Direct: The Kenny Rogers School of SEM

Byline: BRIAN QUINTON

When Michael Sack wants analogies to describe the search marketing industry, he reaches out to Wall Street or Las Vegas: "Both places where they take money seriously," says the chief technology officer of search services provider Inceptor. And one Vegas comparison jumps out at him: In both search and blackjack, uninformed players can ruin the game for everyone else.

"When you're in an open market such as search bidding, you tend to think you're competing individually," says Sack. "You don't realize the effect that other players have on the condition of the landscape you're in." At a blackjack table, even a genius card-counter can tap out if another player makes a mistake and skews the game in favor of the house.

Sack saw this in real life about a year ago, where the account manager at a company about to become an Inceptor client laid out $15,000 to bump up the firm's maximum bids to ensure top placement. That immediately forced the market up to the max bid price, killing return on investment. It took Inceptor months to bring bid prices down from that peak and rebuild ROI for those terms.

The smart company's defense against this kind of dumb play by others is to establish goals for average cost per acquisition and stick to them, Sack says. In setting targets for ROI and CPA, he advocates taking a broad view of those metrics and managing a portfolio of terms. Some search marketers zero in on the cost per clickthrough; others track conversions term-by-term. But one of Inceptor's clients, a multibrand retailer, calculates CPA by considering the lifetime value of the customers it acquires.

"They know the average customer will buy from them 2.3 times over the next 12 months," Sack says. "So that's factored in to an acceptable CPA of $10 per acquisition." When determining CPA and ROI targets for search campaigns, the same retail customer also weighs such operational metrics as cost of returns or cancellations, customer service expenses, overhead, and the value of inventory turnover.

The other key to successful keyword management is to handle that portfolio in the context of time. Market behavior has cycles, and successful players adjust their behavior based on those cycles. A marketer might retreat from a term on which ROI has shrunk, only to come back to it later when that measure falls in line with its goals.

Again, Sack sees a Vegas analogy.

"The handicap weekend gamblers have is that they arrive on Friday and leave on Sunday, and they gamble as much as they can in between," he says. "It doesn't work like that. Sometimes you're down for three or four days and then you're up again. It needs to be something you do consistently, so you can win over time if you also play smart."