Smaller businesses lag in tracking search ad effectiveness

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Max Kalehoff is VP-marketing with search advertising company Clickable, whose software solution is aimed at smaller search marketing budgets. “Hands-On: Search” recently asked Kalehoff about trends in measuring and tracking conversions from paid search campaigns.

HOS: Clickable recently reported that more than half of small and midsize companies fail to properly track conversions from their paid search efforts. What’s going on with SMBs?

Kalehoff: It’s a lack of time and technical knowledge. If you look at Google, it built itself on the backs of SMBs during its early growth. But as search has matured, Google has moved upstream. The space has gotten more complicated, and the competition, greater. If you look at the margins of agencies that service search advertisers, the minimum-size customer is spending roughly $100,000 a month. What this has created is a whole cadre of SMBs that would like to do better with search advertising but with agencies that won’t take them.

HOS: Even small search spenders need to measure and track conversions, right?

Kalehoff: Yes, but roughly half don’t do it. We took a sample of about 1,000 accounts among SMB advertisers and smaller agencies that linked up to Clickable and found some interesting trends. The most obvious was that roughly half of the small-to-midsize business sector was not tracking their conversions. Knowing conversions is the first step in how an advertiser defines its success, whether it’s generating a lead, having someone fill in a form or even making a sale. Tracking conversions is important in directing your ad investment to the keywords that will drive the greatest return on investment. There’s a lot of talk about click-throughs and cost-per-click, but in the end what really matters is the return on your ad spend. If you’re failing to track conversions, it’s really the first step to failure.

HOS: Why do so few SMBs track conversions then?

Kalehoff: One factor is that online advertising has gotten more complex year by year and, in particular, the setting up of conversion tracking. You have to have your marketing and IT departments talking together, and that often drives frustration and friction.

Then there’s the way a lot of advertisers try to manage campaigns across different ad networks. They might try to manage things in Google, but also in Yahoo or MSN, each of which has its own conversion tracking codes. Then marketers have to manage each platform’s different dashboard as well.

HOS: So the complexity of things tends to put off small-to-midsize business owners in tracking things?

Kalehoff: Yes, but they even overlook simple things. One gem from our analysis that was quite shocking was that most businesses that did attempt to enable conversion tracking, typically through Google AdWords, had their conversion value set to $1, which is the default. By definition that eliminates the possibility of making advertising investment decisions based on the true profitability of the click they paid for.

If you know your average lead is worth X amount, you want to define that average value. If you don’t set that value at something besides Google’s default of $1, that means you don’t care about conversion tracking, or you don’t know what you’re doing.

HOS: That is surprising. The common mantra has been that search marketing is easy.

Kalehoff: There is a low barrier to entry, true, which makes it great for SMBs. But one of the things the online ad industry doesn’t talk about is how much churn is taking place—where businesses try it, have a bad experience and write it off as not working. Part of the problem is that for many SMBs the marketing director wears five hats.

But to make search work, these marketing directors must define what constitutes a conversion and put a value on it. This allows them to know when to spend more money, if necessary, on certain keywords if they’re actually converting to success. A measurement like click-through rates isn’t a bad metric, but it’s a metric of efficiency, not of profitability.

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