CHICAGO (AdAge.com) -- For brand marketers using search, a brand name may be their best asset. That's the finding of a recent Travelocity study, which challenged assumptions around the "portfolio approach" to paid search, a common practice in which marketers buy a wide variety of both brand terms and nonbranded terms -- like when an automaker buys its brand terms but also buys "SUV" or "convertible."
Pay more for nonbranded?
Conversion rates tend to differ greatly for brand terms vs. nonbranded terms. Typically there is a higher conversion rate on brand search terms, making them appear more effective, and a lower conversion rate on the nonbranded terms, making them appear less effective. Marketers often assign value to the last click when it comes to search, but proponents of the portfolio approach explain that value should be added to nonbranded search terms. They say marketers should pay more for nonbranded search terms than they might appear to be worth because they eventually contribute to clicks and conversions on a brand search term, in a sort of funnel effect. (Not surprisingly, search engines often promote such an approach.)
But Jeffrey Glueck, chief marketing officer at Travelocity, wasn't completely sold on that idea -- at least not without research to back it up. He cited a 2005 Nielsen NetRatings study on the travel industry that showed half of all searches on Google and Yahoo are comprised of 100 terms -- and that half of those terms are brand terms. He went on to cite another study from marketing-services agency 360i that found buying brand words typically accounts for just 5% of a marketer's total search spend but that those brand words drive 80% of the profit from search.
"Brands still matter on the internet," Mr. Glueck said, addressing attendees at the IAB's Performance Marketing Forum this week in Chicago. "Most of your profits come from buying your own brand name." So Travelocity took a closer look at that funnel to figure out what types of ad words people are clicking on before the conversions.
One search term for most
He tracked Travelocity's visitors coming from paid search and found that 65% of people only interacted with paid search once, via a single keyword. He found 27% interacted with paid search multiple times -- but just searched repeatedly on the same term. Only 8% searched multiple times with different terms.
The final findings? Only 2% of paid-search conversions fall into the category where the searcher originally clicked on a nonbranded term only to click and convert on a branded term at a later date. Travelocity now credits nonbrand phrases as being responsible for only 4% of each booking attributed to branded search.
"For us, we can take a loss on nonbranded terms like 'Hawaii vacation' -- but not much of a loss," Mr. Glueck said. Ultimately, he said, it is a "profound mistake by all of us to think we've figured out how to measure ROI on search. We're in stage one."
More rigorous ROI
He also advocated applying more rigorous ROI to all of his company's online advertising. "You never want to pay for advertising that's not incremental" to business you'd already be getting, he said.
And when it comes to online advertising, relevance rules. Travelocity research showed that banners that had dynamic copy to reflect a user's geography -- for example, if the ad knew, thanks to internet-protocol targeting, that the user lived in Minneapolis and offered flight prices from that city -- performed six to seven times better than static ad banners. Travelocity also spends heavily on travel sites because it's important to reach people in a relevant mind-set, Mr. Glueck said. "But we're looking for ways to expand that inventory" through other types of targeting, such as behavioral.
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CORRECTION: This story incorrectly implied that nonbranded keywords convert only 4% of searches. It should have stated nonbranded keywords are responsible for only 4% of the profits from branded paid keywords. Of the bookings on Travelocity attributed to search, about 80% are attributed to branded terms. Of that 80%, 4% should be credited to earlier clicks on nonbrand terms. Mr. Glueck also cited a Nielsen NetRatings study, and it should be noted the study, published in November 2005, specifically addressed travel-related searches in Google and Yahoo. The study found 47% were composed of 100 terms, and most of those were brand terms.