SEM Tools: Risks, Limitations & Best Practices – Part I: Geo Targeting

Should you use all the search engine marketing tools currently being offered by the search engines? Maybe yes, maybe no. If you do use them it is very important that you understand them correctly and use them in the most effective manner. As the competition among search engines increases and advertisers have more options, search engines have to offer more and more SEM tools to attract and retain advertisers. These tools are definitely useful and tempting, but you must understand their limitations and applicability to your business before using them for your campaigns.

This 3 part series will explore risks, limitations and best practices in using some of the currently popular tools: geo targeting, content targeting and demographic targeting.

Part I: Geographical Targeting 

Through geographical or "geo targeting", you can target your advertising to any US or international region(s). Your ad will be shown only in the selected regions. However, before using this tool for your SEM campaigns you must understand:

1. Your Business type

Geo targeting is useful for businesses whose offering or product prices vary by location, such as online home listings, online dating and web-based job listings. In all these cases there is strong likelihood of the searcher having a location preference.

It is also useful for small businesses who can only serve a local market. Obviously, the neighborhood pizza place in San Jose, CA would not want to show ads in New York and pay for the non-converting clicks.

Geo targeting is most likely not useful for businesses like online retail and enterprise software, since the product offering and prices do not usually vary from one location to the other. You can avoid spending resources in setting up geo targeting if it does not make sense for your business.

2. Bidding limitations

Without careful planning, you will end up placing the same bid for keywords across different locations. This is dangerous and ineffective because keyword CPCs vary across locations based on what competitors are bidding for the keyword in that location. You should create separate campaigns for each geographical region you are targeting, in order to avoid placing the same bid for a keyword across multiple locations.

In the Google AdWords example shown, the campaign “Online Dating” is targeted to Australia, Germany, United States etc. The problem with this structure is that the keywords in this campaign will have the same bid across multiple countries. 

 

 

If there is a keyword “singles dating” in this campaign and if we bid $5 for it based on its performance in the US, we will end up placing the same $5 bid in Germany, in Australia and in China. While its performance might justify the bid in United States, $5 might be very high for China and very low for the Germany. With this bid you might end up at the top position in China, which may not be the most optimal position there. On the contrary, in Germany you might lose out on good traffic because of the low bid and hence low position. 

3. Technical limitations

Geo targeting works by the search engine’s ability to capture a user's IP address or other identifying information, check that information against a database that suggests the likely geographic location of that user, and then serve up targeted ads based on this geographical location. The database is not 100% accurate and there could be IP addresses which are missing from this database. No geo targeted ads are served to the users with missing IP addresses.

Secondly, company firewalls and large internet service providers (which use several IP addresses) tend to skew geographical location. This could result in ads to show up at unintended locations. Geo targeting therefore, is not 100% accurate and sufficient to saturate a regional market with search engine advertising.

To conclude, before you set up any kind of regional or international geo targeting for your campaigns, it is important to ensure that the targeting applies to your business and it is set up for the most effective bidding. In addition, you must understand that you might lose out some traffic volume because of the technical limitations.

Comments

[Ian Orekondy]

Great post - thanks Vividh. What are your thoughts on using geo-specific keywords/phrases and allowing the search engines to implement query-parsing? This can result in extremely long keyword lists...do find it's worth the effort?

[Vividh Chaudhary]

Thanks Ian. I definitely think geo-specific keywords are useful. The users who search using such keywords know exactly what they want, and are more likely to convert into paying customers.

Long keyword lists would contain low traffic but highly specific keywords which very few people search for. These keywords don't get as many clicks and are inexpensive but have great conversion rate. So it's worth the effort.

[Abhiram]

Wondering if anyone has any other insights into Geo-targeting at the region level - that is lower than country level so for example if one wanted to target a particular city or region in a country say Tokyo in Japan. Would this help to lower cpc's if one new that most of your customers were in a very specific destination. Put another way the question is - whether there is any potential benefit by targeting a particular region's ip's since there may not be enough competition targeting a particular area.

[Vividh Chaudhary]

Hi Abhiram,

It's hard to predict whether Geo-targeting at the regional level lowers or increases the CPCs. The cost per click you pay in a region depends on the marketplace. The number of competitors is a less influential factor than the actual bid amount. So, you might end up paying a higher or lower CPC depending on what the competitors are bidding in your target region.

However, the benefit of Geo-targeting is that it allows you to place more appropriate bids for each region or marketplace.