WordStream Launches Low-Cost Search Engine Marketing Tool, Raises $4 Million

1/28/09Follow @wroush

Yesterday Bruce wrote about Covario, a San Diego-based search engine marketing (SEM) company whose clients pay $100,000 to $200,000 a year for help making sure that sponsored links to their websites appear in the right places on Google and other search engines. Here in Boston, an SEM company is launching today at the opposite end of the cost spectrum. WordStream says it will charge as little as $300 per month for its Web-based service, which helps Web advertisers get their sponsored links published as prominently as possible on Google search result pages, for the lowest possible pay-per-click rates.

“There is a bit of a perception that [SEM] is a black art,” WordStream president and CEO Rob Adler told me yesterday. “But there are very well-known ways to success in Google pay-per-click advertising. The problem is that it’s very manual and labor-intensive, requiring you to bid on thousands of keywords and write good ad copy. Our founder Larry Kim, who was a search engine marketer for six years, said ‘These are things I think I can build software to handle.’”

That software, which has been in private beta testing for several months, is available to the general public starting today. WordStream also said today that it has raised $4 million in venture funding from Boston-based Sigma Partners; Sigma managing director Paul Flanagan has joined WordStream’s board. (Actually, we first reported the Sigma funding back in August, when WordStream was using the working name NetGraviton.)

SEM is the art (whether black or not) of making paid text ads appear alongside the right non-sponsored or “organic” search results when consumers enter search queries that may indicate they’re on the prowl for commercial products or services. If you do a Google search for “cross training shoes,” for example, you might see an ad on the right side of the screen for KSwiss, the Sports Authority, or other sellers of athletic shoes. On Google—where WordStream is concentrating all of its effort, for now—the ranking for these ads, or how high they appear on the page, is determined in two ways: by the amount the advertiser bids for the keywords (in this case, “cross training shoes”) and by the ad’s “Quality Score,” a measure determined by Google itself.

Using Google’s AdWords platform, it’s relatively easy for advertisers to specify how much they’re willing to bid for various keywords. But that leaves two problems: knowing exactly which keywords will result in the most click-throughs, and influencing the Quality Score.

Adler says WordStream’s software starts by tapping into Google Analytics, a free service that any website owner can use to track site traffic as well as the exact search terms that brought in visitors. “We dynamically track the queries that result in traffic to your website and display those for you,” he says. “We help you discover this ‘long tail’ of queries and then be as specific as you can about which keywords you should bid on. We help you group and organize the thousands of keywords into logical groupings of 20 to 100, as Google recommends.”

WordStream can also help companies adjust the wording of the ads and of the “landing pages” that the ads link to, so that they relate as directly as possible to searchers’ queries. That, in turn, helps to improve an ad’s Quality Score, Adler says. And the higher the Quality Score, the higher an ad will generally appear on a search result page, the more people will likely click on it, and the less money Google will charge the advertiser per click.

In the long run, says Alder, understanding how to influence that cycle leads to more effective advertising campaigns at lower cost. “Most advertisers only try to influence their ad ranking by adjusting their maximum bids on keywords, since it’s the only thing that you can tell Google,” he says. “But if you double your Quality Score, you can effectively cut your maximum bid in half and stay at the same ad rank. It’s a very powerful lever to play with.” And only an automated system like WordStream’s can help advertisers influence their Quality Score consistently, Adler says.

Using WordStream’s SEM tool is as simple as going to its site, signing up for an account, and activating a software wizard that allows users to upload their own keyword lists or connect WordStream to their Google Analytics accounts. “We put their keywords into our database and off they go,” says Adler. Subscriptions to the service range from $300 to $1,000 per month, but potential customers can get started with a free trial.

Adler says Sigma Partners was persuaded to invest in WordStream because of Flanagan’s prior experience as executive vice president and CFO at VistaPrint, a Bermuda-based online graphic design and print company whose U.S. operations are headquartered in Lexington, MA. “Paul knew what a critical component search marketing was at VistaPrint, and he know how much they had to spend to build SEM tools to get the company to where it is,” says Adler. “Most companies are nowhere near as sophisticated about SEM as they are, but he saw that our software tool could put other companies on a par with everything VistaPrint had built.”

For his part, Flanagan says SEM is an industry with growing potential. “The demand for search engine marketing services is continuing to grow at a rapid clip because it works,” he said in today’s funding announcement. “However, many organizations have yet to embrace search, have been frustrated by mixed results, or find managing campaigns labor intensive. WordStream has built software that can effectively serve the ever-growing and solution-hungry search marketing community.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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