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Danny Goodwin

eBay vs. PPC: Yes, Paid Ads Still Work

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An eBay study on the effectiveness of paid search advertising claims that brand keyword ads provide no short-term benefits and negative return on investment (on average). Our jury of PPC experts had plenty to say about this hotly debated topic.

If you read no further, at least takeaway these five key points:

  • EBay is a well-known brand that can make money without Google AdWords.
  • Historically, eBay's PPC performance has been poor – and at times comical.
  • Branded keywords help you control your own message, own valuable real estate on search engines, and fight off threats from competitors.
  • You should absolutely continue investing in branded keywords, as long as it makes sense from an ROI standpoint.
  • Test, re-test, and analyze your own data.

In the study, eBay revealed that it spent an estimated $51 million on paid search bidding on more than 170 million keywords last year.

A couple other points to note before we dive in: in Q4 2012, eBay got 3.46 percent of all paid search clicks, according to Experian, while Searchmetrics recently rated eBay as the eighth most visible paid search advertiser (and 19th in organic search visibility).

If you haven't yet, you should read the study (PDF) for yourself.

Opening Statements in the Case of eBay vs. Paid Search

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Our jury of experts agreed that the study is both interesting and intriguing, but deserves some deeper scrutiny.

To start with, not every brand has the recognition of eBay as well as the SEO chops to be in high ranking for every class of products, so eBay will suffer less than most by removing paid search, noted Dave Schwartz, VP of client services at DataPop. And Google has been systematically removing organic results from above the fold.

"Most companies aren't eBay: they don't have the marketing budget that eBay has, nor the name recognition," said Melissa Mackey, search supervisor at Gyro. "It's like comparing the average Joe to George Clooney."

Another issue, pointed out by Schwartz and many of our jurors, is that while eBay has great consumer recognition and a lot of AdWords volume, eBay has been guilty historically of producing low-quality, non-specific creative. Thus, it's not surprising that eBay has experienced below average performance at best, and comical results at worst

"When you're running silly, generic ads, it's no surprise that your results aren't stellar," Mackey said, pointing out eBay's famed over-use of dynamic keyword insertion.

"They don't necessarily have the best reputation for their PPC activity, but that's largely based on anecdotal evidence of poor quality ads," explained Alistair Dent, head of PPC at Periscopix. "In a campaign the size of theirs it's inevitable that those will sneak through from time to time."

Though the 25-page study may be accurate from a statistical perspective, Todd Mintz, senior account manager at PPC Associates, doesn't think their conclusion has any value.

"To give my interpretation on the study, eBay won't lose any measurable number of sales if they turn off their extremely ineffective PPC campaign," Mintz said. "Wow, that's insightful."

Other issues our jurors had with the study:

  • "Breaking apart brand/non-brand in the analysis seems to skew their results since non-brand performance in paid tends to drive volume in brand," Schwartz said.
  • "The methodology of halting brand ads on adCenter raises a few eyebrows: Bing and Yahoo searchers do not behave the same as Google searchers, as I'm sure even eBay's own relative conversion rates would attest. But with data samples the size of theirs, I suspect that the systematic bias from that is minimal," Dent said.
  • "eBay generated 25 cents of revenue for every dollar spent on advertising. I know a lot of direct marketers who'd be thrilled with those results for customer acquisition," Mackey said.
  • "Even though eBay is well known, it's not known to everyone for everything. Certainly there are certain product categories yet to be discovered in search. An example of this is eBay motors. Typically when people search, they will start out with different queries that are more general, then more precise when they are closer to a sale (this would include brand terms). Searchers will also often times search multiple times before settling in on content. This concept, called the search funnel, was not mentioned in the research," said Lisa Raehsler, founder of Big Click Co.

To really make something like this concrete, Justin Freid, director of search engine marketing at CMI Media, said he would like to see it done in a more competitive industry – ideally with a company that isn't already number one in the market.

Defending the Continued Investment of Branded Keywords

While eBay or other big brands may see minimal or negative returns, there are still many reasons to continue investing in PPC.

Paid search ads help you control your brand's message and own the most valuable real estate on Google's search results, resulting in increases in conversions.

"If a brand had a top organic result combined with a top paid listing with sitelinks, they're going to control an awful large percentage of the screen for branded searches," Mintz pointed out. "The chances of controlling that click goes up substantially and even if their conversion rate stays constant, the number of conversions rise. Plus in most instances, branded bids are really cheap so why wouldn't you spend the money?"

Another issue is competitive threats. Anyone can bid on your brand in the U.S., Mackey said.

"If you're not there in PPC, your competition surely will be – possibly with a highly competitive offer designed to steal your customers," she said.

Freid said bidding on your competitor's brand names is a common practice, especially in more competitive industries such as auto insurance, life insurance, loans, and banking.

"Having personally executed this strategy in some of the above mentioned industries, I can tell you, it works," Freid said. "If my competitor takes away his brand ad, well then I can own the top spot when someone searches for their brand."

Each brand will experience different levels of ROI from branded keywords, Dent said. There are two factors at work, he said:

  • The incrementality of sales. This will vary a lot by advertiser.
  • The effect on your account level quality score.

"If brand terms are a high proportion of your traffic and you get 30-40 percent click-through rates (CTRs) then you can expect these to have a positive effect on your account's quality score, and see yourself move up into higher positions in auctions on your non-brand keywords."

Does the Paid Search Glove Fit?

Just because one company's study – even if it is a great brand like eBay – says that paid search is ineffective doesn't mean you should throw in the towel, Freid said. Our jury of PPC experts all agreed that you need to test, re-test, and analyze your own results before deciding branded PPC doesn't work.

"There is no guarantee the same results will occur for your brand and your industry," Freid said.

"Different brands see different amount of incremental sales as a result of PPC brand ads, so an individual advertiser's mileage may vary," Dent added. "It's very important to highlight that studying this for yourself will be crucial, because the ROI of brand keywords should take into account the proportion that are incremental."

How can you determine whether paid search is a fit for your brand?

"Turn off branded PPC for a few days and see how much lift you get from organic search. I think it's extremely unlikely that organic will make up 100 percent of the lost paid traffic," Mintz advised.

"Then, do an ROI analysis, comparing lost revenue / lead generation vs. cost savings. If you crunch the numbers and don't see branded PPC ROI, only then would I tell you to turn off branded search. However, I would also suggest that they're probably not running their branded PPC campaigns all that well if they come to this conclusion."

Another option is to set up an hourly study, Dent said.

"Turn brand ads on for an hour then off for an hour," he said. "Use Google Analytics to track the volume of people arriving through organic links in each time period. Check overall whether your organic links have captured all your expected sales.

"If you run for a week, then switch the hours around for the next week then you should be able to mitigate most of the downsides of time series analysis. Track this over a long enough period of time and use Google Analytics to also store the original traffic source."

Closing Statements

One of the key benefits of running brand ads, over organic search, is the ability to craft messages to the audience, based on keyword and search intent, Raehsler said.

"A paid ad gives advertiser full control over messaging, promotions, and driving to specific content landing pages," Raehsler said. "If the brand ads were not persuasive, this shows a glaring issue with the strategy, targeting, and ad copy of the brand ads."

Freid also noted that another benefit to PPC over relying on organic search is that you have more guarantees. On the organic side, there are no guarantees on how long it will take Google to index SEO-related changes, such as title tags and meta descriptions, and even then Google may change what appears in the search results.

"Paid search let's you alter messaging, target and communicate to potential customers in real time," Freid said. "PPC allows you to update your ad text with sales, promotions and direct users to exactly where you want them to go."

In summation:

"It's a shame since every person who has contributed to this post could take charge of the eBay PPC account and make them a boatload of money," Mintz said.

The Verdict

In the case of eBay vs. paid ads, the jury has found that yes, paid search ads still work. Maybe not for eBay … but then again, there's only one eBay.


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