Cost of paid keywords on rise

Entrepreneurs need to be more clever in the way they use paid search advertising. While search engine advertising has helped entrepreneurs market globally, rising prices for generic words is forcing small and medium businesses to change the way they approach paid search.

But many businesses are missing out altogether, with estimates that only 1% of SMEs in Australia even use paid search – in which advertisers pay to have their links appear when certain words are searched for.

Steven Power, chief executive of ReachLocal, which helps SMEs with their paid search strategies, says Australian SMEs are lagging behind the US where about 9% of SMEs use paid search advertising. “It surprises us this is so low given that it is so highly effective.”

He says use of paid search is higher for technology companies or more innovative companies. “But there is extremely low penetration among electricians, plumbers and lawyers.”

He says it is still seen as new technology and the barriers to entry are tough. “You have to set up word account, check bids and check analytics.”

He says for every $1000 a person spends on paid search, it takes about one hour a week to manage the campaign. “It can take up a lot of time for busy business owners.”

He says many people also run inefficient campaigns. “They spend too much time buying the wrong words. They might be paying $3 a word instead of 35c, and buying words that result in a click-through to the site but not into sales.”

Power says people’s online search abilities are developing, which is changing paid search. “For example they used to type in ‘dentist’. Now they type in ‘cracked tooth, Ivanhoe’ so if your ad comes up you are more likely to get the sale than if people are just searching for ‘dentist’.

You also need to put geographical words in paid search campaigns. He also advises companies to use colourful language and misspellings in their campaigns. Instead of using “cosmetic surgery”, “boob job” might work better and at a lower cost.

Paid search advertising grew to take the largest share of Australia’s online advertising spend in 2006, according to a new report by online researcher Frost & Sullivan. Spending on paid search advertising increased 65.5% to $416 million in 2006.

According to the report, the total online market will grow 30% to $1.857 billion by 2008, with paid online search likely to continue to be the fastest growing category – likely to increase 38% to $574 million.

Power says with more people coming on line and using search, it is very important people have good websites with contact numbers.

“You also need to have an answering machine. People are searching Friday nights, weekends, 24 hours a day and then they call. You must have an answering machine to catch those calls,” he says.