Where Do You Go When You’ve Maxed Out SEM?

Advertisers frequently tell me, “If you can hit my CPA target, my SEM budget is unlimited!” This is great in theory but often limited in practice — at some point, there simply are no more new keywords, or landing page tweaks, or ad text tests that can increase an advertiser’s SEM spend.

sem brick wall

Has your SEM optimization hit a wall? See options below.

Two years ago, maxing out on SEM resulted in a virtual dead-end for online marketing growth simply because other channels could not come close to the CPAs achievable in SEM. Today, the landscape of profitable online marketing channels goes beyond SEM and is expanding daily. In this article, I’d like to outline five great alternatives to SEM that can drive significant volume and ROI.

Social Media

The early days of Facebook advertising were basically the realm of big brands spending wantonly to acquire likes for their fan pages. Direct-response advertisers (you know, folks like you and me who love SEM) generally stayed away from Facebook because the ad units weren’t conducive to driving actual sales.

On top of that, Facebook had an uber-clunky user interface, no tracking, and ad units that required almost daily (and manual) updating to keep click-through rates (CTRs) fresh. Overall, not a good use of an advertiser’s time or money.

Today, Facebook advertising is a fantastic channel for advertisers. Facebook has created new ad units (sponsored posts, mobile app installs) that drive ROI, incorporated first-party data via custom audiences and FBX (retargeting) and third-party data via a partnership with DataLogix, and partnered with third-party campaign management companies that make interfacing with Facebook more or less as seamless as working with AdWords. In some cases, Facebook advertising actually outperforms AdWords — for example, a company selling a “new mousetrap” is unlikely to drive many clicks on AdWords but can build an entire business on Facebook.

It’s also worth noting that Twitter has gradually expanded their advertising units (they now offer a unit called “tailored audiences” that is eerily similar to Facebook’s “custom audiences”), and LinkedIn offers highly-targeted (albeit expensive) self-serve CPC advertising, as well.

Display Advertising

Display advertising has traditionally required high upfront investment from advertisers. In the past, to be successful at display required hiring a team of media buyers who had to negotiate one-off contracts with dozens of networks and individual websites, as well as purchase an ad server to run the ads, and build an in-house creative team to constantly tweak ad creative to drive the requisite CTRs.

Today, more and more of display advertising inventory is available on ad exchanges like Right Media or the DoubleClick Ad Exchange. Think of ad exchanges like eBay or any other marketplace — rather than having to negotiate with dozens of individual sites, you can go to an ad exchange and instantly gain access to tens of thousands of publishers and billions of impressions.

On top of that, demand side platforms (DSPs) generally provide both an ad server and a bidding algorithm to help you scour all the inventory and buy the impressions that are most likely to drive ROI for your business. And there are even companies like TellApart and Criteo that will buy display inventory for you and only charge you on actual sales (TellApart) or clicks (Criteo).

While I don’t think programmatic display buying is yet at the level of return that you can get from SEM, the barrier to entry has been lowered to such a degree that it at least makes sense to start experimenting in display.

Affiliate Marketing

Affiliate marketing has been around for pretty much as long as the internet has existed (when did Al Gore invent this stuff?). Affiliate marketing — in theory — is the ultimate ROI channel, because you can choose to pay affiliates a fee that guarantees a profit for your business.

The challenge, historically, has been that some affiliates are very clever at driving “conversions” that are not actually incremental for advertisers.

For example, affiliates might purchase the term “ADVERTISER NAME promo code” on Google and insert themselves into an existing transaction when a consumer leaves a shopping cart to check Google for coupon codes. This results in an unnecessary fee to the affiliate and an unnecessary discount for the consumer — a double whammy!

This sort of behavior still happens today, but advertisers now have better tools to detect and eliminate negative ROI affiliates from their affiliate programs. In particular, attribution tools — which show the actual value of an individual click amongst the many clicks that might have driven a conversion — can now enable advertisers to understand which affiliates are driving incremental revenue and which are driving cannibalistic revenue.

Mobile Advertising

Mobile advertising has been the rage in internet marketing for about five years now. There’s a difference, however, between an advertising channel being heavily talked about and an advertising channel being heavily utilized. I’ve discussed this in detail in the past with my concept of the arc of internet marketing channel adoption.

Facebook’s most recent earnings report revealed that more than 50% of Facebook’s revenue now comes from mobile advertising, so I think it is fair to say that we are rapidly leaving the “everyone cares, no one spends any money” stage of channel adoption to the “no one cares, everyone spends money” stage.

What this means to advertisers is that there is still an arbitrage opportunity in mobile advertising — because advertiser investment is disproportionately low  vis-à-vis mobile consumer usage, you can still buy clicks at a CPC that is lower than the actual “efficient value” (which is really no longer the case on desktop SEM).

No doubt there are many challenges remaining on mobile: better tracking is still needed, many advertisers have yet to build great mobile-optimized experiences, and there are still too many “fat finger” errant clicks. It’s clear, however, that mobile advertising is only going to get bigger in the future, so now is as good a time as any to figure out how to make it work for your business.

Native Advertising

Native advertising, which basically means placing an ad that looks like editorial content, is becoming omnipresent online. Go to any newspaper site and you’ll see links that reference “other articles you might like.” These are almost certainly paid links disguised as relevant content. The homepage of Yahoo has “in-stream ads” that do the same thing. You could even argue that promoted videos on YouTube are a form of native advertising.

The great thing (um, from an advertiser perspective) about native advertising is that it blurs the line between editorial content and advertising, which means that consumers trust your content more than they would if they were 100% certain your ad was a paid placement (the FTC will eventually regulate this, by the way).  And native advertising is still relatively cheap — clicks on Outbrain, the leader in native advertising content distribution, can be had for as little as 10 cents.

The Wide Tail Era is Here!

I’ve argued over the last couple of years that SEMs that focus on the “long tail” of keywords — trying to find keyword number 10,232 to add to their AdWords account — are wasting their time, largely because Google has created numerous disincentives to do so.

Savvy SEMs now understand that success is a combination of focusing on your most profitable head terms in SEM, and finding alternatives outside of SEM to drive more sales. I’ve named this concept “the wide tail” — focusing on fewer keywords on Google combined with adopting more channels outside of SEM. To me, any SEM who refuses to look outside of AdWords and Bing/Yahoo for profitable inventory is rapidly becoming obsolete.

As I have hopefully shown in this article, alternative channels are now easier to use, have better tracking, require less upfront investment, and can drive as much and sometimes more traffic than SEM. To be clear, SEM is not going anywhere – there are many, many very good reasons to keep investing in SEM – but the time is now to start expanding your reach!

Image from MorgueFile.com