How Branded Terms Play a Role in Paid Search

by: Compete

A few weeks ago, we used Compete intelligence on paid and natural search to show how Yahoo! outperformed Google (NASDAQ:GOOG) in paid click efficiency. Now that the Yahoo!-Google search partnership has gone down the tubes, we’re taking another look at paid search – this time at how a few well-known brands drive PPC traffic to their sites.

For this analysis, we looked at paid referrals from the Top 5 search engines (according to Compete’s Search Market Share) to 4 well-known brands. We chose these brands somewhat arbitrarily: they don’t compete against each other, but we can gain some interesting insights into PPC by comparing them.

Some key takeaways from the graph above:

  • In Q3 2008, Apple (NASDAQ:AAPL) had the lowest ratio of paid-to-total search referrals at only 9%, while FTD-OLD had had the highest at 40%
  • The average ratio of paid-to-total search referrals was 23%

There’s a variety of factors driving how these brands utilize paid search referrals. Factors like search marketing budget, competitiveness of keyword bidding and brand awareness are all important.

Another major factor is brand-based keyword bidding. Companies have an obvious interest in appearing at the top of search results for their brands and trademarks, and sometimes have to defend their turf from competitive bidders.

The chart above shows paid referrals from branded terms. Some highlights:

  • In Q3 2008, FTD has the lowest share of branded-to-total paid referrals at only 23%, while Toyota had the highest share at 94%
  • The average ratio of branded-to-total paid referrals was 70%

FTD’s low ratio shows a focus on direct response – that is, driving PPC traffic from non-branded terms. Looking at the list of actual terms driving paid referrals to FTD, 9 out of 10 terms were non-branded (“flowers,” “gift baskets,” etc.). The other competitors were focused on building brand awareness and association. Most of their PPC traffic came from branded terms. This was especially true for American Airlines, where 78% of paid referrals came from branded terms (“American” or “AA”). However, looking at the list of terms driving paid referrals to American Airlines, only slightly more than 3 out of 10 terms were branded. In other words, 78% of American’s paid referrals come from 34% of the terms it bid on. One way to make sense of this seeming inconsistency is to recognize that American bids on highly competitive airfare keywords. So American’s brand gets a lot of mileage against many lesser-known bidders.

One last point: for this analysis, we looked at referrals from a company’s own brands and trademarks only. So if Apple bid on another company’s term (“Zune,” for instance) it wouldn’t count as a branded term here.