“Search Terms are like Magic Words” - Part 1
Marketing Professor Bernd Skiera explains how companies capitalize on our surfing behavior, what an advertisement costs on Google and whether he deletes his cookies
The internet is taking over from traditional media as an advertising platform little by little. What does the internet have that TV doesn’t?
Online advertising has the power to address the individual user much more than is the case with traditional media. With TV or newspapers, you can generally classify your target group according to sex, age and interests, but only roughly and it produces a high amount of scattering loss. On the internet you know more about the individual user and you can judge the success of your advertising better.
That’s nice for the advertisers…
… but also for the users. The interests of both parties essentially meet online: as a customer I would not like to see advertising for products that I would never buy. As an advertiser I don’t want to invest in people that are not potential buyers.
How has online advertising changed in recent years? What do advertising companies know about me today as an internet user that they didn’t know about me five years ago?
On the internet, information is collected by most companies via cookies, which were already around five years ago. The fact that more and more information about the individual user is available today has partially to do with mobile access to the internet. Since the first smart phones went on the market just over nine years ago, not only has the number of internet users grown continually, but also there are always new services and uses. Because of this we expose much more as well as new information about ourselves than we did just a few years ago, and in connection with our location. In addition, there are some services, such as Google and Facebook, that are used extremely frequently today. There wasn’t this type of concentrated use just a couple of years ago.
And the advertisers welcomed these new possibilities of course…
Yes and no. The fact that we use various devices to access the internet on a daily basis has one big disadvantage for advertisers. In order to target advertising as much as possible, I have to know more than which websites a person visits, what they click on, which products they look at and which price category they are interested in. Performance measurement is crucial: it is necessary to know whether someone makes a purchase after clicking on an advertisement. This becomes difficult when users have changed from one medium to another, which is quite common these days: an advertisement reaches someone on the go on a mobile phone, and he or she reacts to it with a purchase hours later on a pc. The user behavior is difficult to track across various devices.
How do companies react to this?
They try to connect more closely with the users. Many people are logged on to certain services, such as Google, Facebook and Instagram, 24 hours a day. Firms can gather information about their users and track chains of action this way regardless of which device they are using to surf – even when they regularly delete their cookies. This way, providers of services that users like to log on to frequently present a clear advantage.
About half of the expenditures for online advertising are allotted to search engines, ultimately to Google. How did they manage that?
Despite all the information that we expose because of our surfing behavior, little is as valuable as our search terms. If you inform yourself about cruises on a website, one can conclude that you are also interested in purchasing a cruise. It is not clear which price segment or which regions you are interested in though. If you enter the terms “cruise” and “cheap” or “cruise” and “Caribbean”, the information is significantly more valuable and is paid for accordingly. Search terms are like magic words. This is why search engine marketing works exceedingly well.
How much does an advertisement on Google cost?
In order to land an advertisement on top with a reasonably popular search term, it will cost between 1 and 2 euros for most branches in Germany. The smaller and more exact the target group, the more it costs. Lawyers in the U.S. e.g. pay very high prices for search terms such as rare diseases paired with terms like “compensation”. Since large sums of money can be earned through compensation lawsuits, it is worth a large amount of money for the lawyers to gain the few people who come into consideration as clients through advertising. These advertisements cost around 100 dollars per click or even more.
This article was published in the UniReport, issue 2.16 (pdf, German)