Yesterday, I popped into the Online Marketing Summit event here in Chicago for the afternoon. I caught Craig McDonald of SEMDirector giving a lecture on estimating opportunity costs for paid search campaigns.
Craig goes to great lengths to estimate the costs and rewards of increasing paid search programs for his clients. He says that they have moved from asking "what are we doing?" to "what should we be doing?" -- and any marketer needs to be able to say, "Well, sure, you could bid for #1 placement on this keyword term, but it will cost you x and I estimate you'd get y number of increased visits and conversions." It's the last part that is so difficult to estimate right now. Craig expects to see software providers solve this problem soon. Then we could hand over brief excel tables to our clients with the cost of placement and the reward -- and they would hug us and reward us with one of those big bags with money shoved in it.
But my question is, how do we also account for the competition in the market on our estimates? Increasing your budget in paid search is immediately visible to your competitors -- so a static estimate of the cost of gaining prominence in your campaign is good for only one or two days in some keyword markets.
I'm honestly not sure if someone is already tackling this project -- but I would like to see a software solution that analyzes keyword markets (here I mean not only Google, Yahoo, etc, but also for keyword terms themselves) and measures volatility, efficiency and level of competition. Then we could begin to create a common metric across all markets to affect an accurate range to our estimates. So when our clients ask, "I'd like the top sponsored link for 'cancer research,'" we not only can tell them our estimate of the value of clicks and conversions for that spot, but also the level of competition and focus that keyword will require moving forward.
And again, they will hug us and shower us with money. What? That's never happened to you?
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