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  • Writer's pictureCalvin C.

What is Paid Search?

A couple weeks ago, we talked about SEM and SEO, offering a high level overview of what they are, how they differ, and how they can be leveraged as part of your marketing strategy. If you need a refresher, or didn’t get a chance to read that blog post, you can check it out here.

Today, we’ll venture a little deeper into SEM, because there are actually a number of various tactics when it comes to search engine marketing. In addition, depending on what your goals are and what you want to achieve, how you use these tactics will differ.

Paid Search

One of the most common ways of advertising your business is through the use of paid search. This is the tactic to use when you want to have your ad appear in front of someone who is ready to act, because when users start searching actively for something, there usually is a high level of intent.

When users are conducting searches, they enter terms or phrases in the Google (or Bing) search bar. These terms or phrases are often called keywords, and every query triggers a brand new auction where Google will determine which ads will show up in the SERP (search engine results page).

Keywords are something that advertisers can bid on. When an advertiser bids on a keyword, and a user searches for that given keyword, an ad from that advertiser may show up. If the user sees your ad and clicks on it, you’re then charged for that click (which is why it’s commonly referred to as pay-per-click advertising).

Now, I mention that an ad may show up, because even though you’re bidding on a keyword, it does not automatically guarantee ad visibility. In the background, Google’s algorithm looks at a number of components before it puts together a list of results for the user based on their query. It’s quite impressive how quickly Google can do this in the background, while a user pretty much gets the results in real-time.

Some factors that come into play include: your budget, your bid, and your ad rank. If your daily budget has been depleted, then you will not have the funds to show up for the remainder of the day. If your bid is not high enough to compete with other businesses (bids vary depending on your industry/keyword), your ad may not be high enough for users to see, and they may click on a competitors’ ad instead. Finally, if your ads are not written well, or if your landing page has a poor experience, Google may lower your ad ranking, which means you may not be eligible to show up as often as you’d like (Google cares a lot about user experience, by the way).

Now you may be wondering, “How do bids work?”, or “How do I know how much a click costs?” Advertisers can set a max CPC (cost-per-click), and search engines will never charge you more than what you’re willing to pay. Let’s say there’s a keyword you’re bidding on, and you don’t want to pay more than $1 for that keyword. You can set a max CPC of $1, and Google will never charge you more than that amount. Something to keep in mind, even though you set a max CPC of $1, it does not automatically mean you’ll get charged $1 whenever someone clicks on your ad. Most of the time, what an advertiser is willing to bid (max CPC), and what the advertiser is charged (actual CPC), are very different.

Your bids and your budget work hand in hand. If you set a max CPC of $1, and you have $20/day to spend on advertising, you’ll bring in roughly 20 clicks per day. You’ll then have to determine if that amount is sufficient, if you need more traffic, or if you’re willing to sacrifice traffic volume for more expensive keywords. For example, you may want to go after keywords that cost $5 per click, which means that a $20/day budget will result in just 4 clicks per day. Just something to keep in mind.

Note: It is an auction after all, and so the highest bidder almost always wins. If you’re not willing to pay more than $1 for a given keyword, while all your competitors are willing to pay more, then you will most likely lose the auctions. Therefore, it’s important to be reasonable with your bids, and not set them too low if you want to compete.

Once you set a max CPC, you will only pay what’s minimally required to beat the competitor below you. So if you set a max CPC of $1, and your competitor bids $0.50 on a given keyword, chances are it’ll only cost $0.51 to have your ad show up above theirs. Furthermore, Google will actually reward advertisers who follow best practices, have a great landing page experience, and have a fast-loading site. This means that if you follow all of Google’s guidelines, your ad may get favoured over your competitors, and you may show up above them, while paying less!

Of course, this can also work against you. I noted earlier that Google cares a lot about user experience. If Google finds that users aren’t clicking on your ads very often, or they don’t have an enjoyable experience on your site, Google will penalize you by showing your ads less, or making you pay more just to have your ads show up.

The lesson here is if you want to be rewarded, put in the work and make sure you’re not cutting corners with your marketing strategy.

As always, there are a lot more nitty gritty and technical details we can get into. But the goal is to just give you information that’s digestible and slowly introduce you to the world of paid advertising. Next time, we’ll cover a different tactic called display advertising, which is an entirely different beast itself.

Until next time!

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