Adam’s recent post made me giggle. While I agree with him that Google is experiencing some difficulties in providing advertisers the scalability they may want so that they can run large volumes of keywords it may not always be needed.

Here’s an example. A merchant with over 1,000,000 customers had less than 5,000 keyword phrases in their referrer log files for the past year. From this pool of 5,000 phrases, approximately 9% of the terms delivered 85% of all searches. How would an additional 4-million keyword phrases in a paid-search campaign help this merchant generate additional revenue?

My focus is not quantity but quality. Here’s a sentence from a long assessment report I provided to a client in the financial services space in November of last year on one ad group containing only 2,200 keyword phrases:

The number of active terms generating a least a single click during the month reached approximately 64%. The keyword phrase xxxx xxx xxxx accounted for 56% of spending for this category and approximately 45% of click volume. During November position 5 was maintained to generate the highest qualified click volume. Bid minimums to reach the next highest position would have required an additional $0.70 per click with position 3 requiring an additional $1.15 or $2.30 per click.
We didn’t need millions of keywords, we simply had to take our keyword research and performance data to drill down a level to get plugged into a 3-word phrase that was generating volume and conversions. We also aggregated search volume, and built out a massive keyword list to average down the overall cost per acquisition while still optimizing campaign spending on a keyword level.

A New Paid Search Reality – Active Phrases

I’m sure the new restrictions limiting the number of keywords per account only demonstrates that growth comes with additional costs, and in Goolge’s case it’s the cost of servicing their advertiser base and providing a simple, fast and effective online marketing tool that’s reliable and accurate. I believe Google’s cap actually hints at the reality of paid-search that is a small pool of terms generate a huge percentage of your traffic. And, yes we are seeing more 2 and 3 as well as 4 word phrases in keyword universes but it’s the percentage of active terms in that pool that is more important than the number of variations you can artificially create.

I’d like to think of myself as a thinking man so if that means I’m chasing the thinking end of the search engine beast I can live with that. But here’s the important concept to keep in mind if your affiliate strategy is to participate in hundreds of affiliate programs; time is money. As an affiliate you don’t have time to conduct detailed keyword research, build out lists into relevant keyword groups, evaluate competitors, develop compelling creative for testing, set up accounts, activate hundreds of programs, plug in performance data for tracking conversions, modify bids, pull underperforming terms, and optimize creative. Let’s not even get into the amount of time it takes to keep up on search engine developments as well as the countless hours of wasted time talking to reps from various engines that believe we are simply framing the content of another site on our site and that our site is just duplicated content. I just don’t have the time to play around with hundreds of merchant programs. My focus is to identify active phrases.

Start Asking: Is it Alive?

I think you have to be able to answer the question: is this program going to work? And, here’s where I believe Adam stepped off on the wrong path; you need to first understand if the beast is alive. It’s about taking baby steps. Plus, it’s knowing if the merchant is going to move you into the highest payouts tiers – cause we all know that’s where the money is! Before I spend the time building out a massive keyword list of phrases, misspellings, competitor terms, and branded core keywords as well as generics, I need to know if the program is worth the effort and if the merchant is able to convert the targeted traffic I send to them. You start small.

What I mean by alive is how active is a core keyword list (what percentage of your list is generating clicks during a given time period) and what conversion rates are being generating.

A little trip to Nelson County Virginia

Let me take you out to the foothills of Nelson County Virginia for a moment.

My boutique-marketing group is really a lot like Rick Miller’s saw mill Log’s to Lumber. We both provide high-end, handcrafted products using specialized tools to reduce the labor inputs to successfully operate our firms. We don’t produce products for the mass market. We don’t compete with large retail chains or in my case with large search engine marketing firms. We both love what we do, and most importantly we know before we take on a major engagement whether or not the beast is alive. We both provide value-based pricing that is aligned with the goals of our customer/merchants.

In the affiliate arena, it’s not that Google is broken, it’s the balance between advertisers demands and affiliate margins has widened in part to do policy changes on a PPC search engine that was too easy to use and generated lots of cash for affiliates without much heavy lifting. The alignment piece of the equation is just missing. Merchants often view affiliate marketing as just another channel – a low-cost acquisition channel. Affiliates simply churn out leads. I mean, come on, other than Commission Junction who really has a business plan on the affiliate side of the playing field that goes beyond making commissions? Loyalty marketers? Maybe. But do you?

Adam’s strategy has always been to use a big net. Adam feels safe using a large pool of keywords and setting minimum bids so that his cost per clicks produce higher earnings. Adam is the poster child of search arbitrage. And, truth be told he does it better than anyone I know. It’s successful but it’s not a sustainable long-term business model. You can have great months and then again you can take a bath on high-volumes of paid search traffic that simply don’t convert.

It’s time for affiliates to be more innovative or it will be the affiliate who will be in trouble not Goolge.

Todd