As online retailers poised to enter their busiest quarter prepare to drop a bundle on pay-per-click advertising, they might be surprised to find how much of that spending isn’t profitable, according to a company that audits paid search agencies and in-house PPC program performance.
Such audit reports can turn up surprising insights, says Steven Schramke, president of Logic361, a web analytics firm that focuses on analyzing PPC performance for retailers. “We would have expected that best practices would be standard practices for very large accounts that were being managed by agencies. That is not happening,” he says.
Schramke contends agencies too often provide clients with weekly reports generated from spreadsheets, which may show management metrics such as the average cost per promotion. “They can see it’s gone up a dollar or down a dollar,” he says. What the reports may not show is what percentage of PPC spending is not contributing and where there is room to save or improve.
Logic361 finds that the productive online ad spend across most of its retailer clients is about 45% to 65% of total spending. The rest offers opportunities for saving with a closer look at the data. For example, Schramke says retailers typically spend 7% to 12% of their online ad budget on branded keywords. “If your competitors aren’t targeting them, why spend the money?” he says. Several Logic360 clients are now considering whether they should continue paying their agency to manage branded keywords.
Schramke also advises retailers to know the amount of advertising expense rolling over each month that is not generating results, and to rebalance spending accordingly. Keywords or ads that are money-losers should be moved to a lower ad price or a different landing page to see if they can produce; if they don’t do so in a short time they should be cut, he says.
Schramke says Logic361 sells its subscribed monitoring and analysis services not to replace agencies’ management services for PPC advertising, but to provide retailers with another way to evaluate their agency’s performance. “Our average client is spending $30,000 to $100,000 on PPC. We typically can show them a minimum of $10,000 to $15,000 of advertising expense a month that they can eliminate,” he says.
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