Marketers hone the focus of online search ads

— -- Jessica Jensen makes money when people visit her Low Impact Living website, a directory devoted to helping you "green" your home.

In a tough economy, sales are down and customers are taking longer to pay bills. But she has not cut back spending on search advertising — those little text ads that appear near search results. "As with every other business, we need customers," she says. "I can't stop advertising, so instead I'm spending every dollar and dime efficiently."

Google dominates the "pay-per-click" business, though Yahoo and Microsoft offer similar programs. The company had a 61.2% share of searches in October, compared with 16.9% for Yahoo and 11.4% for Microsoft, according to market tracker Nielsen Online.

Google won't say whether businesses have pulled back spending during the downturn. But it does say customers are taking a different approach to how they market. "They are refocusing their campaigns," says David Fischer, Google's vice president of global online sales. "We're finding that consumers are most interested in costs and pricing. So what's working right now are discounts and low-cost offerings."

Rolling with the times

During last year's holidays, entrepreneur Jensen marketed products such as energy-efficient LED lighting fixtures at about $50 a pop. This year she's all about products that help cut utility bills. "I've shifted my focus accordingly," she says.

Search ads are more important to Jensen's business than ever, she says, because they're more affordable than other forms of advertising, and measurable.

Google and other search engines don't set the price for the ads. Instead, they are sold auction-style, where high-demand "keywords" (terms we all use in Internet queries) sell for more.

"In the beginning, everybody wanted to be on Google and would happily spend $15 or $20 per click, anything to build traffic. But not anymore," says Avi Wilensky, president of Promediacorp, a company that helps businesses with their search marketing campaigns.

New York real estate firms, for instance, used to buy expensive, but traffic-producing, broad terms such as "New York real estate" or "New York apartments." Now, Wilensky says, he helps them focus on more targeted, lower-cost keywords, such as the name of a specific building.

"It doesn't generate the same kind of volume, but it's a more cost-effective click," he says. "And you're likely to be reaching someone who's interested in living there."

Wilensky says the downturn has brought a general fall in the overall pricing of keywords, "But it's not like 2004 or 2005, when there were a lot more bargains. The bargains are still there, it just takes more time and research to find them."

If you're new to search advertising, here are some tips for getting started with Google:

•Sign up at adwords.com and set a budget for how much you want to spend. You get to determine whether it's $1 a day or $100 a day. (Those clicks can really add up, so be careful.)

While you can set the budget as low as you like, $1 would likely produce only a few clicks, if that. "At least $10 a day, which any business can afford, will give you much more information and results," says Fischer at Google. "Most businesses find that for every dollar they spend on clicks, they get back at least $5 in revenue."

•Figure out which search terms you want to use. If you're a Chicago florist, "Chicago flowers" might be the first keywords you'd choose. But Fischer says that's too broad. "You probably also sell daffodils, roses and other types of flowers. More-targeted keywords tend to cost less and produce better results."

•Once you determine your keywords, bid on a price. The higher you pay, in general, the higher your ranking. Google shows you during the process where you're likely to land, based on how much you are willing to spend per click.

•Write your ad. Google gives you only 25 characters to play with in the headline. "You need to make a clear customer benefit in the headline," says entrepreneur Jensen. "Don't say, 'Tankless hot water heaters,' which is something I sell on my site. Say, 'Save money and water at home.' "

Google gives you two other lines of text. The second line should be the qualifications (such as "energy efficient" for the water heater) followed by a call to action ("25% off through the holidays") to get customers to shop now, she says.

Beware of click fraud

The downside of search advertising is click fraud — competitors, rather than consumers, could click on your ads because they know you have to pay for them.

But Fischer says Google has made "tremendous progress" on the issue and credits back advertisers when clicks come from suspicious sources. "One of the benefits of having such a large base of users and the best engineers, is we have a very sophisticated understanding of what normal user behavior is like," he says.