Many advertisers ask the question “Why should I bid on my branded terms in Paid Search?” They theorize that they will “get this traffic for free” as users peruse the search listings and find the advertiser’s site at the top of the organic (free) search results. They are right, most of the time. However a percentage of users will not “find” the advertiser’s site. The value of lost traffic may far outpace the cost of paid search clicks.
A small percentage of brand traffic will be lost
Some studies estimate that about 15% of brand traffic is lost. Users will find other items and sites to click on rather than the brand’s site. At any time a competitor may choose to bid on an advertiser’s branded terms (in Paid Search) and show up at the top of the SERPs (Search Engine Results Pages) ahead of the advertiser’s organic listings. Brand traffic is some of your most valuable traffic, a lot of brand traffic is word of mouth or referral traffic – traffic that turns into sales at a very high rate. It may be funneled off to your competitor’s sites via paid search. This is the crème of the crop, in terms of potential business, funneling right to your competitor from your brand! Ask yourself, how much would the loss of just one sale amount to in terms of revenue?
Bidding on your brand is a great defensive move
Bidding on your brand terms will dissuade your competitors from doing so. Paid Search has evolved to a place where the highest bid doesn’t always get the top listing or show in the SERPs at all. Google and Microsoft have both come to understand that in the long run the ad that gets the best CTR (click through ratio) makes them more money, not necessarily the ad with the highest bid. Therefore Google and Microsoft have both developed systems that reward the best ads with higher positioning and lower click costs, while penalizing lower quality ads (with lower positioning and higher click costs). How does this help the advertiser in relation to bidding on their brand terms you ask? Your ads will attain very high CTRs for your brand terms. So high in fact, as compared to general searches, that your ads will almost always rank at the top of paid search listings and you will only pay pennies for clicks on these ads. Because your CTRs will be so high, your competitor’s ad CTRs will be very low (everything is relative). This will drive their costs way up and very possibly drive the Quality Score, on their ads, so low that Google/Microsoft won’t even display the ad. We have seen numerous instances, to the point where this is more a rule than a trend, where an advertiser pays roughly a nickel to a dime per click for the top spot and a competitor needs to pay $5-10 per click for the second spot on an advertiser’s brand terms.
Bid on your Brand preemptively
Even if you dominate the Organic SERPs on your brand searches and no competitor is bidding on your brand terms. Google and Microsoft use historical data to set the quality scores for your ads. Quality scores, in turn, help set your click costs and positioning. When a new ad enters an auction for a term, it receives an initial quality score from Google/Microsoft. This is initial quality score is tabulated using an expected CTR for the new ad compared to the CTR for existing ads. If you are already advertising on your brand (and getting a great CTR), when a competitor enters the auction for your brand, they will be met with a low quality score and the accompanying high click costs and low positioning that comes with it (if Google/Microsoft will even display their ads). Bidding preemptively on your brand terms will make the cost of entry into the auction for your brand terms cost prohibitive to your competitors.
Generally speaking it is best to dominate as much real estate as possible with your brand. When someone types in your brand, the only option a user should see is your brand. It should seem like you don’t have any competition. In the long run this will lead to a stronger brand, more sales for you and less sales for the competition, at very little cost to you. With everything considered, it costs you money NOT to advertise for your brand terms.