The purpose of this study is to critically evaluate the concept of “keyword advertisement” as part of Search Engine Marketing (SEM) and its effects on customer acquisition as part of the first phase of customer relationship management, and market exposure.
Holding on to an interpretivist philosophy, the study is focused on the meaning of the topics in discussion in order to understand and evaluate the impacts of Search Engine Marketing (SEM) practices.
By employing a grounded theory approach this study aims to identify and assess previously appraised strategies regarding SEM practices, customer relationship processes, and the online market exposure through keywords advertisements.
The text specifically refers to the case of Google Search Engine Optimization (SEO) applications to identify the real-world significance of understanding these theories and practices.
An inductive approach allows the study to deduce conclusions about the relationship and impact of SEM practices on customer acquisition and online exposure.
SEM practices improve customers acquisition rate and online market exposure. There is a need to evaluate the efficiency of available SEM tools. It is imperative to identify search engines that deliver accurate responses. By employing SEM practices, advertisers are able to assess the ads’ performance in relation to ROI more efficiently than traditional appraisals. It is important to be aware of the differences in multi-cultural SEM practices.
The internet has brought down many of the barriers that traditionally existed between people and technology which traditional marketing methods could not. However a paradox is created, as too much information is uploaded into the worldwide web (www) the harder it is for people to find specific information.
For instance, having 1.7 billion users, from the top twenty countries with the highest web user rate, going online a day looking for products and services, and 90% of search engine users not passing from the second page displayed, creates an unsettling issue regarding market exposure and customer acquisition.
The primary objective of Search Engine Marketing (SEM) is to position a website in the first few pages of the major, most popular search engines. These practices promote the targeting of web users in the precise moment when they are looking for your product or service. Metaphorically, a webpage following SEM strategies is trying to boost its presence in the cloud of many webpages that are part of the net.
The following table shows the penetration rates of the countries with the most web users, suggesting the vast opportunities for customer acquisition and online exposure improvements through the employment of SEM practices.
Search engines act as web material screeners, presenting the cyber user with a list of filtered and selected pages that are chosen according to the set of keywords entered and other parameters.
According to Rangaswamy et al. (2009), during the year 2005, Pew internet’s study concluded that the number of searchers and searches was increasing and many were satisfied with the results obtained, nevertheless most were unaware of how search engines results were obtain.
A 2008 Pew Internet study found that an average of 50% of worldwide internet users use search engines on a typical day. Therefore the need to evaluate the efficiency of marketing tools related to search engines.
Customer acquisition & Online Exposure
A customer acquisition strategy denotes a firm’s efforts on obtaining data about possible customers, assessing their potential value, and allocating resources to acquire customers with long-term value (Arnold et al. 2009).
Acquiring new customers represents the first phase in the customer relationship process (Becker et al., 2009). Thus, marketers are constantly looking for new effective ways to increase customer acquisition rates.
A study exposed that effective customer acquisition strategies on customer knowledge and investment decisions are ultimately driven by innovation performance which is consequently improved when a firm constantly implements specific SEM strategies (Arnold et al., 2009).
The main predictors of customer acquisition and subsequent loyalty are the attachment that web users develop with a particular search engine and above all the perceived quality of the search engine results (Veloutsou & McAlonan, 2012).
The underlying idea is that if search engines are able to accurately identify the specific need/topic that has been searched, then customer acquisition and retention strategies will result in an improved market and online exposure.
SEM innovative tools provide the opportunity to achieve successful customer acquisition strategies by reducing the degree of intermediaries and allowing the customer to directly interact with the product or service provider (Rangaswamy et al., 2009).
Unlike financial market exposure, online exposure does not regard the financial risk undertaken by being exposed to a specific market in relations to other markets. Online exposure concerns the degree of contact that web users have with a specific website/product while navigating the internet.
Due to the high marginal costs created by customer acquisitions strategies (Sullivan & Sheffrin, 2003), there exists a need of looking for highly effective tools that produce efficient customer acquisition and customer retention levels.
In e-commerce, it is considered that the more successful you are in getting each user to be exposed to your product, the more you will increase your long term profits (Allen et al. 2001).
Typically it costs five times more to acquire new customers than it does to retain a customer. As a result, there is a current need of effective online exposure strategies.
The latter constitutes one of the main needs for SEM practices in order to increase web exposure and enhance customer relations.
SEM is considered a solution for companies engaging more in e-commerce and unravelling from traditional marketing approaches. The reason for this is that customers often perceive less risk associated with advertisements on the web in comparison with real time marketing methods.
This perception of less risk is attributed by the intense scrutiny the online ads bear. Customers feel safer by having readily reviewed data about a product merely a simple web search away, this being available via the search engine preferred by them.
The reduction of perceived risk is the force working at the customer acquisition phase for the provider, whereas the increment of switching cost works at the customer retention phase against the competition (Yen, 2011).
It can be argued that this preference is associated with the degree of customer satisfaction. Satisfaction can be widely recognized as a post-purchase evaluation of a product’s quality given the pre-purchase expectation (Kotler, 1991).
In relation to the increasing engagement of SEM practices by marketers, customer motivation entails the satisfaction of accurately finding the subject matter that relates to a certain keyword or phrase and achieving to satisfy the pre-search expectations of the customers (web users).
Rangaswamy et al. (2009), presents a study developed by Padgett and Wu (2004) which evaluated user satisfaction derived from nine different search engines.
The accuracy of listing results was the most important factor characterizing the user’s preference for a given search engine, while the search process hold a less significant position than search outcomes in influencing satisfaction.
It is important to understand this relationship of customer satisfaction and the engagement on SEM practices. A search engine, for example Google, which delivers highly accurate responses will draw more customers satisfaction, consequently resulting on the creation of value for the firms engaging on efficient SEM activities.
Search Engine Marketing (SEM)
Search Engine Marketing (SEM) aims are intended to improve the position a certain website has in search engines, for example like Google, Yahoo, Bing, MSN, and Ask; also it improves the amount of traffic the websites receive.
According to ComScore, a global leader in measuring the digital world and a preferred source of digital marketing intelligence, over 70% first time visitors to a website come from a search engine.
This shows that search engines are an effective targeting method to integrate in customer relationship and online exposure strategies. It is imperative to understand the meaning of these terms and their relationship. The more online exposure attained the more probability of increasing customer acquisition rate.
The use of SEM touches on the subject of an improving return on investment (ROI). Many of the Search Engine Optimization (SEO) applications cost a small amount of money or nothing in comparison to traditional marketing channels.
It is mostly a matter of how much time and effort is put on to using such tools. For example, pay per click advertisement, you don’t necessarily pay the advertiser for how many times you exposed your advertisement, rather you are charged when the user is actually exposed to your product through your ad.
This means that even though web users may not be clicking on your advertisement you’re still getting your word out to public through those impressions made by the ad exposure. This method of web advertisement is essential to reduce the cost of market exposure while still maintaining a good level of market contact.
When comparing SEM versus standard forms of marketing strategy, there is a higher degree of ROI accompanying the SEM approach. Also standard forms of marketing are harder to quantify, by employing SEM practices advertisers are able to control and track the ads’ performance in relation to ROI more efficiently. This evaluating aspect is not easily available in traditional media.
Where areas traditional marketing approaches such as TV or billboards may not allow marketers to accurately evaluate expected outcomes, SEM allows the assessment of specific inconsistencies on online traffic.
A paramount example of SEM strategy in relation to ROI is the case The New York Times (NYT). During 2007 the NYT started developing many aspect of their NYTimes.com webpage, which today has about 59,500,000 estimated unique monthly visitors accessing free of charge.
The company believes their online advertisement revenue opportunities surpassed their subscriptions revenues. These outstanding revenues are intrinsically a result of the effectiveness of NYTimes.com SEM strategies.
Although this approach is suitable to meet customer acquisition and online exposure expectations, it does not necessarily mean is going to improve profitability as well.
For example, many customers may be redirected to a retail website, through an advertisement, many times before actually purchasing any product from it.
SEM “keyword advertising”
It is important to pay close attention to the process of selecting the “right” keywords on SEM practices.
This means paying attention to what domain the webpage is subjected to, either the World Wide Web (www) or a specific enterprise domain.
Once the domain and search engine are selected, a keyword auction process is undertaken. Through these auctions the bidders, mainly website developers and marketers, buy the right for their page links to have a strategic position in the web when search engines searches are performed (Ostrovsky et al. 2006).
Usually, the search engine providers used a set of algorithms to assess the ranking of webpages and the relevance of their content to the keywords in the indexes.
Once the advertisers place a bid, whenever the keyword is requested on the search engine, a main listing called the “organic list” is displayed on the left of the page while another list called the “sponsored list” is listed on the right.
To display the order the sponsored list, search engines take in account the bid amounts, the degree of reliable information regarding the keyword, and a SEO tool call Click per Rate, which is a ratio showing how often people who see your link (advertisement) end up clicking on it (Adwords, 2012).
Tracking softwares such as Google AdWords are able to trigger the advertisement to show in search results and other sites by placing a bid that would be your maximum cost-per-click bid, the maximum amount you are willing to pay for each click on your ad (AdWords, 2012).
Ostrovsky (2006) from Stanford Graduate School of Business, argues about the creation hazardous bidding volatility resulting from the risk undertaken by advertisers usually bidding precisely what they are willing to pay in comparison to other bidders, and how they end up paying more than they need to when engaging on this bidding process.
Underlying this aspect, he claims that fluctuating bids and advertisers’ unpredictability result in a flux that translates into the link (webpages) listings. He states that by applying a Vickrey auction style, the auction would give bidders an incentive to bid their true value, and would help stabilizing the auction system.
In contrast, although the current style used in keyword auctions is derived from Vickrey’s auction style, it fails to incorporate other determinant factors such as tendency to increase the bid offer of the keyword on the basis of previous offers made by others bidders.
The Vickrey auction style incorporates a sealed bidding process, awarding the auctioned item to the highest bidder but at the price submitted by the second highest bidder (Encyclopaedia Britannica, 2012).
In this case, Ostrovsky is referring to the keywords that translate into the links’ strategic positions, as the auction items. This method benefits both buyer and seller by guaranteeing bids that reflect the auctioned item’s true value.
In combination with the bidding process, other determinant factors, not easy to evaluate, also affect the performance of this keywords advertisements, Varian (2009) states:
“Is only natural to suppose that users who have positive experiences from ad clicks will increase their propensity to click on ads in the future, and those with negative experiences will tend to decrease their propensity to click in the future. Hence search engines may also consider various measures of “ad quality” in their choice of which ads to display.”
This argument has a fundamental impact on the degree of customer acquisition and online exposure. This is because with current listing criteria mainly regarding the bids rather than the “ad quality”, advertisers may not able to accurately assess their bid amounts in correlation to successful online exposure, therefore, affecting the customer acquisition practices.
To understand these concept researchers cannot isolate the concepts regarding keyword auctions, bidding offers, online exposure, and customer acquisition. Instead an interrelated analysis ought to be carried out in order to assess the level on impact of each component.
Another instrument that enables web users to draw revenues from advertisement online exposure is Google AdSense. This tool allows the advertiser to add custom search engine parameters to a website and earn from ads in the pages listed (AdSense, 2012).
The Google AdSense program differs in that it delivers Google AdWords ads to individuals’ websites (AdSense, 2012).
This SEM tool is highly regarded in order to tailor the specific substance that a website is displaying while earning from the ads displayed as well. It also displays ads on your website that are suited to your audience’s interests and earn from valid clicks or impressions (AdSense, 2012).
The latter intends to gives webpages the capability to expand their visitors while earning revenues.
Lastly, it connects your mobile users with the right advertisement at the right time as they seek information on the go (AdSense, 2012).
This SEM approach is also an important aspect for acquiring new customers and improving online market exposure through multidimensional marketing channels.
Nevertheless, although the type of tools mentioned are available to the common web page developer, in a research survey conducted by NetIQ, a global enterprise software company, only 11% of the 800 participants responded to be conducting detailed ROI analysis by looking at revenue by search phrase and lifetime value (Sherman, 2003).
From this we can conclude there is a great opportunity for sites developer and managers to take advantage of these tools and achieve a rational competitive advantage over many other webpages that do not engage in such SEM strategies.
With publishers and emerging search engines interacting all around the globe, marketable possibilities of SEM applications are immense.
Nonetheless, it may also represent a setback for bidders engaging on multi-lingual keyword advertising.
Indeed, optimizing a website in languages other than the parent language is the best way to acquire the most customers possible (Kennedy & Hauksson, 2012).
The effectiveness of applying SEM is put to the test when entering cross-language and cross-cultural scenarios. Many inexperienced advertisers attempt to enter such markets expecting to acquire new customers and improve their exposure through SEM applications such as keyword advertisement.
However when entering these unfamiliar markets, they often fail to identify their significant lexical and cultural differences, and the impact of these differences on online advertisements.
In practice, most companies utilize inadequate allocation of resources to advertising channels because of misleading and misinterpreted data. In order to avoid these cross-cultural communication barriers is imperative to tailor the website content according the target market characteristics.
The best way to integrate both keywords advertisement and webpage content is to employ a native speaker familiar with the given market.
Although modifying the website content is imperative to access the right customer base, a less transformative way to catch on keywords is to use Google Trends.
This tool shows you a comparison of the world’s interests as favourite topics, it shows a snapshot of what is on the public’s collective mind by viewing the fastest-rising searches, and data of regional performance (Google Trends, 2012).
Search Engine Marketers look for these trends in order to enter foreign online markets.
However, this application is only available in English and in Chinese, limiting the maximum market exposure (MME), and consequently restraining improvement of customer acquisition rates.
Also Google Translate is an effective tool use to attempt to articulate keywords in foreign languages. But marketers should be aware of its inefficiency to translate slang or popular phrases of a given region.
Language barriers are a main issue surrounding keywords advertisement practices, even if employed on a single language because there are many regional vocabularies that differentiate from each other.
As mentioned the most effective strategy is to employ a native speaker of the foreign language who understands the connotation presented through the keyword advertisement.
Although SEM has enjoyed great success it also carries the burden of sceptic scrutiny. It can be argue that search engines do not deliver an excellent job of assessing precisely what the customer is looking for, because it may not understand what context made the user generate the search.
In the near future, SEM strategies will allow improved search engines capabilities regarding the accuracy of the search.
SEM practices across different search engines are also scrutinized for not having a standard process for measuring effectiveness and pricing.
For example when costumers click an ad and it is redirected to a webpage, there is no specific way to assess whether this is a new coming customer or an existing one. Pricing issues are noticed when advertisers make use of either branded or unbranded keywords.
Bucklin (2007) found the average cost per click of branded keywords (e.g., McDonalds) was $2.80, this been much lower than the average cost of $61.70 for unbranded keywords (e.g., fast food).
This circumstance creates an unfair competitive advantage enjoyed by branded products, hence limiting the average marketers’ potential looking to promote unfamiliar products to the online market.
Customers with low understanding of what they are looking for, frequently, tend to make use of unbranded keywords that describes a brand’s particular attribute in order to initiate the search engine index ranking.
In order to promote new products, customer acquisition, and exposure to emerging markets, SEM ought to narrow the pricing gap that creates this unfair situation.
Through a grounded theory approach this study found that SEM practices improve customers acquisition rate and online market exposure.
Marketers should be aware of the need to evaluate the efficiency of marketing tools related to search engines ultimately driven by innovation performance.
Web users have to identify search engines that deliver highly accurate responses because it will draw more customers’ satisfaction, consequently resulting on the creation of value.
Marketers should look for search engines that account for various measures of “ad quality” when indexing ads to be display.
The study concludes that by employing SEM practices, advertisers are able to assess the ads’ performance in relation to ROI more efficiently, than traditional appraisals. However, practitioners have to be careful of advertisement bids being engaged on multi-lingual keyword advertising, because of the significant lexical and cultural differences.
Finally, search engine developers should promote new products, customer acquisition, and exposure to emerging markets to narrow the pricing gap that creates unfair advantages of branded products.
Future research ought to address more specific issues on the SEM customers’ retention strategies and long-term satisfaction vs. an increasingly overcrowded web. It would be also insightful to study in depth the conditions under most firms decide to engage on SEM strategies, in order to determine the viability of small and medium enterprises engaging in such practices. This would be interesting because, although highly populated, the web and e-commerce market still widely perceived as tools only destined to be used by large enterprises with discretionary capital at their disposal.
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