers and businesses and when they had a problem, what they do is they go, "Oh I need a plumber, where am I going to go?" They go to the Yellow Pages, they break out the yellow pages and look for a plumber and make a call. Well, there are so many other research questions and things that need to be answered before you even get to the Plumber, potentially. That’s what people go to search engines for. So, a search engine and paid search marketing sits in the middle of people looking for services, getting questions answered, businesses who want to reach those customers right when they’re looking for it, and, of course, making sure they get to the right, the user, the searcher gets that right information at the right time and has a great experience. And so let’s just really quickly break down a page, and I think many of us have seen this everyday. Probably you’ve searched a few times today maybe even on Facebook or who knows, or Instagram or WhatsApp, these days, what the kids are doing. And so when we look at the anatomy of a search page, this is what we have for bing and this is the same type of layout for Google. It is the same thing. So at that middle little bar there, you have your search. In this case, we’re looking for garage door repair. And this page looks probably familiar to you. Now in the orange here, we have what are called sponsored results, the ads, and they are on the top and typically on the right, and so that’s a lot of space for advertising. And then in this purple and red area, we have what are called the organic listings and these are actually free. Bing and Google, we have algorithms that go out and crawl trillions of pages on the web to figure out what’s important to answer a question and what these pages are about so we can actually go about answering a question and we report that back. Well, that’s all based on the information that you provide as a website owner, and all the content on your page and so there’s a lot into that and there’s that whole kind of section of search market called organic or SEO, search engine optimization on the organic side. Now on the sponsored listing side, it’s actually a number of businesses coming in and saying, "Hey, if somebody is looking for a garage door repair I want to be there, I repair garage doors." I need to be there to take questions at that time. So there are two different systems. Now when we look at, we broke down just the organic results and we looked at the paid search results and so you know why is this a big deal? Well, it turns out when we’re looking at that page, we didn’t necessarily scroll or do any interaction, but that’s really uncommon. Seventy-five percent, really common, excuse me, it’s common not to scroll. Seventy-five percent of the users, when they’re doing searches, actually don’t scroll past the first page of search results. I mean, think about that, you know, three of every four people aren’t really scrolling past or getting past that first page, or even necessarily scrolling down. Now when we look at where the, if we look at organic clicks and we say, "OK, hey I don’t pay. I don’t click on ads. I click on the organic links below. Well it turns out of all the clicks that go to organic, there’s a number of studies that say that sixty percent of those clicks happen on the top three results. Sixty percent of the clicks on the organic section of the page go to the top three, so that means all the other listings that are out there are fighting for what? For that remaining forty percent, so if you’re not on top, if you’re not number one two or three, you’re really missing out. Well it turns out when we look now at paid search ads, you kind of see something similar. Now, a study on Bing that was done said that the click-through-rate for the top search result is close to ten percent, but the number four result, which typically is on the right-hand, top right hand-corner, drops all the way, almost to two percent. I mean, what a huge difference and that clip-through- rate again is about engagement. How many times out of one hundred, how many people are clicking on that number one ad turns out almost about ten, and then four out of one hundred, you know how many people are clicking on number four, about two. I mean, such a substantial drop-offs. So, being on top really matters. All right, so this is chance for redemption. Earlier we talked about car insurance and I asked you how much per click does Geico, Allstate, or State Farm pay Bing for the term "cheap auto insurance", and it turned out that it was fifty bucks. So you know guys, I don’t know, maybe you can open up a new tab because I’m boring you right now but do a search and tell me how much Jimmy Choo shoes cost. Now I’m lucky I’m I married, and my wife actually told me the other day, I think they can be kind of ridiculous, up to fifteen hundred dollars but you can get a pair for six to eight hundred dollars, which seems like an incredible amount of money for some high heels. Luckily, my wife does not buy them, so I’m fairly happy with that but how much if Jimmy Choo shoes cost you know six to fifteen hundred dollars a pair, how much are retailers, like say Neiman Marcus or Nordstrom or Jimmy Choo paying per click for the term Jimmy Choo shoes? So, go on and write that number on the side. So what is it? actually, turns out, it’s about a dollar to two dollars. So you know, in the example before we had fifty bucks for auto insurance and now "Jimmy Choo shoes" is only worth a dollar, what’s going on here? Well, this is one of the very first concepts of search marketing and talking about the value of how much we pay per click. So, let’s talk about each one of these products. So what happens with auto insurance? Well you’re going to sign up for a policy and it may be one hundred fifty to three hundred dollars a month. Insurance is really expensive but you don’t just sign on for one month, you typically sign on for six months commitment. So I mean you’re talking about nine hundred to eighteen hundred dollars for that policy for six months. So if you get one person a sign up, that’s a lot of money. Now for Jimmy Choo, you’re talking about six hundred dollars plus, but what it really comes down to, in that second column, is the margin. Well, what are our costs involved in selling everything? Well, you know in retail, costs are pretty heavy, you have a lot of overhead, Jimmy Choo’s probably taking a really fat margin on their product and so let’s just say for the Jimmy Choo example, for that six hundred plus dollar shoe as a retailer, we pocket about a hundred bucks in our pocket. Now, as in the auto insurance example, you know, we don’t have to ship anybody any goods but we have a risk that we need to mitigate for. We have to underwrite and make sure we’re paying out policies and let’s just say, on average, per customer that we sign up, we make around four hundred bucks over those twelve months, so we have how much money, not just how much revenue we’ve charged but how much money we make. Now we go to is "Well alright, we got these clicks that are coming to my page and trying to buy auto insurance or to buy shoes what’s really happening here." Well, when we look at this, what we look at is a ratio and really what we’re saying is if that click happened a hundred times, how many sales would we get? How many conversions would we get? We call this a conversion rate. So for auto insurance, it can be really high. Eight to twelve percent upwards or twelve percent. People don’t necessarily like to do a lot of comparison shopping on auto insurance if they find a price that works or maybe is a little bit cheaper than their policy, they’re ready to buy and get going. It’s a pain in the butt. Now for Jimmy Choo shoes, it’s a little bit different and you guys can see this. If you’re going to be spending six hundred dollars or more on a pair of shoes, you better make sure that it fits. You better make sure that you love the feel of it that you can walk in there and they look the right way and all of that. Because you’re making a big investment and you may not actually get that opportunity online. And so in this case, what we might have is a tremendous amount of, let’s call them windows, the equivalent of a window shopper online, where somebody is going and checking out Jimmy Choo shoes seeing what the prices are and buying them in-store, and so online, the number of sales that we get per hundred clicks is a lot lower and it turns out it’s about you know one to two sales per hundred clicks. Now let’s really dive into this margin and conversion rate section. Let’s do a quick translation between some of the business terms that we’re seeing into online marketing. And so let’s just focus on auto insurance. We talked about how much money they make, four hundred bucks per policy and so that’s the margin per sale we understand. Well, in search marketing we call that The CPA which is cost-per-action. And so, CPA- four hundred bucks. Now what’s that ratio of sales we make to one hundred clicks? Well that’s what we call the conversion rate. And then how much are we willing to pay per click? Well it’s actually a pretty simple math formula. You take four hundred, you multiply it by twelve percent and you actually get the break-even cost that you would need or you’d be willing to pay, up to forty eight dollars per click, and you’d still be able to make money. Now for Jimmy Choo, this is how the math works out. We have one hundred dollars on the margin of their CPA. We have one to two sales per hundred. Their conversion rate is one to two percent. Multiply those two together and you can see there, we have a buck or two dollars. So this is a very important concept because in Search Marketing, in the paid search side of things, the more money you’re willing to pay, the higher you’re able to show up. Now, we don’t want or search engines don’t just want people who are going to pay a lot of money; we want to make sure that users and searchers are getting that relevant information because how easy is it to go from Google to Bing or vice versa there’s no cost. It’s just a habit. And so you really want to show up on top. Now if you’re a marketer where would you rather be? You know that seventy-five percent of people don’t scroll past the first result. Many of us don’t even scroll below the fold. And so do you want to be above or below? You want to be on top, and there’s a really good reason when you break down and look at the number of clicks. This is for a different term Office 365, which is a brand term (you can think of Excel and Word, all that online). It turns out when you break down all of the clicks to the paid search ads that you’re getting, seventy three percent, an unbelievable amount is going to that top result and everything else if you look on the right hand side, there are only two percent, less than two percent are actually going to that right hand rail. So if you’re not in position one, two or three, you’re really missing out on a ton of clicks. So you need to be on top. You need to be able to afford a lot. Going even further, this is another example, looking at just car insurance and breaking down what does the number of clicks look like by position. So that top spot that we had on the page is position One. The one under is position Two. You can see all the way through ten. Here, looking at the number of clicks by position, what do you notice? After you get past spot number four, there’s virtually no click volume coming. It’s not to say that there are no clicks, just not very many, and so we want to be able to, in search, be on top for a lot of different reasons but e want to be on top more for everything, and that’s why we talk about break even CPC and being number one because that’s one of our main factors. So gosh, you know, I’ve done I don’t even know how many conferences and talks and different things over the years. Gosh well, I say like three, four years, maybe four or five years ago, I was at a conference in Orlando and I was talking to a lot of lawyers and it was a group of a couple hundred lawyers that wanted to do search marketing so we broke down some strategies and before the talk, one of us things I thought was like, "Oh lawyers, you know, you always hear ‘how do you, how do you start off a presentation?’" I’ll kick it off with a joke, you know, break it down, make it perfect. There are thousands of lawyer jokes online, so I did what a lot of people would do, I went to search. Well, I’m on Bing. I searched for lawyer jokes and you got a lot of results here, sort of a lot of lawyer jokes, but one of the things that really hit me when I looked at this and preparing was that there were a lot of ads showing up. Look, here I am preparing for a presentation not, looking for any kind of attorney or personal injury help or accident or anything of that nature. I’m looking for a joke and I’ve even said that specifically, but you know we have all of these ads showing, and so it turns out that, you know, this is probably not a really good experience for these advertisers to have. And so there is this concept in search marketing called a negative keyword, because what you tell a search engine is, "Hey, this is what my customers are looking for", but on the same token you can also say, "This is what I know they’re not looking for." They’re not looking for jokes or maybe I’m located in Seattle or Denver. I’m not located in, I don’t have any offices, I don’t do anything in New York or Chicago and so I want to make sure if anybody’s looking for Chicago lawyer or New York lawyer, I don’t show up. And so there’s a lot of tools and levers here to not just tell the search engines what you want to show up for as a business, but also what not to show up for and that’s really important when you’re planning your strategy. So let’s just come back to this whole concept of breakeven C.P.C. We talked about it again. It’s just really simple. It’s how much money you make per action times your conversion rate, and that gives you that breakeven point. So if we looked at an umbrella, again just to reinforce that example, if we looked at an umbrella, I know I make thirty-five bucks when I had that sale. Excuse me, I sell for thirty-five dollars. It cost me ten dollars as far as inventory when I bought it from London Fog, which is this brand of umbrella. So I can afford to pay twenty-five dollars for this umbrella. So it’s my profit. Now, a conversion rate we’ve looked at the history that we’ve had in the past, and we see how many clicks that we actually get for these umbrellas and how many sales that we’ve had and out of one hundred, we have four out of a hundred, which is four percent. Multiply those together and turns out again into a dollar. Now when we’re looking at it, this is the math, that top example: twenty-five bucks times four percent. Now again, we want to show up on top, and so because we want to show up higher in the search results to get way more clicks, it’s important for us to be able to pay a little bit more. That’s one of our main levers that we have. Well to do that, you have to be able to afford it. If I paid two dollars for that umbrella, I told you just now that I can pay at most one dollar so if I’m paying two bucks, I lose money and that’s really bad. So to be able to be more competitive in search, one of the things that marketers have to do is really look at what are the levers that we have and in this case increasing that conversion rate, that ratio of how many sales I make for every hundred clicks that I receive for this term, is really important. So what are some of the ways that we actually go about doing that? One of the funniest ways to to do that is through landing page testing. There’s a lot of really cool tools out there optimizely, optimize- L Y , .com, unbounce and visual website optimizers. Endless tools that you can go in and test and do so many different things to pages one of the really common tests that people run are a button tests, and so you know, you’re telling marketers hey you know what are you missing out on? This is the value I’m bringing and then you’re telling them to act. So they are already on your page and you’re telling them to act. How are you getting them to convert, and so button testing is really common. And so you know, based on the need to show up higher for internal products that we did many years ago, what we did was we said, "Hey let’s test buttons. We want to increase our conversion rate so we can afford to pay more and do better. So we had our big landing page and in that big landing page, we had, at the top image above the fold, was this image here, which is: Do you want to reach more customers?, free help et cetera, et cetera and we have this button which says "Sign up". Now "Sign up" doesn’t necessarily confer value like, "Hey you’re going to click this button and get signed up", but it doesn’t necessarily say, you know, what you’re about to do other than sign up. That’s not necessary a valuable term, so we thought, "Hey, real quick, what if we just ran a quick message test and tried something different like ‘launch your campaign as a pro’ or ‘get started’?" and so all we did on that landing page was change this button and looked at "launch your campaign" and "get started" and see, "Hey Was there any difference? Did it get better or did it get worse? What happened?" Well it turned out that launch your campaigns worked much better actually by eleven percent and so we were able to either you know make more, eleven percent more money or pay eleven percent more and get more volume and so these kinds of tests are really important in search and it gives you a fundamental understanding of some of the levers that we have. So we just talked about break-even CPC you know, the whole concept of taking some of those terms of conversion rates and Negative keywords. We talked about landing page testing and all the knobs and levers that you have, but the big thing again, is you know what your business is or marketers know what their business is. What they need to do is just connect some of these online marketing concepts. So now let’s switch to a really big one which is this search funnel, and in search marketing, this thought is kind of one of the fundamental pieces of how we operate. So the search funnel is important, but let’s really quickly just take a step back and think about what the flow of the searcher looks like. So you know this is probably not unfamiliar to you. You go to a search box and so you type in your search here. After you’ve done that, you receive a search page and that page has a bunch of listings. Some of them paid, some of them organic, and you find the information that you’re looking for, you click on it, then you go to a landing page and on that landing page has the message that the marketer and their business wants you to see. They have the product that you’ve been looking for and they want you to buy because of the value proposition and all the things that they have on their page and let’s say that it worked so they go to buy it, they check out. And money’s in. You know, the searcher gets what they need and you as a business get a sale, you make cash and everybody’s happy, everybody wins. So that’s what the typical search flow looks like but what’s interesting is in search, what we, you know, let’s break down some of the terminology a little bit. So, when somebody does a search and then their ad shows, so that when their ad shows, that’s actually called an impression. So going from that search box, and then boom, hey their ad is showing in the paid search results. Now there, that’s called an impression. If somebody goes in, they read that search result and now click on it, they respond to it almost like a vote of "Hey, this is important to me." We call that a click. Now when they’re on the landing page and they’re seeing your message and they see the price and they’re feeling really good about what you offer, they buy that, they click on it and they buy it. They go to the thank-you page. We call that a conversion, and so this process of going from seeing the ad to engaging with the ad and then going to your landing page and buying the product is huge in the overall landscape of search and so these are really important pieces to know. Now when we look at this further: OK, so we have the impression, we have the click you have the conversion. As marketers, we love to look a little bit at some of these ratios, and so now we start to say, "Hey you know, it’s not just about my ad showing or me getting clicks. The thing that we really need to know is how effective is my ad, how good is that ad that I have out there? I mean, maybe I could offer a free shipping, I could, instead of highlighting the benefits, I could, you know, create a sense of urgency or highlight what they’re missing out on. I have all these different strategies I could use to be really, really creative. You know how can I measure that? Well, here are the tools for you. We have a lot of different things that as far as terminology, but when we look at that ratio of how many times your ad got shown to how many times you got clicked, we call that the click- -through-rate, and then we look at it. Well, you got a ton of clicks to your page, but did you make a sale? You know what that ratio is: the number of sales you made to the number of clicks it took to get that sale, we call that the conversion rate, and so these actually help you figure out the effectiveness of your ad for the click-through-rate and the effectiveness of your landing page for conversion rate. Now, we can get into a lot of different slices on that But really those are the big things that these metrics measure. But, you know, this is almost like a marketing machine, like "Hey, I have my ad, is it showing, it’s good, go to the landing page, I’m good at selling and moving everything on, fantastic!", but what really matters is what people are looking for. If somebody is looking for let’s say, a customer service support line for auto insurance or filing a claim, they already have auto insurance. They’re not necessarily looking to buy. You can’t necessarily convince them to buy insurance especially at the moment that they need it. It’s kind of "Junk in, Junk out", but if somebody says "Buy auto insurance now", and that’s what they type into a search engine, you better believe that that is a critical moment to reach them. and so what goes into the search box matters, and so what we start to think about a little bit more mentally is something that you’re probably accustomed to and so the question becomes, and think about this in your day to day you know, "How do I search?", you know, "What do I start with?", you know, "What questions am I answering?" You should be paying attention to that over the next week. It could be on your phone, it could be on your tablet, it could be you know on your computer at school. What are you looking for? Well it turns out, when we look at this behavior, it’s actually really interesting. Now people can come in and out of these different points, but in general it kind of kicks off with initial research so let’s just say in general right now that we’re a small business looking to advertise. So I might come to a search engine and look at "advertise my business" or "options to advertise my business". After some reading, I realized that advertising on T.V. is not going to work for me. The yellow pages aren’t a great option. Actually, what I want to do is I want to look for online marketing channels and I have some in mind but really, I need some tips. I need to do a little bit more information so now we’re getting a little bit more specific. and then we’ve come across this really amazing tool called search marketing and it has paid-search and organic. There’s so many great options here. I think this is really what I want because this is where users and searchers, where I get to meet them and talk to them right when they need what I offer. And after a little bit more research what you figure out is, hey, some ad- -vertising networks have better conversion rates and are a little bit cheaper than others. So I’m going to start with this specific brand, Brand X. In this case, Bing. Advertising on Bing is what I want. So we went on this journey of going from the need to advertise a business, all the way down to a specific brand, and so this, in many ways, is what we call the search funnel. There, they get going from that interest in that research phase to purchasing, and getting ready to make a decision, and so, you know, in your mind as you’re thinking about your search activity and what this looks like, be thinking of this funnel, that the top of the funnel isn’t as close to the path to purchase as the bottom of the funnel and so you can see what those differences are. Going back to that auto insurance example, if somebody is looking at, you know, a policy claim, well then there you go right there, that’s probably they’re not necessarily interested or need auto insurance, but if that claim goes bad, they might be looking at different options but if somebody is looking at like "Get discount on Progressive Insurance", they are interested in Progressive Insurance or looking for a deal. They’re ready to pull the trigger if they can find the right price. That is somebody you want to compete with, so be thinking about where some of these terms and where people would be for your business or your friends businesses, and think about it in terms of this funnel. Higher or lower is a very important because when it comes down to it, what we’re going to be building a lot of our content and our ads and our landing pages would be based on what people are searching for. So if somebody is looking for a review on advertising networks, well you know if I tell them, "Here’s a hundred dollar coupon so you better sign up for Bing right now", that’s probably not going to work, but if somebody says "Advertise on Bing", and I send them a hundred dollar coupon and I say "Get started right now.", that’s a great experience. That’s something that they’re looking for, and so what I need to be doing as a marketer, as a search marketer, a digital marketer in general, is be thinking about where are we capturing in the funnel or in the process, a customer journey, where am I communicating with them and what is that next right step for them? You know in some cases, it’s going to be closing the deal to get that coupon. In other cases, it’s going to be providing, let’s say, testimonials on how we work versus Google or you know, again, back to the auto insurance example, like what the difference is between Geico, All-State etc., and so what happens is when you’re building out an account as a marketer and you’re figuring all this out, you pretty quickly come to an account outline or a map and you think about, "Okay, so what are some of the terms that people are doing when they are doing the initial research for what I offer?", "What are some of the pieces that might indicate that they know a little bit about what they want but maybe not completely the solution?" In this case, you know, you have like online or internet marketing, and then, you know, we talked about the field names so "Search Marketing". Well, search is called many things. There is pay per click, there’s PPC, the abbreviation paid-search, sponsored links, Search Marketing, SEM, all of that, and then, now back to the specific brands, you have Bing ads, Yahoo ads and you have Google. You have so many other options, and you want to get a clear map of this. Because that is what’s going to matter to help you reach again and create those experiences. Not just what ad they’re seeing, but what landing page you’re going to get to, what information we’re going to show etc. Oftentimes what I like to do is, before we start, if I’m working even with the biggest product groups, is to think about, or even the biggest Fortune 500, is to think about, you know, what are the highest margin or the best goods that make sense for them to sell online right now? It’s not everything. Jimmy Choo shoes is the necessary stuff that you should advertise but that’s not made for online advertising. If you’re starting out, you really want to focus on the things that make a lot of sense online so write that down, and then what we want to do, to be thinking about our business and think about, you know, how do we differentiate, how are we different than our competitors. You know, have we won awards? Maybe we’ve been in business longer, we won a J.D. Power award for customer service, we offer the lowest price. What is it? So you write that down and then you get to seasonal offers, maybe promotion that you’re running, incentives that you have, and then you do some math on like, you know, "How much money is it worth if I make a sale?", "What’s that margin look like", and you know, "What are my peak times?", "When are all these things happening?" Well, if you can do this exercise, you can come up with the beginning pieces, the fundamental building blocks for a search marketing campaign because the product that you have is going to lead to the keywords. The differences are going to lead to the ad copy, and then of course, how much you’re willing to pay we just went over all that. It is going to lead to how much you’re willing to pay, which is your bid. So you have the searches, the search funnel. That is where people, the entry point where you’re reaching people. That’s called a keyword, and then the message that you’re hitting them with on, that search results page is the ad copy. That’s the ad, and so this unit of making sure that you reach a search mark, or somebody who’s a search user, when they’re searching for a specific topic with the right message at the right time in that ad, That’s the basic building block of a search marketing campaign. So I set an example ad there. So let’s say this is what it looks like. We actually have something called an ad group and all the ad group does is the combination of a keyword of what people are looking for, what they’re searching for, and then an ad which is, you know, ad copy. You guys, we know what ads look like. They’re all standard on search marketing so that kind of thing. So it’s a keyword and an ad. If you have those two together, that is actually called an ad group. And so a good rule of thumb is when you put these groups together, you typically want ten to thirty keywords. You want them to be closely related. If you want to go from "buy auto insurance now" to "Geico reviews" or "all state versus Geico", because those are different needs, and so if I’m hitting them with an ad that just talks about reviews but they want a discount, well that’s not good and if I can’t connect it to a landing page that has that discount, that’s not going to be as great as it could be either. It’s not to say that it wouldn’t work but it’s one of those things that you start to think about a little bit more because we want to optimize an experience of what they’re searching for, the message we show them, and what landing page they go to. And here’s just a quick example to talk about: If I was a florist and I was doing weddings, well in one ad group, I’d have wedding flowers, so I’d have keywords like "wedding florist", "Seattle wedding florist" if I was in Seattle, "wedding flowers" or "wedding bouquet", and then maybe I’d focus on, let’s say "quick quote" or "great service" or "award winning" types of terms in my ad copy to make that message come clear, but I wouldn’t put things like "chocolate tower" or "chocolate fountain" because they’re not looking for that, or "photo booth", you know, they might be looking for that in the wedding, but what I need to hit them with, and what they respond to when they see that ad, is they’re looking for wedding flowers. I need to hit them with that. So now let’s switch gears a bit. We’re going to talk about effective ad, but before we do, what we just talked about is a search funnel. Visualize what that looks like and where the search is that you’re looking at, maybe you’re doing on a day to day basis or that you’re seeing when you’re putting together and using some tools that are out there, where do they lie in that search formula? Are these people really ready to buy or are they really just looking at doing some initial research. That’s going to dictate a lot of how you group things and what pages they look at. That whole search flow that we wrote down, so let’s talk a little bit about search ads. It turns out that this is one of those fundamental pieces in search, because you can test ads and learn things and repeat and so on. Our top ads here, what do we have? We actually have a picture, excuse me, we have an ad that talks about same-day delivery and that we’re a family florist. But we call these things out a little differently. In Ad A, we don’t say "family" in the title, we only say it in a description, but down below, we try it a little bit differently and we say "family" in the title, and we also put out, you know, "For Mom" here, and talk about, just use a little bit of capitalization, and it turns out that these different types of ads are going to get different responses and so the click-through-rate, that effectiveness measure that we talked about earlier, seven clicks out of one hundred for ad A is lower than ad B so what we could see if we we’re trying these two ads and saying, "Hey, what message resonates?", we’d know, "Hey, wait a second. Looks like things in components of Ad B are really helping out. What can we do to build on that further?" Because there are innumerable number of combinations that you can use to test out ads. I mean there’s so many different strategies, you have only so many characters that everybody can look at, you have headlines and body copy, but really, you need to have things like a call to action. Make clear your value proposition, which is why should somebody buy from you and not your competitors, and of course things like emotional appeal and you know, how are we tugging on all those different heart strings and everything else, but there’s so many other strategies, so many different changes that we need a framework to look at this and think about "How do I build out what I’m trying to do in an effective way to market them." So I’m going through one of my favorite resources. It’s called marketingexperiments.com That image earlier was actually from Boost CTR, boostMedia.com, great blog, great research there too, but Marketingexperiments.com has fundamentally changed the way that I thought about online marketing and I wanted to show you guys that so definitely go check that out, but they have something they call the conversion sequence, and what they break down is they’ve done tests with thousands of clients and thousands of test with hundreds of clients and what they found is that this is more or less the formula that it takes to drive a conversion. So let me read this to you. This is not something you put your numbers into, but it gives a sense of weight, that the probability of your conversion is equal to four, the biggest, times the motivation which is when you reach that user, think Search, think if it’s mobile or devices alike, when you reach that user plus three times the clarity of the value proposition, which is why somebody should buy from you and not your competitor, plus two times any incentives that we’re offering, promos, free shipping et cetera, minus any friction that they have in the process, think about putting in information like credit card information, minus any anxiety that they feel – they don’t trust you. So this sequence gives you an idea of what things they prioritize: the clip, the clarity of how you can communicate, how you differentiate from your competitor is huge and also when you reach them. That’s why we focus a lot on what searches we’re putting in. So if we apply this in action, we can do this for ad copy, not just our landing pages, not just for campaigns, and so here, all I’ve done is just taken the different components and pillars and I’ve broken them down and what we see here is, you know, value props or some ideas of how we can do what, the highest quality we’re offering at the lowest price, maybe we have the greatest selection and convenience. What does that look like in messaging? Well, there’s an endless amount of ways but my point in saying all these is, you know, we’re not looking to test out one word, but we’re looking to test out a strategy of "How do I increase my, how do I increase the incentive that I’m looking at?" Well, you know, there’s multiple ways to do that. And then, how it reaches in messaging and landing page and ads copy is important, but the point is be thinking strategically about the tests that you’re putting down for your companies, instead of looking at things word-by-word in isolation. Really looking down in the weeds, not to say that that’s bad, but there’s so much richness that you can have by looking at a higher level. Wow, I can’t believe how quickly this is going. You might be tired of listening to me. For that I apologize. I hope some of you guys had a great time, but here’s what we covered today: What we talked about was the break-even CPC Strategy and the simple formula there that talked about the value of a click, how much money do I make in CPA times how good I am at converting people out of one hundred conversion rate, and that tells me how much money I could pay, valuing a click. That’s really big. The second thing we talked about was the search funnel and how the search funnel is really important when we reach them in that process of research or are they ready to buy. That’s going to dictate a lot. That’s a very important piece, the search funnel helps us organize our thinking. And the third piece is that messaging. That response and engagement is the other piece that tells us, you know, that really drives our ad to the top. If you have great engagement, you’re going to show up higher and so what are the things that we can test? How do we locate this and how do we really move things forward? So those are actually the really big questions that I had. A really big point that I had. There’s so much answers that we could actually go through, but I know that we have a couple of questions and so I want to spend just a few minutes going through questions and let’s go ahead and get started. So the question that I have here is you know "Hey John, I’m a small business with a low budget. Can I even compete with the big brands and their large budgets?" Well, this is a great question and the answer is "Absolutely, yes, you can." When you have a small budget, the thing to be thinking about is where you can really win. Right? Like, what is the message that we’re getting across? It turns out that consumers, a lot of consumers, really love local businesses and that is something that big brands can’t compete with. So you might want to highlight that in your ad copy. You might want to put pieces that show, we have these things called extensions, that put your kind of pin on a map, and it shows that you’re a local. So that piece is actually really valuable. That’s actually why somebody should buy from you and not your competitor, and the other piece is, you know, there are some terms, you want to really pick your battles and be smart on which terms that you want. What I would say is we call them longer tail terms, but maybe more words in the keywords. So not just "plumber", but maybe a specific neighborhood in Seattle. Be a "Queen Anne plumber", or "Queen Anne plumbing services now". You know, emergency "Queen Anne plumbing services." Pick your battles and focus there. That’s a big big tip there and you can absolutely win, and then another great question is: what’s the biggest mistake you see people make in their ad copy? Number one cardinal sin is not to test out different ads. If you’re leaving so much money on the table, I think that’s a really big one. If I look past that, it’s going to be, it’s not thinking about answering that question of why should somebody buy from you, not your competitor. And really just following what your competitors are doing, you can get ideas from competitors, but you want your value to really shine through, and so thinking about what that looks like, testing it out, and of course, figuring out which things resonate so you can build on it. Don’t just test one thing. After you figure out what works, go and try something else. You know, it looks like those are the questions that we have today. I know that it’s been a good amount of time that we’ve had together. Just wanted to say, thank you very much. You know, if you have any questions, go ahead and hit me up on Twitter. You can see my Twitter handle there: J M G A G N O N Thank you very much for your time. Good luck and have a great rest of the week.

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