Why advertisers spend too much on paid search

TagMan’s Philip Buxton looks at how the recent IAB figures reveal that search needs to be put in its rightful place – and how smarter tagging and tracking can help us to do that.

This piece was already going to be devoted to how disproportionate is the credit – and therefore marketing spend – devoted to sponsored search listings when Revolution discovered that the IAB (or at least its research partner PwC) had mistakenly attributed £50m of online spend to classified advertising.

It turns out that this spend should also have been chalked down to paid search, which has no impact on the top-line figures of online advertising growth but does make the decline in classified spend (and every other on and offline marketing channel) - compared with the growth in PPC - even more stark.

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So, with more lead for my pencil, here’s why we should consider the budget that marketers direct to paid search as disproportionate and what – in the end – all this has to do with campaign tracking and the tags that do it.

In my last job – as a consultant at Circus Street – one of my illustrious colleagues told a great story about how, as the digital guy at a major media agency, he persuaded a large advertiser to take money out of radio advertising and pump it back into paid search. The argument was an easy one: “Look at all the leads you’re getting from PPC. How many are you getting from radio? Well then, take it from there and put it back in here.” As he often put it, he walked out with the business in a bag.

Brand awareness

The problem, which it’s not clear anyone was expecting at the time, was that - with less brand awareness being built through mass media like radio - the number of click-throughs said client started to get through his paid listings took an almighty nose dive. This is because – once they’ve searched – users plump for the links from brands they’ve heard of and associate with the right things.

With less click-throughs, said client was naturally forced to bid higher CPCs to reach the same spots in the paid listings since click-through rate is all part of Google’s ‘special sauce’, even in paid rankings. With more money spent on search for the same returns, there was less money for things like brand awareness and so the negative cycle was formed.

What this story tells us – chiefly – is that, while paid search may be the single best thing that ever happened to advertisers, it is but a link in the very long and complex chain we might call the ‘path to conversion’.

Container tags

So, why – given they know this path to be long and complex - are advertisers constantly persuaded to commit more spend to search than they know is sensible? Tags.

Even online, because the various tags that enable campaign tracking are delivered by different systems (one for natural search, one for PPC, one for display, one for each affiliate network etc. etc.), advertisers cannot assess the data they deliver in the same place. This means they cannot begin to assess the complete path to conversion any user took nor which channel deserves the credit for a sale.

Container tag solutions seek to address this problem. They take all the tags on your web site that measure marketing activity and put them in one place so that the data can begin to appear together and decisions can be made based on users’ entire journeys.

But, most container tags have serious failings, including that they cannot plug in things like email and – most importantly – natural search. It is this fact that helps to account for the disproportionate emphasis placed on paid search. Search results, whether paid or natural, are invariably the final click in any conversion – it’s what we do to finally go and buy. Since SEO can’t be tracked next to everything else, all the credit gets passed to PPC, whether a brand’s own activity or those of its affiliates.

Tags are like atoms – understanding their workings can help to explain very big things. Why does more than 60% of all the money spent on digital advertising go on paid search? Because tags tell us this should be so.

Our former Netimperative editor rejoins as a regular columnist. Philip has been part of the digital media and marketing industry since 1998 and edited Revolution magazine after breaking new ground as Marketing Week’s first new media correspondent. As a consultant he worked with Circus Street from 2007, helping organisations including Transport for London, Starcom, IPC, and Dennis Publishing adapt to the digital media shift. Philip is now marketing director of independent tag management system TagMan.