Advertising on your top ranked keywords

Posted by Josh on Friday, February 1st, 2008.

Should you advertise on keywords for which you already have top rankings?

This question came up recently with a client seeking to improve advertising ROI and redeploy budget to other, less successful keywords. For the purposes of this discussion, let’s assume you have plenty of budget so that the core question is whether such advertising brings in enough additional business to justify the extra cost.

If you already have a top ranking on your keyword, the cost of advertising can be broken down into two components: the cost of acquiring additional business over that which the natural listing would by itself, and the cost of the business that it “steals” from the natural listing. Most of the time we advertise where we don’t have great natural rankings, so only the first type of cost is present: there is no “cannibalism” of leads going on. As rankings get better, this cannibalistic cost increases. The cost of acquiring additional business is good; that’s what the advertising is for. The cannibalistic cost is waste.

If you have enough traffic to make such tests meaningful, it is possible to find out the breakdown of these costs by turning the advertising on and off and examining the difference in sales. This is not always a palatable decision since it could mean foregoing some lucrative business. On the other hand, if you’re spending a lot on advertising for that keyword, the potential savings could easily overcome any temporary downside. You won’t know for sure unless you test, but be careful when testing to make sure the test periods are sufficiently similar, that your tracking is good enough, and that you collect enough data to make such tests meaningful.

Aside from the aforementioned cannibalistic cost, there is very little downside to advertising, and there are several benefits. The first and most obvious is the additional business ads can generate from clicks that would not otherwise come your way from the natural listings alone. This value increases more as your natural position gets lower and lower. The ads also provide some (limited) brand awareness and lift, and, perhaps most importantly if you already have the #1 ranking, they displace your competition from the top ad spots.

To sum up, if you’re not in the top few natural listings, advertising is almost certainly a good investment in the same way it would be if you were on page 50. Even if you have top position, it may still be worth the ads, and you can find out by simply turning them on and off.