Why have some businesses stopped buying their brand name in AdWords?

It’s a question that has perplexed internet marketers and brand owners for years: should clients be buying their brand name on AdWords? What’s more, does a brand name buy-up yield the same profit as it did five years ago? And is this a tactic that delivers value for money and the correct marketing approach?

AdWords: the stats

Google’s global ad revenue in 2015 was $51.81 billion. It also enjoyed a 31.1% share of the total global digital advertising market. Ultimately, Google still makes most of its ad money from paid search.

Between January and June in 2014, UK advertisers spent an eye-watering £783 million on desktop/tablet paid search advertising alone (AdGooroo), with £742 million of that going to Google (the rest was split between Yahoo! And Bing).

In the second quarter of 2016, according to Adweek, Google generated $19.1 billion from its advertising business, more than $3 billion more than the previous year.

This all indicates that online advertising is still booming and Google is consistently developing new and clever ways to advertise to us.

Most articles that talk about this ‘Pay Per Click’ advertising tend to showcase brand bidding in only a positive light. But, in today’s internet-savvy marketplace, will a ‘one size fits all’ format really deliver for your business? Here’s some key points and trends to consider when you’re looking at your brand buying strategy…

Buying AdWords is getting more expensive

If your site’s natural search engine optimisation is weak compared to other industry leaders, you can endeavour to short circuit that and still end up on the first page of search results, as long as you’re willing to pay up.

Our own experience is that PPC costs more these days than it did - largely because competition has increased the cost of AdWords generally. A click can be worth anything from a few pennies to over a hundred of pounds. In 2016, the most expensive keyword term cost £148.51 for ‘play live blackjack’. The top highest-paying advertisers were moneysupermarket.com and Amazon, according to research carried out by AdGooroo on UK paid search from January to June 2014.

 

“A new development in this story is the extent to which CPCs for advertisers’ own brand keywords have been driven higher under these circumstances. According to our research across the programs we manage at Merkle RKG, brand CPCs for Google search had risen 10% year over year in Q1 2015, compared with a 15% increase for non-brand CPCs. In Q2 2015, brand CPCs rose nearly 40% year over year, while non brand CPC growth tapered to 4%.” – Mark Ballard, searchengineland.com

 

Bidding on your own brand name

Let’s be clear, bidding on your own brand name is a widely-established practice. Even amongst companies with a well-optimised online presence and a high-ranking site with countless backlinks, some will continue to pay for their own brand name in AdWords to get the number one advertising spot, even if their organic search is already number one. But why?

Some search engine marketers argue that the dominant reason for buying ads for the company’s brand name is that it forces the competition off the first search engine results page (SERP).

Another reason to invest heavily in your own brand name is that your company can then have complete control over its own ads and exposure, compared with organic traffic, which is left at the mercy of Google. You can integrate ‘extensions’, such as reviews, maps, phone numbers, and adjust your headline and body copy immediately – all of which will update in real time. Organic listings, on the other hand, can take several days, or even weeks, for Google to register depending on the technical quality of the site and it’s content.

Competitors bidding on your brand name

Another argument plays on a potential paranoia that, if you choose not to bid on your brand name, your competitors 'will be doing it anyway'. Companies may bid on a competitor’s brand keywords (think ‘The Fragrance Shop’ bidding on ‘The Perfume Factory’ search queries) to steal clicks and conversions. That creates an inherent risk of losing valuable clicks from your target audience to your competitors if you’re not up to speed with tactics in the latest brand name buying wars.

AdWords are an expensive habit

Bidding on your own brand name is expensive, and our feeling is that it’s getting more costly all the time. More competitors enter the market year-on-year, with everyone bidding on the same ad space. Lots of companies might rightly ask, if they’re a brand leader with a well-established brand, a well-optimised site and an established ranking as number one or two on the first page of Google, why would they need to spend thousands of pounds a month for the privilege of an ad above their organic listing?

There is also a strong argument that buying more and more AdWords actually decreases your organic traffic flow, since users seeking a specific page or product will naturally click on the first instance of the listing that they want – regardless of whether it’s at the top middle or bottom of the SERP.

Why eBay stopped bidding on their brand name

This question bothered marketers at eBay, too. In April 2014, eBay research labs published ‘Consumer Heterogeneity and Paid Search Effectiveness: A large scale field experiment’ detailing a study carried out in March 2012 that evaluated eBay’s returns on its branded AdWord expenditure. The test involved halting all brand keyword advertising, including all search engine queries featuring the term eBay, and keyword phrases such as ‘eBay trainers’ on both Yahoo and Microsoft, whilst simultaneously continuing to pay for them on Google as a control. eBay found that almost all of its compromised traffic from paid advertising was immediately captured by natural, organic rankings. The paid traffic was substituted for unpaid, natural traffic. The results were published in the journal Econometrica in 2015.

eBay argued that the impact of ending branded paid-search campaigns was negligible because organic links garnered enough clicks without the ads. In 2013, eBay stopped buying AdWords altogether saving the company $53 million per year, claiming that the ‘effectiveness’ of AdWord marketing is ‘small for a well-known company like eBay’ and that the advertising platform had been ‘ineffective, on average’. Not only did this close a very costly avenue for eBay, it also diverted the company onto the next easiest path for the user - natural search - which is free.

What works for ebay does not necessarily work for you

This is not to say that eBay’s study wholly rejects the notion of buying brand AdWords. It simply concluded that the strategy didn’t work for eBay itself. Let’s not forget that eBay is actually a very different animal to even its ostensibly ‘close’ relative Amazon, because it is an online auction and shopping website indexing (mostly) second-hand products. These products change daily with no consistent brand to reinforce. When people search ‘eBay trainers’ they are looking to purchase ‘trainers’ via the website ‘eBay’, as eBay doesn’t produce its own trainers emblazoned with the eBay logo or branding. Since eBay does not sell its own branded products, its need for branded keywords is somewhat complex.

The lesson here is that it’s important to evaluate how much that paid click means to you. That means asking yourself some questions. What type of customer are you going to attract? Is the click going to convert to a tangible sale? Is your brand at risk if you fail to uphold your name at the number one position of paid search? Will you lose out on sales or reputation if you stop paying? Are your competitors threatened by your brand enough to continue bidding on your branded terms? Or, are they investing in other organic marketing strategies? Because the bottom line is this: paying for your brand name is still not a substitute for being number one in organic rankings. People’s mistaken reliance on AdWords as a silver bullet solution will never be as effective as a company that recognises the inherent complexity and limitations of a one size fits all approach.

In Conclusion

It’s crucial to interrogate what’s in your brand’s best interest. Is a defensive strategy of protecting your brand the best way forward, or should you be investing in an organic strategy that will be more effective at targeting consumers?

It’s also important to remember that, whilst AdWords can instantly gratify those looking for a higher click through rate or increased traffic, these are mostly short-term triumphs. If you invest all your marketing budget into buying your brand name in AdWords, as soon as you stop paying, your organic listing will be left to fend for itself.

Amazon does pay for its brand AdWords even though the brand is so well known, but it’s worth noting that Amazon receives 10 times the traffic from organic listings than it does from paid search, so they are in a uniquely strong situation. Other brands, such as Pepsi, have followed ebay and appear to be no longer purchasing brand AdWords.

Digital Potion believes that AdWords are there to complement the investment that you make into your website, in terms of its content. That content itself provides a long-term investment that can benefit your business for years into the future, not just right here and now. In our experience, there are many more creative and effective ways to protect and increase your brand’s reach. Internet marketing is much more than just purchasing AdWords. The decision to purchase brand terms should be constantly reviewed and the benefits qualified for each individual business in turn.

If you want to get a second opinion on how your AdWord campaigns are benefiting your business, or whether you’re just starting out and are interested in our full range of digital marketing services drop us a line.

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