SEM...Pay to Play; Is It Worth It?

David Byrd : Byrd's Eye View
David Byrd
Chief Marketing Officer for ANPI

SEM...Pay to Play; Is It Worth It?

Search Engine Marketing, unlike SEO, is a paid approach to search engine advertising.  Companies pay the major search engines for placement in the sponsored links sections typically on the top and right hand side of the search engine results pages (SERPs).  The placement of a company's sponsored ad depends on a Quality Score derived by the search engines based on the quality of content on the company website, the context of the ad, and the amount a company is willing to pay per position. For the most part, the business model works well for the search engines, advertisers, and potential customers.  Unfortunately, there are a couple of glaring issues with search engine marketing.

The first issue with SEM is that there is a 95 character limit on ads for paid search.  It is nearly impossible to offer product differentiation from company to company when confined to 95 characters.  This makes ad copywriting a very creative and difficult task, as you need to find a way to provide relevant information as well as your value prop in a very confined space.  To add a little perspective, twitter, which some view as restrictive, allows a tweet to be up to 140 characters.

The second, more issue with SEM is the persistent rise in cost per lead acquisition. The majority of readers of this blog are well aware that the IP telephony industry is a very aggressive space.  Many companies are competing for the same piece of the proverbial pie and offer very similar products.  This competition especially in paid search is continually driving the cost per click higher on the top industry keywords.  Over the past year, we have seen as much as a 50% increase in cost per click for higher converting keywords.  This directly increases the cost per acquisition across the industry and as each company tries to spend more to outbid the opposition for better positioning, costs continue to increase.  Unfortunately, there is no short term solution for this cyclical increase in online advertising.  Unless each of the company's marketing managers and directors get together and put a cap on online spending (hint, hint), advertising spend will continue to increase until the cost per lead and cost per click reach equilibrium and the model implodes. 

Obviously, Google loves this type of competition.  If the statistics are correct and Google receives 90% of their revenue from Paid Search advertising, then it is absolutely no surprise why they have a market cap of nearly 150 billion and growing.  I see no end in sight as long as this type of advertising continues to be beneficial to both Google and the advertisers who are using their AdWords platform.

Even though Google is the alpha dog and has a commanding lead in search traffic across the board, we have seen success in utilizing Bing and yahoo for paid search advertising.  Both secondary search engines have a substantially lower cost per click and still drive a considerable amount of traffic to our website.

Although there are major issues with SEM, this advertising platform isn't all bad.  Broadvox sees quality leads come through our paid search campaigns on a daily basis.  You, too, should work to gain market share with online advertising, and try out various SEM techniques to increase your quality score and gain competitive advantage.   

On Friday, I will go into greater detail on how SEM works and how VARs can utilize this technology at a local or regional level.



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