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Saturday, March 31, 2007

Google Search Terms

I was talking with a Google Account Manager when he asked me: "If you had a web site that sold shoes, which search key word would be more important...shoes or Nike Pegasus?" Interesting question, isn't it? While shoes is a more general term, Nike Pegasus focuses on a specific product a seasoned Googler (Yahoo'er, MSN'er) would enter. While Internet shoppers become more sophisticated and technology continues to evolve...the answer will most always depend on the ROI of each Ad word across a specified period of time, e.g. December 2006.

For our fictitious web site, let's assume we averaged 850,000 unique visitors per month. Out of those 850,000 visitors, 3% convert by buying purchasing shoes for at least $50 per pair, $1,275,000. Now let's apply the statistics for the key word "Shoes" during December 2006:

  • Drove 1,000,000 unique visitors to the site during 12/2006.
  • 45% of those visitors where 1st time visitors = 450,000
  • 5% purchase conversion rate at $75 each = $3,750,000
  • Cost per click = $.60 > $3,750,000 - $600,000 = $3,150,000 profit.
  • 30% conversion rate for registering new accounts = 300,000

Results for "Nike Pegasus:"

  • Drove 200,000 unique visitors to the site during 12/2006
  • 55% of those visitors where new to the site = 110,000
  • 8% purchase conversion rate at $120 each = $1,920,000
  • Cost per click = $.50 > $1,920,000 - $100,000 = $1,820,000
  • 40% converted by registering for new accounts = 80,000

Although "shoes" is a more generic keyword that "Nike Pegasus," its PPC is 20% greater due to its popular demand by the marketplace. "Shoes" drove more monthly unique visitors to our site than any other month for all of 2006 and earned $1,330,000 more in profit than "Nike Pegasus." Not bad, right? But check this out...The overall KPI conversion rates for Nike Pegasus is actually greater than the conversion rates for shoes. In other words, while "Nike Pegasus" drove less traffic and profit to our site than "shoes," its conversion rates as a percentage were actually higher! A greater amount of visitors per keyword spent more money per purchase and registered for new accounts.

I'd appreciate your feedback. What action can we take with this data? What should we tell our fictitious client to do next? Spend more on specific terms or generic terms? I know this depends on the business goals. I'm actually dealing with this in my real life job...generic terms driving more traffic but generating less conversion rates as a percentage. When I brought this up with my client, they mentioned that driving a visitor to the site was considered a KPI, not just converting. I hope I inspired creative thought.

3 comments:

Ravi Pathak said...

Certainly Interesting !!
Well, what matters is ROI ,right. if product specific keyword gets you more ROI, wouldnt you want to go ahead with that ?
or do a linear optimization ??

It might be interesting to know
what is my funnel size of actually online shoppers. Say I have 4 stages of online buying cycle. A,B,C,D. D being actual purchase.research during A & B might have generic search terms and C/D might have product specific.If I can get proportion of Keyword volume of generic terms couple of times, I would use that ratio (generic to specific) and do a linear regression of that to optimize for ROI . ( check, trends.google.com) it might be helpful. Also , you might want to check cannibalization (what proportion search shoe followed by nike pagasus at adcenter.microsoft.com.

Sounds idiotic ?? This is just my initial thoughts at 4 AM.

Adam Berlinger said...

Ravi, this is wonderful! Thank you very much for your feedback. This is exaxctly the kind of discourse I want on my blog and in the Yahoo! forum. Cheers, Adam.

Gus said...

If driving traffic is a KPI then generic is good. It does introduce more people to your brand.

In my experience the difference in conversion in traffic are typically greater than your example.
One problem with specific to keep in mind is that it isn't introducing people to your brand as much as the commodity that you happen to carry. Your placement on google is fickle and unpredictable, so keeping adequate inventory can be a serious problem.