Internet Metrics
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Calculating the Value of Internet Opportunities

Calculating the Value of Internet Opportunities

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Internet Metrics Internet Metrics Presentation Transcript

  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled From Clicks to Value Understanding Internet Marketing Metrics
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled The biggest challenge with marketing metrics is the Internet which is the Wild West.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled The Internet is the new frontier for marketing and is not yet completely figured out
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled In the American West of the 1800s, there was lawlessness, bandits and ad hoc laws and approaches for survivial
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Internet marketing is much the same
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Innovation occurs rapidly and rules are continuously re-written – if written at all
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled When we first started this journey, I talked about a marketing divide – that few organizations “get” data-driven marketing and majority do not
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled This divide is alive and well for Internet marketing.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Our approach to understanding Internet marketing is to start by focusing on the biggest piece of online marketing budgets and work our way forward from there.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled In November 2008, eMarketer published a survey that found Search Engine Marketing (SEM) was 45% of online marketing spending and was predicted to be 49% of spending in 2010.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled When we talk about Internet marketing metrics, there are some basics like CPC, TCR and ROA that take a bit of time to get used to, but the effort is worth the result.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Metric – Cost Per Click (CPC)
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled When we talk about Internet marketing, the discussion starts with the most basic discussion –
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Cost Per Click vs. Cost Per Thousand Impressions
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled In 2004, on a flight from Washington, DC to Chicago, I happened to sit next to a senior partner from a big five consulting firm
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled He said to me – “I don’t get it – search is easy. What’s the big deal about Google?”
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Search engines are fairly straightforward. They create “robots” that scour the Web and tabulate all the web pages in existence and the keywords on these pages.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled We, as users, can search this very large table for specific web pages with corresponding keywords.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled The challenge in SEM is ordering the very big list of web pages with keywords you want in some way to make sense.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled In the early days of the Internet, search engines counted the number of keywords on a page to define the search order – more occurrence meant higher rankings
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled So web developers just listed their keywords lots of times on a each page to influence the search order. To fight this, Yahoo! Had buildings full of people to review these results.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled But in 1996, Larry Page and Sergey Brin, had an insight that would change the world. They had the idea to rank-order search web pages on the number of links to a given web page.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled That means that the more people who link to a web page, the higher the ranking of the page.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled On September 4th, 1998 – Google was incorporated and patented as the best search engine algorithm in the world.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled The marketing business model for the Internet up until 1997 had been based upon CPM – Cost Per Thousand Impressions.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled That means that every time an advertisement appears on a web page (impression), the advertiser is charged the rate.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled 1997 brought about the first CPC – Cost Per Click – model, which is now the standard for measurement in SEM.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Cost Per Click The Essential Search Engine Marketing
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled CPC vs. CPM is a subtle shift in global Internet marketing strategy
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled In the CPM model, the person doing the search is most important and advertisers pay just to be seen by the searcher.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled In the CPC model, the company being searched is more important, and advertisers pay for a click-through that has good odds of resulting in a purchase.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled CPC is the equivalent of Demand Generation Marketing.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled The CPC for Google is very expensive – you can spend hundreds and thousands of dollars a day depending on the volume of search words and how broad your geography is.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled So how do we ensure that we are getting the biggest bang for the marketing buck in SEM?
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled For this, we need a few more metrics and two essential ones that we will discuss.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Transaction Conversion Rate (TCR)
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Internet search is broken down into two components….
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Natural Search – Organic Search & Sponsored Search
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Natural searches are the search results based in part on the number of links to a page from other sites.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Sponsored Searches are the paid links on the top and sides of the search page.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Our focus is on the sponsored search results since we as marketers can control these.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled When we talk about about sponsored search marketing, we need to understand that there are two more terms that we should be familiar with…
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Bid Strategy – the placement you would like to get on the page. 1 – 4 are the first 4 sponsored links 5 – 6 are the following two
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Match Type – the user must type the exact words (exact match type) or the words can be typed in any order (broad match type). Match type can also include phrases (phrase match).
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled In Match type, there is also negative matching which allows us to exclude specific words/phrases.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled So let’s look at some examples
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled VOIP can have a broad or exact match type. For example, “VOIP calls to Turkey” is a phrase match.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled But Turkey is also part of a brand name of alcohol. So using negative match type, we can exclude the phrase “Wild Turkey” so that alcohol results would not be included.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Transaction Conversion Rate The percentage of customers who purchase after clicking through to your web site
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled In addition to CPC, the next really useful Internet marketing metric is click- through rate (CTR)
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Click-Through Rate The percentage of customers who click through on a link and is calculated from the number of clicks divided by the number of impressions (ad served).
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled The central idea of SEM marketing is that you buy keywords and placement with specific match types.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled So to understand CTR…
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled You might bid $4 for VOIP with a broad match type and a bid strategy of 1 – 4. That would mean…
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Position 1 - $4 Position 2 - $3 Position 3 - $2 Position 4 - $1
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Looking at other bids and strategies, you would end up paying up to $4 for every click after a VOIP search.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Now, Google works on a volume basis. If you have a high historical CTR, you can get a higher placement for a lower CPC. Google favors those who have high volumes and high probabilities for CT.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Why?
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled It maximizes Google’s revenue Google Revenue = CPC x # of clicks
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Why is this model bad?
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled It favors large brands with a history of good CTR. That means if you are new to the SEM market, with no history, it will be difficult to get higher positions at fair pricing.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled We use CTR and TCR to calculate the Take Rate Take Rate = CTR x TCR
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled The take rate is just the percentage of customers who click through times the percentage who convert to a sale once they click through.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Return on Ad Dollars Spent (ROA) ROI for Search Engine Marketing
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled To complete the SEM metrics, we need to cover the equivalent of ROI for SEM – Return on Ad Dollars Spent (ROA)
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Return on Ad Dollars Spent Measures the efficiency of generating net revenues from ad dollars spent when the end action is the purchase.
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled ROA is calculated as follows: ROA = Net Revenue/Cost
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Understanding the Numbers
  • http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled Optimizing Your SEM Strategy 1. Optimize the Publisher Strategy – Figure out which publisher will give you the best results for the money you are spending. 2. Optimize the Campaign Strategy – Analyze the campaigns within the publisher to determine the campaign changes needed to deliver the most value 3. Calculate the KPI Impact – Determine the impact of campaign changes on key performance indicators (KPIs) such as net revenue and ROA.