Ruth P. Stevens Articles and Columns: IM Press (Interactive Marketing Press)

Search Engine Marketing for e-commerce: What do you do when Pay-Per-Click prices become sky high?

Online merchants were early to the game of using keyword bidding to drive traffic to their sites. A much better deal than general advertising, SEM provides the ultimate in a qualified prospect: someone who is already looking for the products you offer.

But the situation has changed dramatically in recent years, as more websites are competing for scarce consumers, and competition has driven up the price per term in many categories to the point where the re-tailer can't make a profit on the transaction. Should you continue to acquire new customers even if they are unprofitable? No.

According to Fathom Online's Keyword Price Index©, the average keyword bid in the U.S. was $1.46 at the end of the first quarter 2007. But bidding is a huge sales driver: in an Internet Re-tailer survey in April 2007, 30% of e-tailers said that more than 50% of their online sales are due to search engine marketing

So, online retailers are exploring new techniques for finding profitable online customers in the newly expensive world of pay-per-click SEM. Here are some of the approaches that are showing results.

Migrate the more expensive terms from SEM to SEO (search engine optimization). For example, a sporting goods re-tailer who notices that "fly fishing accessories" has become too pricey to support a profitable sale can rewrite the home page copy to include several mentions of that expensive term. The re-tailer can continue to bid on cheaper, narrower search terms like "fly fishing rods," if they are producing an acceptable ROI.
Off-prime-time bidding. retailers are exploiting inefficiencies in the SEM market by timing their bids to times when prices are lower, like after 8:00 p.m.
Identify opportunity by investing in new technology, like automated bidding tools. The hat merchant Lids.com reduced its cost per order by 60% and improved its ROI by 150% using an automated bidding agent to expand its keywords from 500 to 13,000, with no increase of management time.
Increase the number of keywords per SKU. Some retailers are using a technique called "keyword imputation" to generate as many as 10 to 20 linguistically similar terms to describe each product, versus the traditional single term.
Connecting online to offline marketing. For example, adding a radio or print advertising campaign to raise consumer awareness can improve online conversion rates and make the entire campaign more profitable.
Promote offline marketing activity with online SEO. Events like holiday sales and products promoted on catalog covers need to be written into online copy early enough to be picked up by search engine spiders.
Add vertical search engines to the mix. LookSmart has 181 "interfaces" that allow consumers to search more efficiently in interest areas like health, finance and travel, compared to the thousands of search results produced by Google and Yahoo. Specialty sites are springing up in all kinds of categories: SpaFinder, FindGift, and BookFinder, for example. Also popular with e-tailers are the comparison shopping sites, like Shopzilla and NexTag.
Play off Google against Yahoo. Marketers are finding subtle differences between the two major U.S. search engines that they can exploit to their advantage. One technique is to bid for top position on Yahoo, where prices are lower, but go for sheer traffic when bidding on Google, where the volume is higher. Another difference is demographics: Google skews higher than Yahoo on males, for example.

Top 10 retail product searches, March 2007, according to Nielsen NetRatings

pet food recall
crystal animals
shoes
menu foods
flowers
turbo tax
prom dresses
books
furniture
ipod

These techniques are paying off, but most are only a temporary fix, as the world of search engine marketing continues its rapid growth and evolution. As they have adjusted to the new realities, online retailers have learned two lessons:

Job One in search engine marketing is site optimization. After years of frenzied keyword bidding, e-tailers are trending back to organic search, this time with a better understanding of how paid and organic search work together. They are focusing on adjusting page architecture, content, and copy to be friendlier to spiders.
They must continue to test and update their strategies. SEM changes daily, so it's essential to keep current. You snooze, you lose.

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