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March 21, 2005Increasing Keyword Prices vs. Increasing Keyword VolumeThe Wall Street Journal says keyword prices may be overdone, while Kevin Lee of Did-it.com says they have room to rise. Meanwhile, David Jackson of InternetStockBlog.com looks at advertising costs in total, and says they are outpacing revenue for many web-based companies. At least, I think that is what everyone is saying. It is kind of like when you see that beer is good for you on CNN, but they run a conflicting report before you have time to down a Guinness. I think people like to talk about keyword prices because they are easy to measure, but keyword prices never tell the whole story. You could have falling keyword prices and rising keywords costs, and vice versa. The key, of course, is volume. Similarly, keyword prices do not always move in the opposite direction of ROI. for example... The Comparison Shopping Dynamic Meet Joe Shopper. Joe does his comparison shopping using keyword PPC ads, clicking each advertiser and making mental notes. Today, Joe is shopping for widgets. In the past, there were 4 widget advertisers. Currently, there are 8 widget advertisers. Joe still has the same amount of money to spend, but now he is racking up twice the clicks. At least twice the clicks, because the chance of forgetting important information is higher, requiring re-clicks. So, how do the widget advertisers react to Joe's shopping behavior? In theory, everyone will adjust their bid prices to account for the lower conversion rates, but in practice the lag-time varies greatly, from same-day to not-until-we-go-bankrupt. In all probability, in the this example, keyword prices will fall, keyword costs will rise, and ROI will fall. For everyone wishing for lower click prices, be careful what you wish for. :-) Better to wish for higher ROI, regardless of keyword prices.
Increasing Keyword Prices vs. Increasing Keyword Volume
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