December 20, 2002

The Invisible Edge – Search Engine Optimization

(Read in entirety at Multichannel Merchant. Published 2002)

Ask your e-commerce manager how your search engine optimization program is going, and he may be able to tell you that, say, 5% of your visitors came from Google by searching for your company name. But what he probably can’t-—or wouldn’t–tell you is that 521,000 people were searching across the entire Internet last week for the 21,200 products you sell, and that since 99.3% of them did not know that you sold those items, they did not visit your site. And this cost you, $5 million in missed sales opportunities.

Search engines can be a boon to your business.

“Direct marketers have been given an unusual opportunity,” says Larry Becker, director of Internet publishing for electronics cataloger Crutchfield, “Search engines let us offer the prospect a relevant message at just the right moment. Our offer meets the consumer while they’re on task, instead of hoping to distract them. These programs are more than IT solutions–on our site and others–we sell with search.”

According to research by Georgia Tech, 85% of Internet users find products and Web sites using search engines. Some 55% of online purchases originated with a search.

By the beginning of the 2002 holiday season, sources report some 60,000 people already search for digital camera products and reviews each day–more than 1.8 million a month. Some 2,500 people search for a “Sony digital camera” each day. How can search engines impact the bottom line? Consider if these 2,500 daily “Sony” searchers each were to spend at least $350 buying a digital camera. Vendors would stand to reap over $26 million in monthly sales. Similarly, if a majority of the 1.8 million “digital camera” searchers purchased, this group would produce a windfall $400 million or more in monthly digital camera sales.

This should be encouraging news for catalogers like Office Depot, PC Connection, Crutchfield, Spiegel, JC Penney, Sears, Zones, and others who sell digital cameras. Yet because of the problems caused by their dynamic Web site URLs, the “digital camera” product pages on these Web sites have not been indexed, and are therefore invisible to this massive market of motivated buyers. Where did this business go? Where will it go this holiday season?

The search engine user assumes the engines do what they’re supposed to–organize the web, in an unbiased fashion, around keywords that simplify information retrieval. In not so many words, these consumers are asking the search engines “Which digital camera is right for me?” and “Where can I get one?” Being absent from their query tells the customer “We don’t carry it here,” or “If we do, you’ll have to look awfully hard to find it.” Imagine the frustration of these millions of people simultaneously clicking three or more pages deep into Google results (75% never click further than page 1) to even find a recognizable

With so much new business on the line, search engine “invisibility” is becoming a problem of epidemic proportions. How can catalogers position themselves to profit from search engine usage? Savvy e-commerce directors agree that search engine optimization is the ideal strategy, but for many, “keyword bidding” has become the interim solution.

Most direct marketers are aware of keyword bidding, indeed, most are at least beginning to test the waters with a few dozen keywords. And why not? After all, bidding a few pennies on Overture to be highly ranked when a prospect searches for a qualifying keyword phrase, seems like a marketer’s absolute dream. You pay only if they click on your link, you’ve got complete control over copy and calls to action and you can easily measure return on investment.

Figuring ROI on Keyword Bidding
Is keyword bidding your most cost-effective acquisition strategy? To find out, multiply your Web site’s conversion rate times your catalog acquisition cost. This will tell you how much you can afford to bid and still save money over offline acquisition costs. For example, recent Catalog Age data suggests the average business-to-consumer cataloger spends about $40 to acquire a new customer, while the average e-commerce Web site converts about 2% of visitors. Based on these figures, keyword bidding would be a worthwhile investment if the average bid for your top keywords is less than $0.80 per visitor ($40 x 2%). While some bids may be at $0.50 and others at $1.50, once the aggregate average bid exceeds $0.80, you’re spending more than you would offline to acquire the customer.

There are some 42,000 people who search Overture (ad syndicated affiliates) each month for the phrase “light bulb.” and have bid $2.28 and $2.27 per click respectively for this phrase, while #3 has bid a mere $1.01.

Suppose you’re Office Depot. If 50% of these searchers–21,000 people–click on your #1 link, you’ll pay Overture $47,000 ($2.28 x 21,000) in advertising fees. If your Web site converts at least 5% of search traffic, then you should gain about 1,000 new customers. Your acquisition cost can then be calculated at $47,000 divided by 1,000 customers, or $47 per customer. However, if your catalog acquisition cost is $40 per customer, then the current “light bulb” bid of $2.28 is costing you more per customer than your traditional direct marketing, and may no longer make financial sense.

Once you’ve placed your bids, it pays to periodically check the links by clicking on your own bid. Though you may be reluctant to pay $2.28 for your own click, it would be well worth it to learn that your $47,000 a month is driving 1,000 hot leads to a landing page that tells them “The requested category of products are no longer available.”

The bidding model offers attractive ROI in general, but marketers understand the opportunities are fleeting. “You can still find pockets of ripe keywords,” says Aimee Boothroyd, E-commerce Director for Micro Warehouse, “But the more popular that engines like Overture become with marketers, the faster ROI will diminish.”

The true value of keyword bidding for catalogers seems to be more of a proxy in determining the bottom-line impact search engine optimization could have on their business. One business-to-business cataloger has been aggressively bidding on keywords for years, and has managed to carve out a hefty keyword budget of nearly $225,000.

“We still expect keyword bids to provide better ROI than our traditional marketing,” says their e-Business Manager, “But we realize optimization carries even greater benefits. Our goal is to leverage our budget towards optimizing our e-commerce site.” By getting their thousands of product pages indexed and “selling themselves” through search engine listings, they hope to maximize ROI while reducing their prospecting costs to near zero dollars per customer.

Making SEO Work for You
Just what is search engine optimization? Often misunderstood and a bit mysterious, to some, it is merely manipulation: tricking the engines into indexing and ranking particular pages by preying on algorithm loopholes.

Optimization is often portrayed by vendors as some form of electronic pixie dust that can be sprinkled on your Web site to magically whisk it to the top of the search engines. While many catalogers have tried basic optimization (tweaking meta tags and building replica pages), most were left unimpressed with results that marginally increased search traffic. More often than not, though their efforts failed to move the needle on the P&L. Other direct marketers are consistently generating an encouraging 20% to 25% of online sales from search listings. Instead of treating search engines as an afterthought, or focusing on manipulation tactics, these companies have “optimized” their e-commerce sites from the ground up by making the product pages relevant to specific searching audiences, qualifying those prospects before they click, and then converting them once they do. These optimized e-commerce sites can often be recognized by characteristics such as:

A URL structure free of stop-characters or session variables that will allow search engine spiders to index all dynamic category and product pages.

Category pages and product pages that target narrow, high-converting keywords in order to be ranked as a relevant resource by the search engine algorithms.

Product copy and HTML that contain a balance between “keyword density” and persuasive benefit-laden copy.

Product landing pages that contain the merchandizing and “accessorizing” of a compelling window-shopping display, with clear trust-building policies, user friendly design, and ample reasons to buy.

The results of search optimization vary for each cataloger based on the marketplace of buyers searching for the products on offer, and by the quality of the optimization. But since search customers self-select themselves, they naturally convert at much higher rates–in some cases double digit conversion rates versus the average 2% to 3%.

Plus, since there are no variable promotional costs (printing, lists, mailing, etc.), the conversion also incurs no acquisition costs. This means search customers can produce two or three times the profit per transaction–a luxury foreign to traditional direct marketing.

Similar to volume printing costs, optimization becomes more cost-effective the larger the business. For example, if an optimization project costs as much as $200,000 for a cataloger with 20,000 product pages, this spread cost would be $10 per page. If 100 new prospects are introduced to any given product through a related search engine query, the cost per “mailing” is $.10–far below the offline equivalent. If over 1,000 new prospects do the same, the cost decreases to $0 per prospect.

Making the Invisible Visible
Search engine marketing is changing the face of online direct marketing, with practitioners who are equipping their Web sites not for order processing, but for aggressive acquisition. Search engine marketing presents both a threat and an opportunity: Not only is it introducing your most valuable prospects and customers to your fiercest rivals, this “invisible threat” can become your new tangible edge.

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