80 / 20 Rule Flip: Back Story
This is a sidenote to a series of posts called Advertising’s 80 / 20 Rule is Flipping. See all posts.
So who the heck am I to be talking this big talk? What makes me think I just spout off on the direction of the advertising industry?
Here’s the Back Story
I worked for a company called Intrawest. Intrawest was the largest developer and operator of destination resorts in North America. We built websites and e-commerce systems for ski resorts like Whistler-Blackcomb and Mont Tremblant.
During those years we bought more cost-per-click (CPC) advertising on Google and Yahoo (GoTo / Overture) than pretty much anyone else in Canada. I remember buying keyword-targeted banner ads on Google for $15 CPMs before Google borrowed Overture’s business model. I have a Google gumball machine on my window sill.
Because we spent a few million dollars per year and had some great people like Alexandre Brabant of eMarketing 101 working on the team, we learned a ton about what worked.
The biggest lesson we learned was about how advertising scaled on the web, and how its delivery changed its creation.
Long Tail of Keywords
The graph above shows the conceptual relationship between Value, Competition and Cost and Specificity, Qualification and Value of keyword phrases (customers queries) in a long-tail media distribution model.
We bought large keyword lists. Both our ads and our organic listings showed up for a huge array of keyword phrases. We played in The Long Tail before it was named The Long Tail. Before the Wired article. Before Chris Anderson’s famous book.
By playing we learned. We learned that advertising on a search engine was not much about attention. It was mostly about intention. The search box acted like a huge engine driving a dynamic database of intentions. People told us what they wanted. All the time. Our job was simple: meet them at their intention with the right message.
Now that’s pretty abstract. How about a concrete example?
We sold Whistler: flights, hotel rooms, lift tickets, ski rentals, shuttle transfers, snowmobile tours. We sold all of it.
So we wanted to show up as the top result for searches for ‘Whistler.’ And we did. But the intention of searchers typing in ‘whistler’ was broad. They were seeking Whistler weather, maps, directions and the namesake hoary (whistling) marmot.
Showing up for ‘Whistler hotel’ proved to be better. ‘Whistler hotel Pan Pacific’ better yet. ‘Whistler hotel Pan Pacific Spring Break’ even better.
We realized that our potential customers employed a huge array of keyword phrases to find the kind of information we offered. Many searched multiple times, starting with a few words and qualifying the search phrase in iterations to find information. Adding and changing words as they learned.
A lot of our potential customers sought general information. The volume for ‘Whistler’ was huge. But many more of our potential customers sought specific information, like ‘Whistler hotel Pan Pacific Spring Break.’ And these specific customers were the most valuable of all, advanced in their shopping process and the most likely to buy.
Yet no one was paying them any attention. Competitors bid the keyword ‘Whistler’ up to $5 per click. But no one bid on ‘Whistler hotel Pan Pacific Spring Break.’
‘Whistler’ wasted a budget quickly with thousands clicks and only a few conversions. ‘Whistler hotel Pan Pacific Spring Break’ never hit thresholds for cost or clicks and brought in conversions like a champion.
Long Tail of Ad Creative
Photo courtesy of lynetter on Flickr.
We bought all the keywords we could.
We tested every new keyword we could come up with to determine their value. We had a rough metric: we paid up to 4% of an average sale to acquire a customer. If that average sale number was $800, we would pay up to $32 for a conversion into a customer.
But cost constraints only arrived when we bid on big traffic keywords because they converted poorly. No one was competiting with us for ‘Whistler hotel Pan Pacific Spring Break.’ So across the board on thousands of keywords we put in the minimum bid.
We ran our campaigns and saw good results. Eventually, we started to tap the number of keywords we could buy. Our results continued to improve but growth started to flatten. Then we started customizing our creative.
We rewrote all our ads. The ad appearing in response to the search ‘Whistler hotel Pan Pacific Spring Break’ said ‘Whistler Spring Break’ in the headline, ‘Pan Pacific’ in the second line and a call to action in the third. It was customized in response to the search. We were meeting our prospective customers at their intention with the right message.
Our results jumped. We customize the creative for all our keyword, down to their most granular level. Our results improved 8 times our baseline. We tweaked the creative. Our results improved to 10 times our baseline.
Everywhere where we customized the ad creative as closely as we could to the context where the ad appeared, we saw huge increases in performance.
We had found something new: to advertise in a world of long tail media we needed to create long tail creative.
That one lesson still resonates. It underpins my understanding of how advertising is changing. It forms the basis for where I believe advertising is headed.
And it still largely eludes most people I talk to about advertising.
They want to buy reach, mass, big numbers.
So I decided to write this series about how advertising is changing in distinct, knowable ways and what that means for the ad industry. Here’s the bold pronouncement:
Advertising’s 80 / 20 (media / creative) is flipping.
20 / 80 (media / creative) will be the new rule.
Read the full series: Advertising’s 80 / 20 Rule Flip.
Next: 80 / 20 Rule Flip #3: All media and advertising will be managed by software.
Tags:
80 / 20 Rule Flip, chris anderson, google, gumball machine, Intrawest, james sherrett, keyword phrases, keywords, long tail advertising, long tail media, The Long Tail
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