Search Engine Paid Advertising: The Mechanics

by Mark Walls January 11, 2018

If you’re reading this article, it’s virtually unquestionable that you’ve used a search engine. The World Economic Forum acknowledges: “Google is easily the world’s most popular site: ranked number 1 across North and South America, Europe, the Middle East, and in parts of Africa and Asia.” Statista reports: “in December [2012], 77 percent of the 1.52 billion search engine users worldwide conducted a Google search at least once. That’s 1.17 billion Google users” in addition to the “293 million users” who searched on Chinese search engine Baidu, “292 million users” on Yahoo’s search engine, and “267 million” users on Bing.

With this immense traffic, search engines are ripe for advertising. In fact, according to Statista, digital ad spending was forecast at $204 billion for 2017, expected to rise to a $330 billion by 2021. If you own, run, or manage an enterprise, you probably know that you need to prioritize search engine paid advertising. You may even be spending precious promotional dollars on another PPC platform. However, what you likely don’t fully understand is how search engine paid advertising actually works.

Especially in this ever-changing digital era, it can be difficult, if not impossible, to master search engine paid advertising if you don’t fully understand its mechanics. At Site Rank Systems, our team is committed to helping companies properly coordinate their online advertising efforts and reach their full potential with this twenty-first-century marketing medium. In the following blog, we explain how search engine paid advertising works and what we can do to help you leverage it to your business’s advantage.

Search Engine Paid Advertising Simplified

We’re all familiar with how search engines work. Users type a word or phrase into the search box in order to bring up websites that hopefully have the information they’re looking for. If you were feeling a particular hankering for some sweet, peanutty noodles, you might search for “best Thai food restaurants near me,” or if you wanted to settle a historical argument with a friend, you might search something like “who was the 30th president of the United States” (to save you the inevitable search, it’s Calvin Coolidge – but you’ll have to figure out the Pad Thai for yourself).

Users make millions of these searches every single day, and each one offers an opportunity for advertisement. By tying your promotional efforts to particular keywords or key phrases, you can reach people who are already inclined to purchase your products or seek out your services. You can pay for your ads to appear at the top of the screen, above the websites ranked by SEO, or Search Engine Optimization. For example, if you owned a jewelry business, you might target your ads to those searching “emerald necklaces” or “pearl earrings.” That way, users who are already looking for those items would see your ad and be much more likely to click on it, perhaps leading to a purchase.

How Bidding Beleaguers Your Business

How does the search engine determine which ads appear at the top of the page, with what frequency, and at what cost? There are a number of factors that enter into this equation, but essentially, businesses bid on ads and pay for them according to how many clicks they receive (this is called PPC, or Pay-Per-Click). As Google’s Chief Economist, Hal Varian, explains: “Google uses an auction system to rank the ads that appear in the search results page and to determine the cost for each ad click.” The system is designed, ideally, to offer maximum worth to both the users and the advertisers. After all, when leads and businesses are in alignment, everyone wins.

When it comes to applying this philosophy, the bidding process gets a bit more complicated than the traditional image of a man standing at a podium. Advertisers indicate the amount they’re willing to pay, but they actually pay the amount of the bid right below theirs. So, if the top three bids were $10, $6, and $4, the top bidder would pay $6 per click and the second bidder would pay $4. In addition, the highest bidder doesn’t necessarily rank at the top of the screen.

Google also ranks ads based on their value to users, determined in a variety of ways, including click-through rate (how many users tend to actually go to the website promoted), website quality, relevance to keywords, and format. Based on this system, some ads will never show up on search results, since they simply don’t meet the standards to rank.

This sophisticated system is designed to incentivize high ad quality and clever tactics. However, its design assumes that only external competition for ads exists, meaning that different businesses are bidding on the keywords they want to appear for. When it comes down to Company A versus Company B, bidding works out well. However, in many cases, larger corporations have various branches all creating their own campaigns, and they don’t even realize that they’re actually competing with themselves. For example, a national car insurance office might be trying to rank ads for “car insurance in Seattle” against its own northwestern regional office and local Seattle branch.

This is called internal ad competition, and it is especially problematic because, within the same business, ad quality doesn’t tend to differ much. This means that, no matter what you do to enhance your ads, you’re likely to get stuck at the same rank, end up paying much more than is truly necessary to hold the top spot, and if there is a marketing allowance, this is a wasted budget.

How SRS Squashes Internal Ad Competition

When you haven’t identified what’s happening with your search engine paid advertising strategies, internal ad competition can seem infuriating and impossible to overcome. However, once you’ve identified it, you can defeat it, allowing your business to truly make use of everything search engine paid advertising has to offer. Site Rank Systems was founded to help companies overcome this very problem. We serve as a knowledgeable, strategic, independent party to help your enterprise coordinate its tiers, craft clear search engine paid advertising policy, establish swim lanes, implement the standards we’ve devised, and make sure you get the most out of your online advertising.

Do You Need to Synchronize Your Search Engine Paid Advertising?

Take advantage of our Free Internal Competition Analysis to find out if internal ad competition is interfering with your search engine paid advertising success and contact the SRS team today to schedule your consultation.

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