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Do the PPC Engines Reward the Right Behaviors?

mackey-melissa
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Reward for  High PerformanceYears and years ago, when I was in graduate school, I read an article published in the Academy of Management Journal called "On the folly of rewarding A, while hoping for B". Originally written in 1975, the article was already a classic, even at that time. Still, as with most college reading assignments, I approached it with disdain, prepared to extract what I needed for the next class exam and then forget about it.

I was wrong. The article has stuck with me, all these years later.

The article's basic premise: "Reward systems are fouled up in that the types of behavior that are rewarded are those which the rewarder is trying to discourage, while the behavior desired is not being rewarded at all." An example given in the article is businesses who say they are committed to total quality, yet incent and reward employees for shipping products on schedule, even with errors and defects.

What does this have to do with PPC? A lot.

One example of "rewarding for A while hoping for B" in PPC is the quality score conundrum. Ever since Google rolled out quality score in 2008, advertisers have struggled in their attempts to improve it, often to their detriment. The pursuit of high quality scores is frequently at odds with PPC results goals.

Let's say that an ecommerce advertiser is using PPC to generate sales. ROI is their primary key performance indicator (KPI) – in other words, the advertiser wants the most sales at the lowest cost. But let's say this same advertiser is also trying to optimize for quality score, and that their PPC manager is measured and rewarded in part based on quality score improvement.

Both Google and Bing have openly stated that click-through rate (CTR) is the primary determinant of quality score. An advertiser must improve CTR in order to improve quality score. So, the PPC manager who is trying to improve their quality score needs to increase CTR.

In ecommerce, though, high CTR often does not correlate to high ROI. In fact, it's not uncommon to see the best ROI on ads with the worst CTR!

Carefully crafted ad copy will, by design, discourage unqualified prospects from clicking. That's why it's a good idea to include product prices in your ad copy – to prevent clicks from tire-kickers who are clicking on ads to compare prices, with no intention to purchase at that moment. Including the price in the ad precludes clicks from price shoppers.

In this case, though, unfortunate PPC managers are faced with goals that are almost mutually exclusive. They need to improve quality score to make a client or boss happy, and yet improving quality score means increasing CTR – and reducing ROI. It's a no-win situation, because if the PPC manager is rewarded for higher quality score, the company faces a potential decrease in ROI.

Enhanced campaigns are probably the most egregious case of "rewarding for A while hoping for B". When Google announced enhanced campaigns, they touted the ease of management.

"Tired of maintaining separate campaigns for each device? Good news – now you can't! Just use bid modifiers instead!" The same thing goes for geotargeting, dayparting, and other "features" of enhanced campaigns – by introducing bid modifiers, Google claims to have simplified account management.

Why did Google develop enhanced campaigns? The prevalent belief is that the current AdWords system had become unwieldy, with features bolted on to the point that it was taxing their system servers.

Enhanced campaigns are Google's answer to a system that had become, in their opinion, needlessly bloated and complex. In other words, Google launched enhanced campaigns with the hope of reducing the number of campaigns in the AdWords system, thereby making it easier for advertisers.

Alas, Google fell into the "rewarding for A while hoping for B" trap. In their quest to reduce the number of campaigns, they've actually increased them.

Google rewards advertisers (or at least experienced advertisers) with a nearly endless number of levers to pull to improve performance and ROI. We PPC managers use every tool in our arsenal to weed out non-converting traffic and improve our conversion rates. We don't want to pay a penny more for a conversion than we have to.

Enhanced campaigns took away some of our levers, namely separating campaigns by device. We're forced to come up with crazy workarounds that, more often than not, require more campaigns, not less.

Employing bid modifiers created a similar conundrum, in that we now have to organize our campaigns by bid modifier. Where in the past we may have had two campaigns, we might now have 10: one for each geo, daypart, and device modification percentage.

Google hoped to simplify the AdWords system, but by rewarding PPC managers with multiple levers, they've instead complicated the system by an order of magnitude.

Many advertisers also unwittingly "reward for A while hoping for B", often with distractions and pop-overs on landing pages that pull visitors away from the primary conversion action. Don't make this mistake! Align your goals with your ad copy, landing pages, and website – and don't reward visitors for something other than what you're hoping for.


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