Paid Search Advertising

Abstract

This note provides a primer on paid search advertising, which is an important component of digital marketing. The mechanics of paid search is explained using the Google search engine platform. The note covers metrics for evaluating the performance of paid search, the strategic objective of paid search, the relationship between customer lifetime value and search ads, how to overcome sparse data problems using keyword clouds, and the nature of Google AdWords's enhanced campaigns. Excerpt UVA-M-0860 Rev. May 3, 2018 Paid Search Advertising You're in the market for a baseball cap, an espresso maker, and a Ferrari F430 (lucky you). You decide you'd like to purchase each of the items in an online auction. You'd like to pay $ 10 for the hat, $ 1,000 for the coffee maker, and $ 150,000 for the Ferrari, so you set aside $ 151,010 to make sure you land your items. Without understanding the nuances of the bidding structure, you decide to take an average of your total budget and allocate that as your bid amount on each item—$ 50,336.67 for the hat, $ 50,336.67 for the espresso maker, and $ 50,336.67 for the Ferrari. Much to your dismay, you later learn you've won the auctions for the hat and espresso machine but missed out on the Ferrari. As ridiculous as the strategy sounds, this is what can happen when businesses run paid search advertising campaigns without trying to optimize or target their efforts to the business context and nuances of the system at hand. . . .