An Investigation of Pay Per Click Search Engine Advertising
John Battelle’s Searchblog: A PPC Primer
John Battelle points to an interesting primer on PPC published by Alexandre Douzet. PDF here.
Basically I think it’s a good read, but he carries the mining analogy a bit too far. OK not really, but you should read the article anyway to see what I mean.. I found myself thinking more about the implications of his iron-mining analogy than PPC itself.
I like reading about parallels between different types of seemingly unrelated online channels. The author introduces some analogies to auction theory here, which definitely permeate the PPC bidding process:
In theory, with a collection of identical bidders, the same revenue is generated as in an open auction, because each bidder bids exactly their value for the auctioned good, no more, no less [8]. In practice, however, bidders are not all identical. They come with different strategies, and motives, and as such, the seller increases his revenue by between five and twenty percent by using a sealed bid auction. The variance is attributed to the competitiveness of the auction-taking place [8]. Because of the low barriers to entry and the relatively small price for a
keyword, any given keyword auction is most likely to be highly competitive.
This is true of eBay sellers as well. Different sellers come to eBay with different economics and different business models. For some large companies, eBay is strictly a customer acquisition tool. For other companies, eBay is their only sales channel. Think these different customers have different strategies in terms of how many listings they want to place on the site, at what price they place those listings for, and which features they use? They definitely do.
Let’s flip over to a discussion by the author comparing Google merchants and ebay bidders:
In all fairness to Google, the introduction of the second price option to the sealed bid auction adds a feature that attempts to make the auctions a more level playing field. In a second price auction, bidders do not have to pay their bids; they merely have to pay more than the next highest bid. This auction type is seen a lot online particularly in auction sites like Ebay [6]… people are encouraged to bid their actual willingness to pay, since they will only have to pay the second place price.
He’s referring to eBay’s proxy bidding system, described on eBay’s site.
The article continues…
The biggest difference between the keyword auctions and the auctions in the rest of the world, is the fact that the auction is technically for first position (truly winning the auction), however, there exist many “runner up” items.
This reminds me of some of the Second Chance offer functions on eBay…
He goes onto make some observations about how PPC is like an iron ore mine.
The PPC market place is not much different. The mine in the PPC paradigm is the page you are attempting to show up on. The dirt in which the iron is suspended equates to the views of your ad. The iron ore itself is the clicks from the ads to your page. Finally, the steel you produce can be mapped to the actions you generate on your web page.
These observations are a little impenetrable to me, but if they are true, then iron buried at a low depth would seem to me to be the long tail 
You can’t think too hard about this analogy I don’t think because it would mean that the long-tail is easier to “mine” being nearer the surface than more heavily clicked items that are not in the long tail. The problem is there is another factor at play too: how easy it is to generate those terms in the long-tail. It’s way harder than generating those other terms. Everyone knows the term “Britney Spears” generates a lot of traffic.
He follows up with a great discussion of the value of tweaking your creative:
Minor changes in creative can have a major impact. The only difference between the two ads, above, is the position of the words “Find” and
“Search” yet there is a 100 % difference in the response rate of the ad.
Personally, I think this is one of the most underappreciated areas of search marketing. With it being fashionable to discuss “The Long Tail” everywhere, and focus on your landing pages, what often gets left behind IMO is a discussion about good creative. In particular, for their tests, changing one word on the creative doubled their response rates. Quite a difference.
Incidentally, this has parallels to eBay as well. Your creative on eBay (in their search engine at least) is your 55 character title and subtitle. The machinations of tuning creative on Google and tuning these elements of eBay are nearly identical from a seller’s perspective.
Often a seller’s decision tree on eBay looks something like this for something that’s not selling:
- Is it selling?
- If no, is it getting hits?
- If no, tweak creative and/or pricing.
- If yes, my title is OK but I might need to tweak pricing or maybe description isn’t good enough.
Because the price of the item appears on the search results and on the item detail page, you have to consider it twice.
On Google, the process of tweaking this is analogous except that the buyer doesn’t know up front on Google the price of the item they might be willing to pay for. As a result, if you’re not getting clicks you can be sure it’s not your price because the buyer hasn’t seen this yet…. All of this is true if you’re not talking about comparison shopping, in which case pricing comes back into play.
At least this paper is different than the same old you read every day about PPC - bringing in the auction theory elements.