The SEM Opportunity
SEM (paid search engine marketing) is easily the most effective paid advertising channel. This is because advertisers can bid on exactly what potential customers are looking for via keywords that represent specific intent. For example, if a company offers online payroll software they can get in front of people who are searching for phrases like “best online payroll software” and there is a good chance of converting these people into customers because of the relevancy. This opportunity to reach huge volumes of customers when they are ready to buy is unparalleled by any other form of advertising which naturally leads to a lot of competition on the paid search advertising networks – Google AdWords and Bing Ads. This can be both a blessing and a curse for startups, depending on their ability to understand and manage SEM. For startups that get it right, it can be one of the largest and most effective distribution channels.
The Challenges and Advantages for Startups
Managing SEM for startups is very challenging because in most cases they are competing with well-established, well-funded companies with well-understood unit economics – so they are disadvantaged from the get-go because they have less operating history, fewer resources, and less data to work with. On the flip side, startups have things working in their favor that established companies do not. They can move much faster and thus learn very quickly. They can also prioritize growth over profitability in the short-term, allowing them to better compete with established companies from an ad auction standpoint. Lastly and most importantly, they typically have better product offerings compared to established companies so they have the opportunity to steal both current and would-be customers away if they can get in front of them.
The trick to making SEM a scalable and profitable channel for high-growth companies is not so much a trick as it is a comprehensive strategy that overcomes the challenges I outlined above while exploiting the unique benefits of being a startup. This is precisely what we do at Growth Pilots and we wanted to put together a guide that other startups can use as they are thinking about leveraging SEM for customer acquisition.
Start with Goals
As with any marketing strategy, defining your goals up front is critical to setting yourself up for success with SEM. Start by asking yourself what you are trying to get out of SEM. Is it leads? Trials? Subscriptions? Transactions? This will vary based on your product and industry so spend time thinking through what your conversion funnel looks like and what key steps are important. Once you know your conversion funnel inside and out and have defined what steps are important, assign a value that you are willing to pay for each step. These will be your CPA (cost per acquisition) targets and they will determine how well you can compete against other advertisers who are trying to reach the same audiences.
Once you know what your conversion goals are and how much you can afford to pay for each goal, you need to make sure you can actually track these goals. If you can’t track the goals you’ve decided on, you have a major problem since you won’t know if you are successful or not. This happens far more often than you’d think – I’ve seen AdWords accounts spending hundreds of thousands of dollars per month that did not have tracking properly configured. Make sure you have conversion tracking set up correctly and save yourself an awkward board meeting. The native conversion tracking with AdWords and Bing Ads is sufficient for most companies, but if you have a complicated conversion funnel you may need to use a more customized tracking solution in addition.
When it comes to choosing which keywords to add to your account, it’s typically best to start broad since you ultimately want to learn so you can build on what’s working and cut away what’s not. If you have a strong understanding of your target customer’s search behavior, you have a very limited budget, or you have very low CPA targets it could make sense to tighten things up out of the gate. Use Google’s Keyword Planner tool and third-party tools like SEMrush and SpyFu for keyword research. Don’t forget to bid on your competitors’ brand terms as this can be a good way to capture very high intent traffic that’s ready to convert. You cannot use other companies’ trademarks in your ad copy but bidding on their keywords and showing an ad that mentions your own brand is fair game.
Update as of February 2019: we’ve developed a comprehensive guide to keyword research for startups that is based on what we’ve learned by working with more than 100 startups over the past five years.
Account structure is the most important aspect of your SEM account. If you have a good account structure in place, you can see a very clear path to scale and efficiency. Building an overly simplistic account might get you up and running quickly but that’s not going to let you turn SEM into a meaningful channel. If you plan on taking SEM seriously it’s best to use a granular account structure that allows for the deepest level of optimization and budget allocation. Start by mapping out the different keywords you want to use and from there create overall themes for similar keywords. Each theme should then have its own campaign. Within each campaign, use one-keyword ad groups to maximize control and to make adding new keywords more manageable in the future. Duplicate this campaign structure for each relevant keyword match type so you can ensure each search query triggers the right keyword. Most companies should only ever need broad modified and exact match types.
Optimizing is where the majority of your time should be spent once you have your account structure built out as this is what will enable you to scale. As you begin to understand which keyword, ad, and landing page combinations get you the lowest CPA, you will be able to more efficiently allocate budget to the top performing combinations and maximize their volume. The four core areas to focus on for optimization are keywords (selection and match type), bids, ads, and landing pages. There is a lot to cover here and we’ll be sharing much more on optimization tactics in future blog posts.
Balancing Efficiency and Scale
If you are optimizing your account as efficiently as possible, you’ll be maximizing your budget by squeezing as many conversions out as possible. This takes time and data to see what CPAs can be achieved with a given budget and it requires frequent optimization to keep things dialed in, but once you have an optimization cadence down you’ll be able to iteratively test and maximize your budget. As your budget starts to grow, you’ll inevitably hit a point where you cannot acquire additional customers at the same CPAs you were getting when your budget/account was smaller. The reason for this is due to fairly complicated ad auction dynamics but for simplicity’s sake, there are only so many people you can reach who are relevant for your business. When these people “run out”, there is an added cost to find more of them so you’ll need to determine if you can afford the added cost. This is when intelligent expansion and rigorous optimization really kick in since you are now faced with the age-old marketer’s challenge of finding more volume at the same marginal cost.
Tying it all Together
Startups face a number of challenges when it comes to competing with established companies on SEM, but for those companies who are able to put the time and effort into developing a thoughtful strategy, there is a huge pool of high-intent customers for the taking. We’ll be regularly publishing guides like this one to help startups run their SEM accounts more effectively and better compete with the incumbents in their industry.