On a recent trip to Italy, I was struck by the pricing gap between “insider deals” you might get if you were a local, and the prices paid by harried newbies who just got off the plane.
It’s price discrimination against the “rich,” or anyone who is new to the scene.
It extends to everything from real estate to pizza slices. And of course, there are probably two sets of grocery stores in some towns. The “tourist” grocery store carries only a limited selection of marked-up wine.
Some towns have free beaches. In “touristy” towns, you mostly have to pay. The water-clarity-and-bikini-density quotient is roughly the same at both, so you figure most people who live there don’t pay for beach space.
Some time ago, Google figured out the “tourist tax” phenomenon, presumably to the benefit of its profit margins. Some have called it a “bozo filter,” but that’s not fair. Tourists aren’t stupid, they’re just trapped, vulnerable, and in a bit too much of a hurry.
Long-standing, loyal advertisers will be less impressed with arbitrary measures to ratchet up click prices, especially when they’ve invested heavily in optimizing their accounts. That relationship settles into a relatively happy equilibrium. Patient advertisers who are willing to build up their “local knowledge” over time can look forward to bargain rates. It’s important to stress, of course, that they’ve optimized a marketing channel over time, so that’s the primary reason for their improving ROI as time progresses. The “tourist tax” I refer to is specifically the initial hump (lasting anywhere from a week to two months), during which it’s particularly daunting for the newbie.
Many new advertisers are unsettled by the initial response to the first draft of their campaigns. There are some common outcomes:
- The advertiser is deterred by the high apparent costs of clicks, or other “scary” metrics like low quality scores, and pauses the campaign (leaves AdWords Nation on the next flight out).
- The advertiser is unsettled or even freaked out by their inability to make things work, and tries to fix things all at once. This might include taking dogmatic views of matching options, cranking bids up and down, etc. No progress occurs, so eventually they have to leave as well.
- The advertiser exhibits more patience, but misses a number of key optimization techniques, and buys into subtle cues in the interface (such as quality scores, “first page bids,” the bid simulator, and “impression share” reports) that make it seem like paying more is almost a requirement. These advertisers may show slight improvement over time but are accepting worse ROI than someone who is relentless in optimization, and who doesn’t take certain click price ranges as “inevitable.”
Seasoned advertisers, on the other hand, exhibit five key traits:
- Much like those who are natives of a “costly” country, they avoid the high-price district as quickly as they can. There are ways to accelerate progress in the short term, so why not compress some of that activity into the early going so you get out of the weird “new account spiral,” a negative feedback loop that feeds you low volume and bad metrics? Some “smart kickoff” activities might include leaving the optimize setting on for ads at first; starting with more granular, highly relevant terms first, and going broad later; bidding high (but not too high) for one to two days to get some data built up on particularly relevant parts of the account; enabling content targeting and optimizing that as well; taking care to walk bids down crisply as progress is made, so as not to exhibit too much irrational demand for your keywords; and more.
- They gain organizational buy-in for paid search, setting reasonable expectations that an initial “tourist tax” will be required, and that the days of setting expectations around 10-cent clicks are long gone. You don’t just set up a big campaign and “lowball” at 10 cents, hoping to cherrypick the odd click. Chances are such a campaign will just sit there.
- They plan to stay the course and run campaigns based on stable brand names and relatively consistent campaign structures, understanding that one factor Google looks at in quality score is the performance of the display URL.
- They manage accounts over a long period of time, with one eye on ROI and one eye on quality score friendliness, and enjoy the “green light” advantage of an established account that make new campaigns and ad groups more likely to gain positive momentum from the outset.
- They learn to tell the difference between helpful and boilerplate Google advice.
Google prefers the seasoned advertisers to the tourists, at the end of the day. But if the tourists are going to keep barging in to disrupt the flow of AdWords Nation – the least they can do is profit from their short-term stays. Your job is to minimize the damage, by thinking like a native.
Good luck on your long-term quest to attain that peaceful, reasonably-priced existence that is eventually extended to full citizens of AdWords Nation.
This column originally appeared at ClickZ on July 16, 2010. Reprinted by permission.