The paid search keyword tail

There is no doubt that the keyword tail is important, provided it is effectively managed in a resource efficient manner, for example by using a bid management system.  The difficulty in assessing just how much the tail contributes lies in the exact definition of the tail itself.  The contribution of the tail to total campaign revenue is quite sensitive to this definition.   There are numerous definitions of the keyword tail and head out there.  A good practical view of the keyword head is to consider it as the number of keywords an analyst can manage manually with reasonable ease.  A number of 250 to 500 seem to be popular choices.  Other definitions specify fairly arbitrary click thresholds.  In this post we will consider a visual way for assessing the size of your campaign’s tail. It is also important to assess if your keyword tail meets your campaign’s overall efficiency targets.  The tail can add great value to your campaign, but it needs to be managed effectively, just like the rest of your campaign.

A useful way to view the tail is to sort all keywords by their traffic contribution over a specified period.  This enables us to divide keywords into different segments based on their contribution to total traffic, and then to compute the contribution of each of these keyword segments to total revenue and their relative efficiency.   The choice of segments need some care due to the discrete nature of keyword traffic for lower volume keywords. Figure 1 below shows how this data can be visually represented to give you an overview of an entire campaign.  This can then be visually represented as illustrated in figure 1.  The data represents the performance of all non-brand keywords for an online retailer over the last 3 months of 2009.  The blue bar represents about 3,818 keywords (23% of the 16,601 keywords with an impression over the period).  If we consider this group of keywords as the head keywords, it will provide a fairly conservative estimate of the tail.  In this definition the tail keywords still contribute about 24% of total revenue at an acceptable efficiency given the campaign’s efficiency targets.

Kalahari (large)

Figure 1 - Tail visualization

A thought that crossed my mind is whether the Pareto principle (or 80-20 rule) applies to paid search keywords.  It states that for many events, roughly 80% of the effects come from 20% of the causes.  It is a common rule of thumb in business; e.g., “80% of your sales come from 20% of your clients.”  In a paid search context we can rephrase this principle as follows: do the top 20% of keywords in terms of traffic volume, account for 80% of total revenue?  One would expect this to vary by the type of business, the product or service offering, and how people search for these particular products or services.   We investigated this for a wide range of PPC campaigns across a range of industries and geographies with different levels of spend and inventory.  We visualize the results in figure 2.  In this figure we visualise the cumulative contribution to total revenue by different percentages of top traffic keywords.    The  dotted lines represent a 80-20 keyword rule, i.e. the 20% top traffic keywords represent 80% of total revenue.   If this rule holds for a campaign, its line will cross through the point  where the two dotted lines intersect (or at least close to it).  As expected there is considerable variation between advertisers due to some of the factors outlined above; however,  for most advertisers less than 20% of the top traffic keywords seem to account for 80% of total revenue.  The one exception being Advertiser 5, however this result is not surprising as the nature of it’s industry would be expected to support a longer tail campaign in comparison to the other industries.   Similar visualizations can be used to track shifts in tail behaviour over time or differences between different departments.   For example we find that electronics campaigns are generally longer tailed that for example home & lifestyle campaigns.  This makes intuitive sense as inventory for electronic departs are generally much larger and online shopping for electronics is more established, while home & lifestyle sales are generally driven by a more limited set inventory and head keywords.

Pareto for KWs (large)

Figure 2 - Testing the Pareto Principle for keywords

About Wiesner Vos
A chartered statistician with a passion for quantitative marketing.

Comments

3 Responses to “The paid search keyword tail”
  1. Great data, Wiesner, thanks for sharing. BTW, can’t wait to see Volume Two of your Ad Sitelinks study…

  2. Wiesner Vos says:

    Thanks for your feedback Chris. Volume II of site links is in the pipeline.

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  1. [...] This post was mentioned on Twitter by Heidi Ocker and Quirk SearchStatus, clicks2customers. clicks2customers said: An interesting look at the efficiency of the long tail of paid search – http://bit.ly/dfmvJB [...]



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