At the SMX West 2017 Conference in San Jose, we had the pleasure to chat with David Szetela, Owner of FMB Media, about the current and upcoming trends in all things SEM. Check out the full interview below.
Direct Youtube link.
To stay tuned with David, follow him on Twitter, @Szetela.
We will be at SMX London, May 23-24…more chats to come!
Andreas: David you are probably one of the most well-known people in the paid search industry. At the same time, you’re living in Fort Myers, not where you’d expect these experts in between or right in the middle of the paid search industry, AND you haven’t built a team of a hundred people but rather rely on yourself. Could you explain what the philosophy behind what you are doing is?
David: Two parts, really. First, I am living in a place where most people vacation, which is a dream come true. I also call myself unemployable. In other words, I’d rather not have a boss. I like being able to do what I want to do, when I want to do it. I’m lucky enough to be in an industry where that is possible, where I can help clients, keep in constant communication with them by electronic means, and everyone is happy.
Andreas: I think you’re pretty familiar with the Google Display Network. First is it possible to drive a similar performance in GDN, compared to search? If so, how do you this?
David: So how do you drive similar performance in google display network compared to search? Number one is sometimes more important to advertisers than search is. And I’ll give you an example. A new product or new company, for which there’s no demand. Let’s say a startup that’s producing software for which there there’s no analog, there’s no competition, there’s not even demand for the segment that the software is in. No one’s searching for it, unless the company has a strong brand, which is doubtful. No one is searching for the brand either.
Search is demand fulfillment advertising services. It’s like the yellow pages. Someone is actively looking for something, the job the advertiser asking fulfill that desire, that is already being expressed. Whereas display advertising is demand generation. Its convincing someone that they need to look into something, a product or a service, in amidst looking at the content of a page. So that is one example where display is more important than search, when it’s an unknown product or service. I’ve also find that with correct targeting, that Facebook forwards that GDN has, the messaging can be refined and the audience can be refined such that there is a really good match between the ad, the Product service, and the person looking through the ad. So we actually get Click through rates and conversion rates through GDN advertising as we do for search.
Andreas: If done properly, what would you say is a healthy share to assign to GDN?
David: Well that’s a good question. Given the fact, if done properly, GDN CPAs are lower than search. In other words, the cost per click are lower, given the fact that there is so much competition for CPCs on the search side. Frequently we see CPAs for GDN are lower than for search, and in that case, my recommendation is to spend as much as possible on GDN. So really the allocation of one set of one budget to search one to GDN, that decision. Should be made based on volume and profitability? Which one can return the better Return On Ad Spend at a reasonable volume?
Andreas: We see some so-called search remarketing companies around…they buy 3rd party data with user intent and then apply this data to target people in display. Do you know whether Google has already leveraged something like this, or are there any plans that google will use this data to drive performance in GDN?
David: The answer is two parts.
- They don’t allow an advertiser to explicitly use that data to place GDN advertising. In other words, the advertiser can’t say “Google show my ad only to people who have searched on this search term.” That requires my responses to key words, for example.
- Google has very powerful automated bid management. They have CPA based bid management, return ad spend bid management, and the algorithms for their GDN automated bid management actually takes into consideration automatically previous searches. It’s part of the black boxes that google uses to predict if someone looking at an ad is more or less likely to convert. So the short answer is advertisers get it for free if they use Google’s automated bid management.
Andreas: Interesting point of view you just raised. Do you think that in search, something similar will happen as we saw in social, especially Facebook that initially there was some bidding tools around on Facebook, but then Facbook started leveraging its own data and all the bidding tools had to disappear because there was no way to compete against Facebook data? Do you see something similar happening in AdWords?
David: That’s a good question. I’ve been predicting that the answer is yes for many years. It hasn’t put a dent in the business of Marin, Kenshoo, etc. So I guess the answer is no. It surprises me that more advertisers don’t take advantage of googles automated bid management. I blame google for not educating the advertising public on how well these tools operate. Furthermore, the third party usually has a Swiss army knife about their software where bid management is just one of the pillars that the entire platform is based on. The other pillars would be reporting, consolidating reporting, bid management across different platforms, attribution across different platforms. So I guess the answer is third party businesses aren’t going out of business any time soon, and they haven’t traditionally.
Andreas: You’re familiar with the dynamic remarketing. We are active in the retail space. What would you recommend an e-commerce retailer on how to use this remarketing format?
David: Very very powerful capability. I think every e-tailer should be using it in conjunction with shopping campaigns. One of the most powerful aspects of Googles dynamic remarketing is when a campaign is created, google automatically creates 5 remarketing lists/audiences that can be used in a very powerful way. For example, Google creates a list of people who have put an item into the shopping cart but failed to complete the transaction. So shopping cart abandoners. When the advertisers direct their campaign to show ads to that population, the images that appear in the ads are of course the items that have been left in their shopping cart as well as other images of associated products that people have bought when they bought the item into the shopping cart. So there is an extra bit of impotence to go back and complete the transaction and maybe buy some additional products.
Andreas: We say the space evolving quite a bit. Initially it was all keywords driven, then Google started introducing the Google Shopping format, so you wouldn’t bid on keywords anymore, but rather on the product, in addition to that, we see audiences overlapping with the keywords. Do you think on the long run key words will completely disappear?
David: I don’t think so. Their function will evolve. Rather than just being the only signal that tells a search engine what is the intent of the search, the behavior, interests, association, etc., of a person will help the search engine understand the intent behind the search. That is one way where key words will evolve, it will be an additional signal, not the only signal on what is being searched for.
They served as the only indicator of intent, now with the rich amount of data available to search engines through audiences, there will be additional information about whoever is doing this search, what their interests are, what their behaviors, their search behaviors, the devices like they to use, the date and month they are searching. There is a rich set of data to augment the keyword related data to inform the search engine algorithm what the intent of the searcher is. Keywords will always be important. Again, whether typed or spoken, their importance will be tangential rather than central.
Andreas: Target KPIs are evolving. Initially businesses went for cost per order and they realized okay whether you are selling socks or a Gucci handbag at 5k, that makes a huge difference in cost per order is not the best indicator so they started incorporating revenue and went for ROAS. Others found the margin important, so whether you are selling underwear at a 70% margin vs. laptops at a 5% margin, roas is not the right metric, so let’s go to ROI, incorporating the margin data. The next step of this evolution was aiming for repeat purchase, throughout their entire lifetime. What do you recommend your clients on which KPIs they should optimize their campaigns for?
David: Let’s go into the future a little bit. Within the next 5 years or so, 2 things will happen.
- Software tools that includes search platforms like Bing or AdWords, will make it easier for advertiser to take into the consideration lifetime value. This huge missing chunk basically changes the profitability equation entirely. I’m hoping and predicting that lifetime value data will be used to inform decisions about what investment to make in search.
- The other data point that I think is important that’s not being used by advertisers to make decisions about investment is assisted revenue. The phenomenon where a particular set of searches on a keyword generate X number of dollars of direct revenue, but Y number of dollars in revenue if you take into consideration the pathway the searcher has taken through several different actions to get to the site. Think about it. If an advertiser took assisted revenue into consideration, along with lifetime value, frequently they would be driving much more volume and profit than they think they’re are driving now. I almost see an image of the advertiser community as a whole being much more conservative, too conservative than they could be/will be in the future.
Andreas: I couldn’t agree more. I’m wondering why Google could miss this opportunity as you mentioned it, would change the equation entirely. It is a fundamentally different approach, which will pay off and invest way more because you get a long term ROI instead of just focusing on the first purchase.
David: I can speak to part of that with a recent experience. Google recently allowed the advertiser to report right in the dashboard, the amount of assisted revenue alongside the amount of direct revenue, and then the advertiser can add up the two for a total conversion value for any given action. The problem is that the data is wrong. Consistently the data is wrong. I found this out with my client when he said That adds up to a number that I’ve never seen before. That’s much higher than my bank account! The advertiser community as a whole will not embrace this kind of data until it is closer to reality.
Andreas: Where do you currently see the bigger bottleneck? Is it the knowledge in the market which is limited…which are the ideal KPIs, how do you incorporate LTV, or do you rather see the corporations as the major bottleneck because they are too slow, too rigid, controlling, and finance lack behind, they don’t understand what is going on, so there is a huge change management effort to introduce these things which apparently make a lot of sense?
David: I see the latter as being the bottleneck. If you consider the fact that many search advertisers and this includes companies that are surprisingly large, don’t even track conversion data, then you get an idea of the amount of inertia that’s going on. For example, I’ve worked with clients at B2B companies that don’t know the value of their own leads. In order to figure out what we have to bid or pay for a lead, Mr. client you need to tell me what is the value of a lead? That naturally requires them to know what their close rate is, what their average transaction value is, and they say Well we don’t know those things right now. So in order to decide on the right KPIs, they first have to have the internal measures and KPIs to inform what we use on the search side.
Andreas: Things get way more exciting when you are not able to easily measure everything. But the wrong approach is probably saying “I’m not able to measure this, so I don’t take it into account.” It’s probably way smarter to say “Okay if I’m not able to measure it, I’ll try to estimate and include this into the optimization equation.”
David: That’s exactly the advice I give to clients. If they don’t know what their close rate is, I tell them to start by estimating. And as we get the data, we will get closer and closer to reality. Just like you were doing if you were conducting the same kind of exercise without searching the equation.
Andreas: Thanks a lot David. It was a pleasure talking to you, we really do share a similar mindset!