Have you checked the health of your online pay-per-click advertising or affiliate marketing program lately? Why should you? It could save you a lot of money and headaches. Both tried-and-true Web marketing strategies are coming under increasing scrutiny as savvy marketers begin to do pay more attention to success metrics. If you need an audit, of course, get in touch as I provide them regularly.

Here’s the skinny: Marketers are using multiple strategies — on and off the Web. They’re working with multiple parties — agencies, affiliates, etc. — as they try to chase down customers. Lately, they’re noticing “cross over” or conflict of sorts. Campaigns are influencing each other to varying degrees. This can create both marketing budget waste and confusion on what strategy is yielding the most cost-effective results.

Good news: The doctor is in and his name is Alan Rimm-Kaufman of the Rimm-Kaufman Group. Uniquely, Alan’s search marketing agency specializes in making sure ALL of marketers’ performance-based campaigns are working together in harmony (similar to Angel Djambazov’s efforts when he was with OnlineShoes.com).

Lucky me, I was able to sit down with Alan recently over lunch to learn more about why savvy marketers are so interested in performing pay-per-click and affiliate marketing campaign audits. I’m making the audio interview available for immediate streaming, download or reading via the transcript below. Enjoy! And you need an audit, of course, get in touch.

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Jeff Molander: Hello, everyone. This is Jeff Molander, and I am with Alan Rimm‑Kaufman of the Rimm‑Kaufman group out of Charlottesville, Virginia.Alan is here to talk to us a little bit about…well no, actually, a lot about the health of your search marketing program. It sounds like a wacky topic to me. But Alan is in town, and I was lucky to get a few minutes of his time.

So I thought, Alan, come on by and explain to the world why they should be questioning their search marketing program, its health. You’re saying that anybody out there who’s got a search marketing program, a paid search marketing program may have problems, although they don’t know they have problems with it. Either they’ve got an agency, or they’re doing it themselves.

Alan Rimm‑Kaufman: That’s right, Jeff. Thanks for having me in today. It’s great being in Chicago. I enjoyed coming by, and thank you for lunch. I really enjoy being in Chicago.

Just as a matter of background, I have a pay search marketing agency. We serve over 100 clients, most of them BDC retailers, many of them IR500, IR100, a couple Fortune 500 clients ‑ big and small, managing paid search.

I think that the topic you asked me to address today, which I think is kind of interesting, is that your paid search program may look fine on the surface, and quickly it is. But, just as we recommend you go to the dentist twice a year just to prevent problems before they get big, we’d suggest you do an audit of your paid search programs about every twice a year just to make sure things are as they should be.

Jeff: An audit. We should also mention to folks that you actually come from, what I call, a hard‑core direct marketing background. You were with Crutchfield several years…

Alan: Sure. Before I started in the business, I did direct marketing in the financial services industry with Signa Bank before First Union involved them. For five years I ran marketing at Crutchfield Corporation, a leading retailer of consumer electronics: car stereos, large TVs and so forth.

So I’ve mailed my share of catalogues and done my share of portal deals and written many, many large checks to Google over the years.

Jeff: My point is that you come from a direct marketing background, and those are typically the people you are serving now. Right?

Alan: That’s true.

Jeff: You’ve lived in their shoes.

Alan: That’s true. My agency does have a focus on direct marketers, folks that want to buy their search so as to make profit.

Folks come to search with different objectives. Some folks are doing it for branding. Some people are doing it for awareness. Some folks maybe just looking to grow revenue, and I guess our concern is about the bottom line. Those are all fine objectives. Our sweet spot, our specialty, is for folks that are using search to drive web profits.

Going back to the audit. A couple of steps in doing a paid search audit ‑ Is this something I should get into? Is it of interest to you?

Jeff: Yes.

Alan: OK. Cool. Before we even get to the economics of your program, we’d suggest you should look at the data quality. If you’re looking at a spreadsheet filled of key ratios and you’re going to make management decisions based on them, I’d say it’s worth your time to make sure the numbers are accurate.

Jeff: How do you know what numbers to look at?

Alan: As silly as it seems, we first recommend doing a cost audit. So if your agency or if your internal team says that last month you paid Google $1,000 or $100,000 or $1 million or $10 million, whatever it is, you pull invoices and see that the checks you wrote to Google maxed the number on the report. And match what’s in the dashboard.

It’s a silly kind of thing. You don’t need to do this once a week, but you’d be surprised at how often people are making mistakes based on cost data that aren’t accurate. Many of the leading platforms out there, at least on a daily basis, use estimated cost data rather than actual cost data. What really matters is that check to Google, is that check to Yahoo, the actual authoritative cost that you’re being billed for, not clicks. There’s robots; there’s fraudsters. It’s the actual money going to Google.

At some point, every six months or so, you should actually get your Accounting Department to figure out your true costs paid to the engines and that goes against your reports. Just to give yourself some comfort that the cost side is correct.

Jeff: Twenty percent of the people out there in your estimate don’t do that? Eighty percent of the people? What do you…

Alan: I don’t think though…I think a lot of people have some squirrelly numbers there. But if costs are difficult sales are even more difficult. And the reason that sales are difficult is because of the double counting issue.

So on your site you probably have web tracking beacons and all sorts of different tracking systems. You may have Coremetrics and Omniture. You’ve got an affiliate program running. You’ve got search. You’ve got email. Sometimes if you add up all the revenue from all of those programs, they can exceed your total site revenue. You’ve got some double or triple counting.

The most important thing to do is ‑ so we said step one was get a sense that your cost data are accurate. Step two would be to get a sense that your sales data are accurate. If last month your report said that through search you did a million bucks in revenue, you say, “I’d like to see those order numbers. Show me the order numbers that add up to a million dollars. Cool. There they are.”

And then look in your back‑end systems and order by order number make sure they don’t tie out to something else. First of all, if the total report says you did a million bucks in search revenue last month, make sure that you agree with that. Your agency may have a different cookie. You may be using a different tracking platform, so the numbers may be different.

“… different tracking systems come up with different revenue numbers; sometimes, as much as 30 or 40% different. Big, big swings. So before you sit down and make a management decision, you want to make sure that your total costs are right and that your total sales are right.”

Legitimately or not, this might not be fraud or deception on anyone’s part, but different tracking systems come up with different revenue numbers; sometimes, as much as 30 or 40% different. Big, big swings. So before you sit down and make a management decision, you want to make sure that your total costs are right and that your total sales are right.

Now, on the total sales piece. Once you’ve shown that the million dollars in revenue ties out to 10, 000 orders or whatever they are, you want to then go back and make sure those orders are actually all tied to search.

Again, in most cases, this should just give you a good warm feeling, like when you go to the dentist and he or she says; no problems. But you might find something. You might find something actually quite important.

Jeff: What have you found with some of your clients that was important and/or why don’t you tell us what was devastating on top of a real good story?

Alan: Well, a lot of times when we see all kinds of issues with tracking, and this order audit where you take a total search attributed revenue and break it down to orders, it can be very revealing. In the most egregious case looking at a potential client’s numbers we saw that actually a former agency had attributed organic search to the paid program. So in order to pump up their results, they were basically counting as attributable paid search the organic search on the retailer’s brand name.

Probably later in the conversation, we might come back to that notion of brand versus non‑brand. I think taking free search and shoveling that into the same pile as paid search to plump up sales to make the paid side more efficient because it was grossly inefficient, that would be pretty fraudulent or deceptive.

Usually, the case is of tracking discrepancies. We had one client that instituted a Web multi‑variant testing platform, like an Offermatica or an Optimus, I forget which one. That system was overwriting the acquisition code with a test code. So where the person may hit the site saying “from email” or “from search”, this testing platform would overwrite that and then say “saw the red home page, or saw the green home page”.

Anyone who went through an experiment, in effect, was removed. Their origin was lost so that’s a major retailer hustle; the name of the retailer you would certainly be familiar with.

Reported sales could be high. They could be low. I think every six months you should actually dig down and audit them so that you have faith in them. Again, those first two steps making sure your costs are accurate and that your sales are accurate is well worth spending the half day every six months.

Then we get to the good point, and that’s the ratios.

Jeff: And it’s worth it, why? Because usually you find problems, or?

Alan: I would say, more often than not, you will find problems. Sometimes the problems can be happy problems in your favor. Oh, good. Opportunity. Sometimes they can be bad problems against you. Oh, crap. Things were not as good as they looked.

Either way, I think that as direct marketers if we’re going to be steering these ships that we’re driving, we need to have a clear dashboard. We’re about to get to the ratios, making sure that you’re headed in the right direction.

Even before that, are you actually seeing reality? I’m almost embarrassed to bring it up; it’s so basic. But if you are going to make decisions based on numbers, yeah, put in four or five hours to make sure those numbers are actually reasonably accurate.

Jeff: You keep referring to these ratios. What are you talking about there?

Alan: We’ve looked at your business. We’ve said the numbers on the reports are basically right, both on the cost side and the sales side. Now we want to make sure you are getting an appropriate level of sales for each dollar of cost.

We want to do that in aggregate to make sure that the numbers you need support your profitability goals. A certain ratio of cost to sales might be three to one or five to one, whatever it is. You then want to look at that by engine. You definitely want to break that up by engine.

A very critical dimension that you want to break it out on is brand versus non‑brand. The issue there is you should take your search portfolio and categorize all the words in it as that which has your name, retailer.com, and that which doesn’t.

The reason being is that your brand name… Just do a quick example. Suppose someone goes to Google and types in “Lands End oxford” looking for a man’s button‑down shirt. Case 1.

Case 2. Same person goes to Google and types in “Men’s pinpoint shirt”. Case 2. It seems pretty similar, but I’d suggest they are radically different.

In the first case, the search query has the words “Lands End” in it. That consumer had identified the marker they wanted to buy from, and was looking for to find their website through Google. It’s a White Pages search. It’s a navigational search. It’s get me to Lands End; I want to buy a shirt.

In Case 2, the person said “pinpoint oxford” or “men’s oxford”. I forgot my example already. In that case the person didn’t have a pre‑cooked notion of who to buy from. It’s a competitive search. It’s a Yellow Pages search. It’s going and saying: show me everyone that sells shirts.

So the value of someone coming in on a non‑brand search is higher. It’s more incremental. Search on your brand name is great. It tends to be super high converting and super low cost. All good.

It’s probably the result of your catalog mailings. It’s the result of your good reputation. It’s the result of years of customer service, your direct mail, your print, your television, your retail stores. When someone comes and looks for your name, the retailer’s name, that’s really spill over goodwill from all of your other marketing and fulfillment goodness over the years. So it’s not incremental.

Where you want to be growing your program, and where your program needs to be profitable, is in the non‑brand words; the words that are competitive. Just as the first slice should be your profitability or your advertising efficiency by engine, that should also be by engine by brand versus non‑brand.

What you’ll find is that the brand search; very low cost, very high conversion, very high sales, could hide a lot of crap on the other side of the portfolio. It’s very important to disaggregate. You know, if I were advertising the retailer’s name itself it doesn’t really take a lot of work, and it isn’t that incremental.

That’s a very important slice to make: brand versus non‑brand.

Jeff: And in making that slice, this gets into one of my favorite subjects every time… Well, we don’t talk about it anymore because we’ve kind of burned through it. But the whole third party affiliate… Do you turn it over to your affiliates? Do you not?

There seem to be two camps in this. The decision all boils down to, seems to boil down to coverage. What you will hear people refer to as coverage and “whack and tackle” and that kind of stuff where, in particular, with paid search as well as organic non‑paid search.

The 2006 best practice, I suppose, is to allow certain affiliates, a limited number of affiliates, and to maintain separate terms with those affiliates. The way you pay those affiliates is different than you would normally pay. Some actually pay higher; some actually lower in terms of commissions.

How do you answer that question? Is balancing it…

“I think my solution to the affiliates would be to turn the programs off entirely. In most of the cases, I see little value to the programs at all.”

Alan: Well, I think my solution to the affiliates would be to turn the programs off entirely. In most of the cases, I see little value to the programs at all. For most retailers that are running a typical affiliate program if they turn them off entirely they would see those savings go right to the bottom line and they would see their top line stay intact. All of the affiliate dollars would switch over to their untracked or their organic search column.

It’s not the case for all retailers. There might be five or 10% that are getting incremental value out of affiliates. It’s really in the minority. I think most affiliate programs are probably not worth the time or the cost that they ensue.

Jeff: And you say that based on what?

Alan: Looking at both numbers.

Jeff: So the audits?

Alan: Yep. Strong words, but that’s my sense.

Jeff: Well, at the ACCM Conference recently, I forget the gentleman’s name from…one of the founders of Flax Art, stood up and said: after saying that some people look at affiliates disparagingly, he then went on to say that many people are doing exactly what you are describing.

Now, I don’t know that that’s the case. I don’t know that there are… I certainly… I’ve told the story of Lisa Papagaras from Universal Screen Arts to people at conferences and those kind of things. We don’t see a lot of people shutting the program down. We see companies like Lands End, as an example, really going through and restructuring quite a bit, but we don’t see them actually shutting down.

Alan: There’s a small amount of good traffic in there. I was estimating 5%, maybe it’s 10% as a first order effect. So affiliates can be done well, but it takes care and attention. I think just the average program plucked at random from a hat would act not to be done as well as best practices would ensue.

But getting back to search, you just want to make sure that each portion of the search portfolio is pulling its own weight. You wouldn’t allow the wonderful goodness of your brand name to be carrying lackluster performance in the non‑brand portfolio.

You should be really charging your in‑house team or charging your search team to make the non branded keywords profitable and growing.

You know, you might say, “What’s the right amount?” I’d say as a manager I’m not sure. But that’s where I would push on the team to get growth. The branded search will jump when you mail a catalog or run a TV campaign. What you should be charging your team with is aggressively growing sales from your non branded keyword portfolio and doing it profitably. That would be in a nutshell the kind of audit things that we’d be looking at.

Then after looking, we were talking about by engine and then by engine brand versus non brand, we want to go down to the keyword phrase, of course. And the things we would be looking for are keywords that have excessive cost and insufficient sales or vice versa. We want to look for keywords that have great sales at a very reasonable cost and are in position number one. If you have a word that’s high performing and it’s not at the top of the page, that’s a red flag. If you have a word that’s burning more cost than its revenues justify, that’s a different kind of red flag.

So looking at the economics of your top, say, 200 or 400 terms sorted by cost descending and then looking at the economics of your top 200 or 400 terms sorted by sales descending ‑ those are very instructive things to look at. And again, that’s certainly by engine results at the keyword level very widely across the major engines.

Jeff: When we were having lunch earlier you had mentioned that the search industry is growing more complex. In fact, you’ve mentioned this more than once and that one of your takeaways from some of the conferences you’ve been to ‑ and you’ve been to a whole bunch of them lately, including “Internet Retailer…” How can someone like you sit across from me and say search is getting more complicated?

Now, obviously, what we just talked about a lot of folks aren’t doing. And when you talk about search marketing very few people talk about audits and the health of their program and all that, and understanding channel confluence and all those kind of things: the way that different marketing channels interact together and how this can be costing you a lot more money than you should be spending and all that kind of stuff.

But when we see companies like Yahoo! Chasing after companies like Google… What I’m getting to here is the black box. Where in paid search marketing everybody is saying, “Just put money in the black box. We’ll do the rest ‑ don’t worry about it.”

Alan: That would be an engine or an agency saying that?

Jeff: Well, that would be an engine saying that. My question is: How can it be when Yahoo! Takes away your control as an agency… Is that the kind of complication? Is it complicating your job as an agency?

Alan: I think that things like Google’s quality score algorithm changes this year, which removed transparency to the retailer be it an agency or direct marketer, are in general bad. I don’t think the industry is well served by having Google in the position of “we’ll do what’s best for you.”

And, you know, Yahoo!’s position in the market… They’re such a small portion of the search. Focusing on Google at 65 or 70 percent of the market ‑ they are they are the dominant player.

I think the complexity comes in not so much because of the release of features and I think Google is certainly to be lauded for making some of these things simpler. I think Google should be lauded for the tremendous effort they’ve put into their public tools, the tremendous effort they’ve put into their desktop tools… AdWords Editor ‑ tremendous, as well as the tremendous effort they’ve put into their APIs, which agencies and larger advertisers use to communicate with them directly.

Google’s done everything they can to really give people good access to their platform in a fair and reasonable manner and they should be commended for that. I think that the complexity they’re talking about is, the engines have succeeded in forcing or in encouraging so many marketers to jump into the space that the average CPCs have been rising aggressively and steadily. So it’s not that the complexity is in the tool side it’s that you need to be a much more savvy marketer. You need to know what you’re buying and why you’re buying it. You need to know your economics cold. You need to know what words you’re bidding on for position for branding because you care about them, which words are actually making you money and why.

For example, Google has integrated AdWords with the new Intuit QuickBooks platform, allowing even more retailers to push skews onto Google. So the game when I started in search, probably six or seven years ago, it was a printing press. We were just making money hand over foot. We could throw up ads, we could bid low. Revenue would come in at huge multiples of the ad spend. Every time we added new words every word worked. It was a gold mine.

In my role at Crutchfield, we moved a huge amount of cost in marketing expense out of paper in the mail and moved it to search and had some great runs. What’s happened over the last couple of years is the market’s become more expensive. There’s still a tremendous amount of sales to be had through search, but the sophistication you need… The direct market sophistication? That’s the complexity to which I was referring.

Jeff: OK, so, I think what you’re saying is the black box is actually what is making it more complex.

Alan: Well, I don’t think the box is that black. I mean, in some ways the box is totally black because of Google’s quality score and so forth. But retailers should be tracking all this stuff. They should be seeing at the most atomic level what they’re spending and what they’re getting back. So in that case, while Google’s inner workings might be completely opaque ‑and those windows are painted over black, you should have complete awareness into what everything is doing, click by click, word by word.

Jeff: But… I suppose you’re right. And that’s when you’re saying the audit comes in. Where you’re actually looking at not the data that necessarily Google reports in its system, which is an approximation, but the actual check that you’re cutting, right? You’ve got to use the right data.

Alan: No, actually the numbers that Google reports on their web screen will match the invoices you cut to Google. The issue is more with agencies or reporting tools. If you’re trying to estimate sales or costs through a quarter metrics or through, say, a paid search agency. If there’s an intermediary in there, be it a software or another organizational entity, that’s the kind of place. Google’s actually quite good at matching their public reporting tools to their real invoices much better than the other engines.

We’ve had an interesting one with Microsoft recently where Microsoft would randomly bill some of our clients basically for other clients and the only thing these clients had in common was that they were working through the same agency. And Microsoft was just scrambling invoices! And everyone’s like, “What’s going on?” Actually sending an invoice to Client A to the address of Client B… jumbling names and addresses.

And so, Microsoft is working thru some issues and I’m sure they’ll find their way soon. But no, I’d say the Google numbers are quite solid. It’s more the other entities in the space, like agencies and reporting tools.

Also, you were talking about cost data. Google knows exactly what you’re paying them. Sales data reported through the Google tracking tool or through your own tracking tool… that’s where you’re going to get the possible double accounting issue. And that’s where, again, you need to do an order audit, looking at the million dollars that came through search in that time period. Show me the order numbers that add up to a million and make sure that all those orders in your system are all tied to search. That’s a very important audit to repeat.