Online car rental bookings are expected to total $7.7 billion in 2005, according to Jupiter Research. Many of these reservations originate from queries made on search engine Web sites.
To grab their fair share, independent car rental companies must have a deliberate and varied search engine marketing strategy. All Internet marketing programs should include pay-per-click (PPC) search engine advertising.
PPC is an advertising payment model in which advertisers bid to have small text-based ads placed at or near the top of search results for a particular keyword phrase. These ads contain a provocative title about the offer, a brief description, and a link to the advertiser’s Web site. Advertisers pay per click — in other words, they pay based on how many Web visitors actually click through to their Web site. The desired outcome is a reservation.
Jupiter Research reports that from 2003 to 2004, spending on Internet advertising increased 27%. During this same period, the growth in advertising on broadcast television totaled 8.2%, cable television 14.1%, radio 7.0%, magazine 5.0%, newspaper 4.8%, and Yellow Pages 3.2%.
Jupiter also reports overall online ad spending increased from $3.5 billion in 1999 to $8.4 billion in 2004, and is projected to grow to $16.1 billion in 2009. Paid search marketing continues to grow faster than any other sector of online advertising, leaping from $2.6 billion in 2004 to a projected $5.5 billion in 2009.
Paid search listings generate substantial revenue for search companies. Without the paid search business model, the search engines could not offer free natural listings that are still the most popular with users.
Search engine users have accepted sponsored listings, but this trend in no way represents a threat to the popularity of natural or organic search. Sponsored ads (PPC) capture only one out of every seven search engine clicks. This represents 15% of all search engine traffic, while 85% of queries result in a click on natural listings.
Paid listings have been common since 2001. Their success can be attributed to their simplicity and how seamlessly they have been incorporated into the natural listings. Most consumers are not fully aware of what constitutes a paid ad. Paid listings are usually differentiated from the natural listings only by an inconspicuous “sponsored link” label. Because the paid ads stand side by side with the natural listings, they are generally viewed as equally relevant click options for the search visitor.
This intermingling of both natural and paid search listings is essential for paid search success because statistics show banner adverting is not a viable revenue model. Banner advertising is so clearly associated with paid advertising that most consumers develop banner blindness and simply “block out” the banner message and rarely consider it a viable click option. Unobtrusive text-based ads have become the standard for search engine advertising.
Major Pay-Per-Click Networks
There are hundreds of pay-per-click search engine networks doing business on the Internet today. The networks providing the most ad exposure are Yahoo Search Marketing Solutions (formerly Overture) and Google Adwords. In March of this year, MSN announced plans for a PPC service that will debut before the year’s end.
On Google, the paid search is found in the right-hand column titled “sponsored links” and on the top in a colored box also titled “sponsored links.” Like Google, Yahoo Search Marketing Solutions displays results on the right and top in colored boxes identified as “sponsored results.”
Although these sites draw significant traffic, they recently broadened their reach by engaging in contextual advertising. Contextual advertising, or content-targeted advertising, is the delivering of paid search ads to content-specific Web sites where the ad delivered matches the contextual theme of the page content.
For example, a travel Web site participating in Google’s content-targeted advertising program may contain a page about traveling to New York City. As an advertising partner, this site can generate a relevant paid search ad on such keywords as “New York Car Rentals.” If the visitor clicks on the ad, the advertiser pays the search company, which in turn pays a small portion to the content travel site owner.
Both Google and Yahoo Search Marketing Solutions (YSMS) have extremely large networks of affiliated sites that expand their reach with these types of relationships. YSMS calls its program Content Match. Google’s program is known as Google Adsense.
YSMS distributes its results to a wide variety of sites, including AltaVista.com, Excite.com, Go2Net.com, InfoSpace.com, Sympatico.ca, Yahoo.com and others. Google’s partners include America Online Inc., Ask Jeeves, AT&T Worldnet, CompuServe, EarthLink Inc., Netscape Sympatico Inc., HowStuffWorks and many more. [PAGEBREAK] Living and Dying by the Numbers
To take advantage of PPC advertising, a car rental company must be aware of the many complexities built into this advertising model. It’s essential to understand the various metrics involved because of the real-time nature of paid search.
Before entering a paid search campaign, you need a complete understanding of its profit margins and what you are willing to pay to acquire new rentals. This cost is referred to as customer acquisition cost (CAC). CAC is calculated by dividing total acquisition expenses by total new customers. So basically, a rental company needs to determine how much it is willing to pay to attain a new rental customer.
In the simplest terms, if there is a profit margin of 30% built into an average $200 rental [$200-$140 (gross costs except marketing) = $60], then a customer acquisition cost of $60 becomes the break-even point. Paying more than $60 in marketing costs to secure that rental means losing money. Of course, this cost must be less than $60 to make a profit, but it is the correct starting point. All companies have a customer acquisition cost, but many don’t know what it is.
Further, spending $30 on marketing leaves a $30 net profit ($200-$140-$30 = $30). The $200 reservation has fixed costs of $140 plus the customer acquisition cost of $30, leaving a $30 profit.
To be successful online, a rental company must be acutely aware of its Web site’s conversion rate. A reasonable conversion rate is 1% to 2%. This calculation can be expressed as the number of reservations made for every 100 site visitors. One hundred visitors converting at 1% will generate one rental. With the $200 average rental and $30 profit, the maximum paid for the 100 clicks is $30 or 30 cents per click. The advertiser can now buy 100 clicks at an average price of 30 cents per click. By maintaining these clicks at 30 cents on average, the company can maintain the profit margin. Increasing the conversion rate or the value of the rental will also increase profit margins.
How Pay-Per-Click Works
PPC advertising is unique because it can be acquired on a self-serve basis. Site owners can create and control all aspects of the campaign. Their success depends on how well they understand the overall process, metrics and strategies.
When a company joins these PPC networks, it gains access to the campaign management control center. This is where the ads are created and managed. It’s here also that keywords are selected and the bidding process is controlled. Both Google and Yahoo offer a wide variety of analytical tools that can help improve advertising efforts by providing detailed reports of keyword and ad performance.
The overall goal of any PPC campaign is to achieve a significant number of page impressions for ads pertaining to specific keyword terms. Advertisers bid against each other to have their ad rank high for these keywords. The highest bidders get the coveted higher ad placements on the page, ensuring substantial page impressions for their ads.
A page impression is defined as the single viewing of one html page containing search ads. The search engine lists upwards of 15 click options (listings) per page impression. To capture the click, the ad must grab visitors’ attention and persuade them to click through.
When a click occurs, the resulting cost charged to the advertiser is known as the cost per click (CPC). The number of clicks achieved relative to the number of impressions is called the click-through rate (CTR). The factors that affect CTR include the persuasiveness of the ad itself. To create an effective ad, include the targeted keyword as well as a differentiating value statement and geographic information.
Cheap Car Rentals
All-inclusive weekly/monthly rates
San Francisco, L.A. and Orange County
In this case, the ad clearly targets consumers who want inexpensive car rentals in the San Francisco, L.A. and Orange County areas and who want one all-inclusive price. Although this ad may only produce a small click-through rate, it ensures the advertiser that the lead it generates is going to have a high potential for conversion because the click is highly qualified. If the ad didn’t mention the cities, then the advertiser would end up paying for clicks from people planning to rent in other cities.
Landing pages are the pages the paid search ad links to. To better convert the paid clicks into reservations, visitors must be sent to highly persuasive pages custom-built to address the keyword originally queried. For example, if the keyword phrase targeted was “car rentals under 25,” then the landing page should contain content regarding the company’s policies for renting to those under the age of 25.
This content should present a compelling reason why the company can best serve this special requirement. The page should also contain a call to action — such as “reserve your car now” — that triggers further investigation of the company and improves the chances for a reservation.
Because you pay a premium for the specific keyword the search visitor used, it’s best to offer as accurate and relevant information as possible. The landing page should be viewed as a stand-alone sales presentation based on the keyword subject. This greatly increases the probability that the searcher will make a reservation with the company because the original question has been answered. An extremely common error is to send the searcher to the homepage. Having the homepage serve as the landing page reduces the chances for the sale because this page typically offers a general overview of the business and the Web site content. [PAGEBREAK] Differences Between Google and YSMS
Google’s setup fee is $5, and the fee for YSMS is $50. YSMS requires a minimum ad spend of $20 per month. Google has no minimum. The Google account can be up, running and delivering ads within minutes, whereas YSMS takes up to five days.
YSMS’ ranking is 100% based on the price of the bid. Google AdWords, however, has a more complex ranking system based on both the maximum bid and ad relevancy. Both are included to determine the click-through rate for that ad.
Let’s assume, for example, that the bid is high enough to generate lots of impressions, and Google users find the ad relevant enough to click on it. The ad will then rank higher over time than an ad not judged as well by its click-through rate. If the ad does not get the clicks, it can actually be disqualified and removed from the listings. Google allows a monthly budget, while YSMS requires payment of funds in advance. Once the funds are gone, the traffic stops.
The other major difference is in the process of creating and posting the actual ad. YSMS subjects ads to human editorial review before taking them live on their network. Google’s editorial requirements are monitored automatically. If there’s a major problem with the ad, an editor will contact you with advice on how to correct the error.
Google is more user-friendly. It’s best to start with its program first before venturing into YSMS. But participation in both of these PPC networks will maximize overall search engine exposure.
If your goal is to create 100 more reservations per month and your CPC budget is limited to 30 cents per click with conversion at 1%, then the budget needs to be $3,000 per month.
The $3,000 will buy 10,000 clicks, converting at 1% to generate 100 reservations. Valued at $200 each, the revenue realized will give a return on ad spend (ROAS) of $20,000. If hard costs are $14,000 and the ad spend totals $3,000, that leaves a profit of $3,000 for a return on investment of 100%. The customer acquisition cost was $30 ($30 x 100 = $3,000).
Once you understand the metrics involved and can create effective ads, the next major step is keyword research and selection. You need literally hundreds of keywords to create enough traffic to the site. Each search company can supply the tools that allow research of past keywords that customers actually queried and the number of searches these keywords created.
The best plan is to create a matrix of 200 to 300 keywords that include the most obvious and accurate keywords and their derivatives. For example, if the research reveals actual queries on “New York car rentals” (assuming your company is in New York), then you might want to bid on this phrase as well as more general terms that apply to your market segment.
If there is appropriate content, then travel or city-specific keywords like “traveling to New York” will also capture reservation leads. Both Google and YSMS offer sophisticated keyword research tools based on their data.
The goal of this exercise is to create a list of the projected number of impressions (searches) available, an estimated click-through rate, average cost per click (CPC) and the required budget to reach the desired traffic levels. With this information, you can make an educated guess to increase your chances for campaign success.
PPC management isn’t easy. The variables involved are volatile because each metric is somewhat unstable and requires constant attention. Seasonality, sales performance, competition and landing page conversions all greatly affect results. The learning curve is steep and requires constant management. Depending on the extent of your campaign, the project will require a commitment of many hours per week.
It’s possible to run this in house, but another option is to hire an Internet marketing professional who will optimize and manage your campaign for a monthly fee. Usually, there’s a campaign setup fee that covers the original keyword research and landing page development, followed by a monthly management fee commensurate with the total ad spend. The more money that’s involved, the more responsibility there is.
Paid advertising is here to stay and should factor into any online marketing strategy. But paid advertising should never be relied upon as the only source of traffic generation because once the campaign ends, the traffic stops. PPC search engine advertising should be implemented along with an ongoing and aggressive search engine optimization campaign. SEO is a long-term strategy and provides the most cost-effective, long-term traffic. Combining these two approaches can keep the cost per customer acquisition low and help make marketing on the Web a profitable venture for most car rental agencies.
Paul Allison is Internet sales and marketing manager at Car Rental Express (www.carrentalexpress.net), a British Columbia-based company that specializes in providing Web services for independent car rental operators. Car Rental Express also operates a consumer car rental site (www.carrentalexpress.com) that books reservations with independent car rental companies.