Online Customer Acquisition: SEM and Contextual Advertising

It’s time for Back to Basics. No, not clothing fashions…Online Customer Acquisition that is. Bing, (Director, Product Management & Marketing of Kriyari Inc) our new contributor debuts here at SGE with an introduction to Search Engine Marketing and Contextual Advertising (the by-now standard way of gaining revenue – read: AdWords/AdSense). Here are some topics you can expect to be covered over the course of the next several months: Affiliate Marketing, Display Ad Networks, Incentive Promotion, E-mail Marketing, List Management, Lead Generation, Co-registration, Search Engine Optimization, New Media Guerilla Marketing, Lifetime Value of Customer, Ad Copy, Creative, Landing Pages, Metrics and Reporting. Phew!

Bing says: If you run an online consumer start-up or just have something to sell online, I’m sure you will agree with me that Distribution is KING. But, wait, traffic is just half the battle. Next is how you convert that traffic into loyal users and generate a sustainable positive margin. Coming from the online promotions space and having worked with most of the major ad networks, social networking sites, search engines and portals, I thought I’d contribute a mini-series on online customer acquisition. I hope that this will save you the effort of having to scour several wikis, forums and blogs to derive the same bits of information.

The Distribution Landscape I: Search Engine Marketing (SEM) and Contextual Advertising

Your Grandpa came to this country with nothing. He worked really hard and ended up starting a company that makes exquisite bamboo bags. Your Dad makes bamboo bags. Your big brother makes bamboo bags. He’s also currently the company’s CEO. You’ve recently been appointed as the company’s CMO and you’ve been tasked with driving customers to your company’s new retail website. You can’t disappoint the family now, can you? But, where do you start?

Let’s begin by analyzing the different distribution channels. The channel with the lowest barrier to entry is Search Engine Marketing (SEM). The concept here is simple: pick several keywords that best describe your business, write a 3-line ad copy, link the ad to a webpage and voila, you have a search campaign up. Your ad shows up when someone searches for one of your keywords from a search engine. You pay whenever someone clicks on your ad. The top 4 search engines are Google, Yahoo, MSN and Ask. There are also hundreds of alternative search engines.

Search is the best way to gain initial data to assess how you can make paid media work for you. You can set how much you want to pay for each click, how much you want to spend daily as well as what hours of the day you want your ad to run. Most search marketers will begin testing with Google and then farm out their campaigns to the other networks once they gather enough learnings. Search also acts as a good benchmark once you decide that you want to explore other distribution channels.

Another channel that is closely related to SEM is Contextual Advertising. Contextual networks are also often referred to as text networks as they mostly carry text inventory. The difference between SEM and Contextual Advertising is that with SEM, you are working with a search engine and your ad is displayed as the result of a searcher proactively entering a query. On the other hand, with Contextual Advertising, your ad is displayed on content websites where your ad is deemed relevant. You still pay only when someone clicks on your ad. What determines whether your ad is relevant to a content site or not is different from one contextual network to another. Some networks use simple matching logic while others have more complex algorithms. The top contextual networks are Google Adsense, Yahoo Publisher Network, Quigo (now part of AOL) and Pulse360 (formerly Kanoodle).

Understand that with SEM, your ad is displayed as a result of a proactive user search. With Contextual Advertising, your ad is displayed to a passive reader. As such, the click-through rates and conversion rates will be lower in this channel. However, for the most part, you can also expect to pay less per click in the contextual channel. At the end of the day, all that matters is whether the ROI is acceptable. Be prepared to create and test new ad copies as well. You cannot assume that your SEM ad copies will also pull here as you are catching the consumer when they are in a different frame of mind. Only venture into Contextual Advertising once you have your act together with SEM.

About the Author: Bing’s expertise is in online customer acquisition. As Director of Display Media at Netblue (now Connexus Corporation), she spearheaded product marketing, business development and operations while driving millions of dollars in revenue to the business. At her current position, she is responsible for developing compelling user experiences that drive transactions across Kriyari’s multi-channel merchandising network. She also manages all marketing and distribution efforts for the consumer shopping site, iStorez. Earlier, Bing held positions in software engineering and product management at Macromedia and Hewlett Packard, giving her a unique blend of experience across technology and marketing. Bing holds a B.S. in Computer Science from the University of Wisconsin-Madison and an M.B.A. from the Johnson Graduate School of Management at Cornell University, where she was an SC Johnson Merit Scholar.

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