Adchemy Aims to Overhaul Search Engine Marketing By Killing the Keyword

Google is broken.

Not in a fundamental way, of course. Given that Google’s search and advertising services are the glue holding the whole Web economy together, you’d know it if something were truly malfunctioning. But Google’s advertising program has a basic flaw, at least according to the executives at Foster City, CA-based Adchemy. It’s a problem that causes huge headaches for search engine marketers, says CEO Murthy Nukala, and one that keeps them from getting the most bang for the mucho bucks they hand over to Google for search advertising (more than $6 billion in the second quarter of 2011 alone).

Nukala traces the problem to a conceptual difficulty in AdWords, the keyword-based system that Google developed in 2000 for selling ad space on search result pages. Adchemy, naturally, thinks it has come up with a fix for that flaw, involving some fancy natural language processing and statistical machine learning software. Now, at right about this moment, you’re probably asking yourself “Do I want to read a whole article about the mechanics of search engine marketing?” It’s true that the only people who would be interested in paying for Adchemy’s technology are advertising managers at companies who win a lot of customers through AdWords ads. But keep in mind that SEM is a $30 billion business—counting the ad spending alone, not the sales the ads generate—and if you read on, I guarantee you’ll learn something about how it works.

First, a mini crash course in AdWords, the program that determines which pay-per-click text ads show up in the right-hand column of a Google search result page. AdWords is keyword-driven, meaning it only shows ads related to words in a user’s search query. It’s also an auction platform; it lets advertisers specify which keywords they think are most relevant to their ad campaign, then bid for a high position on search result pages by specifying how much they’d be willing to for a click. Google determines the actual placement of the ads using a complex formula that takes into account the keywords themselves, the amount of the advertisers’ bids, a quality score based on the ads’ past performance and the relevance of the “landing pages” they link to, and other factors. Because AdWords ads are often closely related to the user’s intent, at least as expressed in his search query, the click-through rates for the ads are pretty respectable, which is why companies advertise on Google in the first place.

Murthy Nukala

The problem is this: the bigger your company, the more products you probably want to advertise on Google, and the more keywords you’ll have to think up to cover all the possible ways people might search for them. Also, the more ads you’ll have to write to make sure they’re customized to the keywords, and the more landing pages you’ll have to tend, to maintain your quality score. For truly large companies—think e-retailers with thousands of products in their catalogs—this problem can get out of hand. If you had to think up a separate set of relevant keywords for every product, you’d end up managing millions of keywords on AdWords—and that’s a task that not even the largest Excel spreadsheet can help you with. “We know of large retailers who sell three million products who are only advertising for 10,000 of them,” says Nukala. “The reason is it’s too hard and too expensive to figure out all the keywords.”

The problem, Nukala argues, is with the keyword itself. He says it’s time to move beyond keyword-based ad auctions to and give advertisers a way to target potential customers based directly on their intent, not the specific wording of their search query. But since it doesn’t appear that Google is about to rebuild AdWords from the ground up, Adchemy is offering a workaround. “We want to break the current model and change the keyword as the unit of sale,” Nukala says.

In a nutshell, Adchemy helps search engine marketers generate large numbers of appropriate keywords automatically, using “intent map” technology that … Next Page »

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Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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