TO DO OR NOT TO DO: THE SEM DILEMMA FOR START UPS

Okay we all know how Internet is the liberator and how it is provided the level playing field for the small guy. Now kids with a laptop sitting in their garage can fight the global multinational. However, the empire has fought back with something known as, SEM (Search Engine Marketing).

For the uninitiated, Wikipedia defines SEM as “promotion of websites by increasing their visibility in search engine results pages (SERPs) primarily through paid advertising.”

The last two words “paid advertising” take the wind out of the sails of the startups and tells them that the Trojan Horse of capitalism has managed to infiltrate the Internet. There is no way small companies can compete with established players when it comes to “paid advertising”. Or is there?

Let’s find out by examining both the challenges and solutions:

The Challenge:  Unproven Customer LTVs (Lifetime Values): How do you know how much to spend on acquiring a customer when you don’t know how much the customer would be worth over his lifetime. You don’t have the proven data or the deep pockets of bigger players.

The solution: Expert Advice and Similar Product Data: In all probability the VC next door would be able to give you a fairly good idea of the LTV for your customer. Moreover you can also see how comparable products stacks up. You can make a small start then can fine-tune yourself rapidly adapting to new realities.

 

The Challenge:  The CPA Wars: In simple words, CPA is Cost Per Acquisition which means the amount you are willing to spend to acquire a customer (called a target CPA). The higher your target CPA, the more customers you can get. However, there is no way you can beat a Nike while it comes to CPA bidding for a prime keyword like “Sport Shoes”.

Solution: Long Tail Key Words: Two words, “Long Tail”. “Long tail” keywords are those 3-4 word long phrases which are very specific to your product.  “Sport Shoes runner wallet” can be a savior as Nike in all probability won’t bid for it and the person looking for this is perhaps looking for exactly what you have. Finally some sling for the startup David against the corporate Goliaths.

The Challenge:  A New Product: How do people search for what you are selling as long as they don’t know that it exists. Somewhat of a chicken and egg situation. This can be tricky but not unassailable.

The Solution:  Bidding on close competition’s key words: Let’s say you have a bird feed especially designed for sparrows. It is unlikely that people are looking for it, but what stops you from bidding for “bird feed” and then luring the customers away to your super special treat for sparrows?  

THE FINAL WORD: Life is not fair. We can scream and shout that it is not fair for Google to allow paid advertising, but then they are a business and have to make profits. Paid advertising is here to stay and there is now wishing it away. Best idea would be to play smart around it and make it work for you. You just can’t afford to ignore it.

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