How paid search works{Comments Off on How paid search works}


by Ricardo G

Summary:
Paid search advertising business model is based on real-time auction for search words submitted by the search engine user in order to display
sponsored advertisements along with the search results. The auctions and the display of ads are run by the search engines; advertisers merely submit a copy of their ad and make their bids. The advertiser is only billed for those ads clicked on by the user. The purpose of this journal article is to discuss the opportunities to improve the efficiency of how money is spent in online advertising; the focus is to concentrate on a fundamental focus for advertisers: how different strategic marketing objectives will lead to very different schemes for managing the money spent on the paid search channel.
Google adWords works in the following way: An advertiser bids to have their textual ad placed on the results page returned when an individual
submits a particular search term. Google identifies the ad as ‘Sponsored Links’ and physically segregates them from the actual ( theĀ  so-called ‘natural’ or ‘organic’) search results. The advertiser is only charged if the user clicks on the sponsored ad. Thus adWords represents
a ‘pay-per-click’ (PPC) cost model for the advertiser.
Regarding keywords, one natural division of is between ‘branded’ and ‘non-branded’ ones. Branded terms are phrases such as an advertiser’s
name, words that describe other branding elements such as mascots, web addresses, and importantly, various misspellings of all of these. Non-branded terms, on the other hand, are generic terms that describe an advertiser’s products or services. The author’s belief is that branded terms need to be bid on so as to generate as much traffic as possible. Luckily, such terms tend to be relatively inexpensive as fewer advertisers are likely to be bidding. There are three arguments in favor of such approach: (1) classic brand maintenance and development – if a consumer has a name in mind when searching, that association has to be supported by being present in the search result; (2) the notion of ‘search funnel’ – consumers usually start with broad terms such as ‘tropical vacation’ and gradually narrow their focus. By the time they are using an OTA branded term, they are ready to make a purchase, so an add to bring them to the site should be brought up; (3) there’s a significant group of users who use Google navigationally, rather than type a web address into Google in order to be directed to the correct link

Reaction:
I must admit I’m usually skeptic when it comes to Sponsored ads. Usually, when I’m searching for a plane ticket, I visit diferent websites
directly, during several days until I find the rate that seems reasonably. However, I do have to agree with the article when it mentions that
it is important to use ‘branded’ keywords, because I usually type the name of the OTA -such as Travelocity or Expedia – so I can be directed
to the correct website. When I search for other things, I usually try to avoid Sponsored links. For some reason I think there seems to be
some bias against them, even if the results may be more relevant to the user.

Citation:
Blankenbaker, J., & Mishra, S. (2009). Paid search for online travel agencies: Exploring strategies for search keywords. Journal of Revenue and Pricing Management, 8(2-3), p. 155-165

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1. This blog took me 2 hours because it was a journal article with very complex information and I had to use only some parts of it. Usually 1 hour

2. I read 3 posts by my classmates and will read more during the week to select the ones I want to comment on.

3. About 10 – 15 minutes to comment on each blog