1. © 2007 Didit - Confidential & Sensitive Thank you for your sponsorship DATA | ANALYTICS | RESULTS

2. © 2007 Didit - Confidential & Sensitive Maximizing Your Paid Search Profit A Direct Marketer's Guide Kevin Lee, Chairman & CEO Didit

3. © 2007 Didit - Confidential & Sensitive Why search marketing matters Consumers are searching for you and your products / solutions RIGHT NOW. 1)Either you are there or your competition is taking the clicks and customers you need 2)Google is the new Yellow Pages (Plus an online catalog and encyclopedia) 3)Organic position (unpaid listings) is great but you can’t count on it. 4)You can lose the sale at any point in the buying cycle.

4. © 2007 Didit - Confidential & Sensitive Search Marketing, Why it’s Special Search engine traffic is unlike other traffic. 1)Search marketing catches your customers and prospects at a unique moment in time when they are actually seeking information. 2)Searchers are in hunt mode. 3)Searchers are solving a problem 4)Searcher want to learn more about something, NOW 5)Searcher may want to buy immediately

5. © 2007 Didit - Confidential & Sensitive Search: a Psychic Postal Carrier Search engine marketing is like direct marketing with a Psychic Mailman. 1)Keywords, like mailing lists – scarce, valuable 2)Search ads are like the envelope 3)Your web site… the material inside envelope 4)Targeted messages hit the searcher at the perfect time 5)The searcher is thirsty for info, leaning forward and open to information 6)SEM fulfills the needs of searchers, and makes them into your customers

6. © 2007 Didit - Confidential & Sensitive What we’ll cover today Winning at paid search. 1)The Google AdWords System (overview of key elements) and the clones (MSFT adCenter & Yahoo Panama). 2)Bidding For Clicks in a Quality Score World (why it’s not as simple as it initially seems) 3)Bidding Strategies (how to maximize profit, revenue, leads or whatever floats-your-boat) 4)Conclusion

7. © 2007 Didit - Confidential & Sensitive Why I’m presenting this session I’ve been in the search marketing industry since before Google was founded, have presented over 500 times at conferences and seminars. My firm, Didit transforms clients’ businesses through automation of search marketing, & auction-media. I’ve written three books including most recently, “Search Engine Advertising” and run the D&B online business directory PowerProfiles.com. At Didit, we work with clients who spend $20,000 a month or more on Search + media and put our money where our mouths are. Our Performance Trust Account (PTA) pays $25- 100K if we don’t deliver on our metrics.

8. © 2007 Didit - Confidential & Sensitive Didit & Enquiro with Eyetools tested Google results page Of 50 people, 100% viewed/clicked top 3 listings 85% viewed/clicked position 4 listing 60% viewed/clicked position 5 listing The Famous CHART, what does it suggest strategically?

9. © 2007 Didit - Confidential & Sensitive The sponsored results on Google, AOL, others all originate from the Google AdWords system: Every Keyword phrase is its own real-time auction. There are three match types You can set lots of targeting parameters Geography Syndication Time of day, etc. You bid on a CPC (cost-per-click) but the system is a hybrid auction. Managing a hybrid auction is key. The Yahoo, MSFT and other systems are similar The Google AdWords System.

10. © 2007 Didit - Confidential & Sensitive Marketers typically have well defined goals and objectives and manage to budgets, ROI or both: Fixed budget biggest “Bang for the buck” where “bang could be: Revenue or Profit Leads Calls, pageviews, downloads, etc. Mixed metrics Unlimited budget given a specific “allowable” ROI or cost per customer or dollar earned. Fixed Budget with ROI constraint overlay What is your mission, goal and objective?

11. © 2007 Didit - Confidential & Sensitive Your target audience for your site and your SEM efforts may extend beyond the obvious: 1.Prospects 2.Customers 3.Your Reseller and Distributor Channel 4.The Press and Industry Analysts 5.Investors 6.Potential Employees Consider the needs and behaviors of all important constituents. Who is your Target Audience?

12. © 2007 Didit - Confidential & Sensitive You can set bids at the keyword level and then within keywords there are other levers. The foundation remains the set of keywords and phrases: Products and Services Problem – Solution phrases Questions Don’t ignore the types of keywords that might align against your objectives. Remember, the more competitive keywords are the ones everyone thinks of. Click price and conversion determine overall suitability of any keyword. Keywords are the Foundation

13. © 2007 Didit - Confidential & Sensitive Match Type is actually a targeting method. You have three choices in Google Exact Match Phrase Match Broad Match When you are running phrase or broad match, you can also specify negative keywords to eliminate serving against the wrong traffic. Exact match give the greatest control but you can’t capture all the opportunity with exact match. The right balance is different for every marketer. Match Types

14. © 2007 Didit - Confidential & Sensitive Google empowers you to set up campaigns at various levels. Account (the login) Campaigns (which share certain targeting parameters) AdGroups (which share the same advertising creative text) The right account and campaign structure can help a campaign run optimally while also providing the benefit of a logical data structure for analysis. Account Structures

15. © 2007 Didit - Confidential & Sensitive At the campaign level make sure you take advantage of the appropriate targeting levers. Geography Syndication network and device type Bidding and budget Dayparting (very powerful) Contextual targeting network on/off An important reason to use these targeting levers is to choose the clicks you want most. Campaigns

16. © 2007 Didit - Confidential & Sensitive At the AdGroup level don’t over-stuff the single group with keywords that vary significantly. Make sure the keywords and ad copy resonate together Consider using the Google DKI (Dynamic Keyword Insertion) system. More than one ad creative can be used For contextual targeting the Google system targets based on the theme of an AdGroup making it even more important. AdGroups

17. © 2007 Didit - Confidential & Sensitive Google’s quality score is designed to prefer ads that are relevant and that searchers like more. Quality Score is calculated every time your keyword matches a search query. To do this, Google has thrown a bunch of factors into the quality score calculation. Better quality score lowers the CPC you need to bid to achieve a position. Better quality score gets you a higher position given a specific bid. Poor quality score can mean you aren’t eligible for first page or top positions regardless of bid. Elements of Quality Score

18. © 2007 Didit - Confidential & Sensitive What’s in a Quality Score? For search results, the quality score includes: The historical clickthrough rate (CTR) of the keyword and the matched ad on Google; note that CTR on the Google Network only ever impacts Quality Score on the Google Network -- not on Google Your account history, which is measured by the CTR of all the ads and keywords in your account The historical CTR of the display URLs in the ad group The quality of your landing page The relevance of the keyword to the ads in its ad group The relevance of the keyword and the matched ad to the search query Your account's performance in the geographical region where the ad will be shown Other factors (Google’s extra Black Box variables) Elements of Quality Score

19. © 2007 Didit - Confidential & Sensitive Google doesn’t give you much feedback on your quality score, but it can make a huge difference in a campaign. Remember to add the quality score column and indicator to your AdGroup. It’s accessible via the “filter and views” pull-down. Elements of Quality Score

20. © 2007 Didit - Confidential & Sensitive If your quality score (mostly normalized CTR) is significantly higher or lower than your competition, your CPCs will vary dramatically as well. Your reserve price or ability to bid has a cap. It’s more likely that you can afford top position if your quality score is good. If your competitions’ quality score is better than yours they may pay LESS of a CPC and still show up in a HIGHER position than you. There’s evidence that quality score within accounts is somewhat osmotic (meaning that if you have overall good listings your overall scores go up and if there are many poor listings, your overall account can suffer, perhaps even the good listings. Quality Score can Kill you or turn you into a Killer

21. © 2007 Didit - Confidential & Sensitive Google spiders your landing pages and follows ad links. Generally, the impact of this element of quality sore is over-stated. However, it never hurts to have the elements of a landing page that get incorporated into quality score. 1. Bidded keywords on the landing page on readable HTML text A. Consider the page title as well 2. Speedy landing page load time Landing Pages and Quality Score

22. © 2007 Didit - Confidential & Sensitive The whole point in a bidding strategy is that you bid on the highest profitability clicks first and work your way down till your budget is exhausted. The trick is accurately predicting the value of a click Bid at the keyword level, not AdGroup. Take advantage of the different values of a click based on targeting options available The search engines, in particular Google don’t run straight keyword Paid Placement Auctions. Instead they generate an AdRank based on “Quality Score” and predicted overall revenue (bid x CTR). Bidding

23. © 2007 Didit - Confidential & Sensitive There are only two kinds of marketers at the top of the PPC search results: Brilliant Marketers The idiots. Marketers who buy Market Share at any price, often irrationally Success requires figuring out how to either: a) Be the brilliant marketer that can AFFORD a top position b) Deal effectively with those buying market share irrationally c) get high organic positions to supplement paid In exchanges & auctions the same holds true. Bidding in Search Auctions Can Be Painful, The Winner’s Curse

24. © 2007 Didit - Confidential & Sensitive Most PPC advertising is measured & managed based purely on last-click gets the credit. How does measurement move us beyond this demand harvesting mentality to a holistic influence model? Total ROI and immediately measurable ROI are different. An evolution is underway, driven by data. Bidding Strategies, Beyond Harvesting

25. © 2007 Didit - Confidential & Sensitive Beyond Search, Convergence Better targeting in search & media marketplaces - holy grail of advertising: Marketers get to put more of their budgets towards their best prospects/customers Searchers (surfers/viewers) only see the ads that the marketers really want seen, the relevant ones Publishers get a higher yield on their search and impression inventory

26. © 2007 Didit - Confidential & Sensitive Often your best solution is to use different landing pages for paid and organic. But if you don’t have the budget to build both… Have a great title tag that becomes a headline. Use keyword rich copy of at least 100 words Consider using a DHTML layered offer-serving platform to deliver offer-centric messages that can be tested and refined based on visitor source Landing Pages that work for SEO & PPC

27. © 2007 Didit - Confidential & Sensitive When creating content, you need to decide which part of the buying cycle you are targeting. Promotional content sells. Educational content captured searchers earlier in the buy-cycle PR content is for the press and analysts Sometimes you are creating content for existing customers (support content). New Content Creation

28. © 2007 Didit - Confidential & Sensitive Technology helps us predict the value of an impression or click before we buy it Buy clicks with highest LTV, ROI and Top or Bottom line impact. Use direct response or branding metrics. Create segments /cluster analysis (ongoing basis) Strategy is about maximizing the value of all purchased media, in concert: Personalizing the user experience, click routing Figuring out how to improve the profit profile (conversion) of all segments Predicting the true value of an impression or click

29. © 2007 Didit - Confidential & Sensitive There are two kinds of models and systems we can build to assure an optimal budget allocation for maximum profit. Predictive: use clustering, segmentation models and statistics to guess with a high confidence level the value of an impression or click. Reactive: in an auction the bid landscape what your competitions do changes your strategies and tactics. You need both. Data-driven models of impression / click value

30. © 2007 Didit - Confidential & Sensitive Most the data you have at your disposal is worthless unless it helps you understand the differences between audiences. You need to figure out what differs between the clicks and impressions coming in. Who are the audiences? What do they respond to? Are there some audience members you just don’t want? Can you rescue a poorly performing segment? It’s Audiences not Impressions or Clicks

31. © 2007 Didit - Confidential & Sensitive How much difference is there? This is just daypart and day-of-week for conversion rate.

32. © 2007 Didit - Confidential & Sensitive The 80-20 Effect in Search. Pareto “Rules” Given a choice, wouldn’t you prefer to devote your PPC search budget to acquiring High-revenue, high profit customers? Application of the Pareto effect against your data empowers you to put your money where it works hardest. Use your data to effectively generate maximum volume, profit and revenue.

33. © 2007 Didit - Confidential & Sensitive What metrics should you use? Pre-Post Click Behavior Segmentation: Which behaviors correlate with increased profit? Higher conversion from impression to click (CTR) for a given position. Better conversion from click to lead/sale Higher immediate value (profit per order) Better lifetime value of the customer (predicted) Offer responsiveness Look at your data and determine if behavioral targeting (or retargeting) makes sense.

34. © 2007 Didit - Confidential & Sensitive Better CTR The first metric you have control over is the clickthrough rate (CTR) of your ad (holding position constant): Higher CTR gives you two bonuses 1.More high quality traffic on that listing 2.A higher predicted CTR for the engine’s formula which calculates rank/position and price As you test ad creative and ad targeting, continue to optimize post click metrics as well.

35. © 2007 Didit - Confidential & Sensitive Geographic Segmentation Geographic segmentation may be the most powerful method of segmentation you have, and it is available from all three of the big engines: 1.Clicks are worth different amounts 2.Customers have different profit profiles 3.Prospects respond to different messages (think ad creative and landing pages) Why manage only on a national basis when you can segment?

36. © 2007 Didit - Confidential & Sensitive Site-side conversion rate It’s a lot of work to re-structure campaigns to market differently to segments. Why bother? Better conversion click to lead or immediate sale For example if the conversion of non-segmented (mixed traffic) averages 1.5% and the conversion rate from the Chicago DMA is 2.1% then you can afford to bid over than 25% more. In Microsoft, you could further segment, for example, men aged 26-35 if they index high. Higher bids may get you higher position and additional volume.

37. © 2007 Didit - Confidential & Sensitive Higher Immediate Revenue Does one audience segment order more expensive items or larger quantities? If NY DMA visitors have a bigger shopping cart with $178 vs $122 for the average shopping cart, you can afford to bid more for the NY segment. Again, higher bids in a segment may get you additional volume due to a position change while retaining ROAS.

38. © 2007 Didit - Confidential & Sensitive Higher Predicted Lead Score Does one audience segment have higher lead quality indicators? If NY DMA visitors have better quality leads, you can afford to bid more for the NY segment. Again, higher bids in a segment may get you additional volume due to a position change while retaining ROI.

39. © 2007 Didit - Confidential & Sensitive Higher Lifetime Value Start by crunching your current customer file. Do certain geographies stand out for predicted LTV? Does one segment order more over time or stay with your company longer creating annuity revenue? What’s your 90-10 or 80-20 rule? If buyers from LA likely to order your laser toner product every three months for 4 years, you can afford to bid more for this power-segment. Higher bids may get you additional volume.

40. © 2007 Didit - Confidential & Sensitive What are your other segmentation levers? Geography is only one segmentation lever: Time of day (dayparting) Day of week Network click source (content vs search) Demographics (in Microsoft adCenter and Google Content only) Each is an additional segment you can analyze to cherry-pick out the highest value traffic.

41. © 2007 Didit - Confidential & Sensitive Perfect Storm, the POWER SEGMENT What happens if the same geographic or daypart segment has a: Better conversion from click to lead/sale Higher immediate revenue value Better lifetime value of the customer The Power-Segment drives a dramatically higher ROI and profit. Each segment with the possibility to drive scale should be considered for separate bidding + targeting (landing pages and offers)

42. © 2007 Didit - Confidential & Sensitive Constant evaluation analysis and testing Insight Driven Advertising Feedback Loops of Data at Multiple Levels It Starts with a winning paid search campaign

43. © 2007 Didit - Confidential & Sensitive Branding and DR Metrics? Does conversion correlate with influence? If the lagged conversions, “assists” and ability to influence consumers who don’t purchase in- session correlate well with measured conversion then manage by marginal profit, top- down. “Buy” or harvest your most profitable orders first by buying clicks that fit the optimal conversion profile, work your way down.

44. © 2007 Didit - Confidential & Sensitive 2009-10 Search Campaign Priorities There are less searchers than in prior years for many industry segments: Cherry pick the very best clicks Eliminate the waste in your campaign (especially if you have budget cuts) Experiment wisely Use re-targeting if your campaign and site visits are over 40,000 visitors a month. Test promotional ad copy and landing pages D&B listed? Claim your PowerProfile at http://dnb.powerprofiles.com free (I’ll bump you to a Silver for 3-Months $60 value) http://dnb.powerprofiles.com

45. © 2007 Didit - Confidential & Sensitive Things to watch the next year or two While the search engines may try to add tools into their interfaces, chances are complexity will increase: Keyword-targeted display (contextual) Re-targeted search display ads and text ad retargeting Keyword-targeted Video and Rich Media Better control over syndication networks Mobile? CPC, CPCall, CPM, CPA, CPSMS? MSFT/YHOO alliance

46. © 2007 Didit - Confidential & Sensitive Conclusion Stay Educated on best practices. Pick the right partners for technology and strategy development Never stop testing, never stop segmenting. Copies of PPT? kevin@didit.com. Questions?