Correspondence: John Blankenbaker, 3150 Sabre Drive, Southlake, Texas 76092, USA. E-mail: john.blankenbaker@sabre.com

¹has worked in Sabre Research for the past 2 years. At Sabre he has worked to provide analytic insights to a variety of business units. Before joining Sabre, John spent 10 years at Delta Air Lines, working on revenue management, airport and flight operation problems. John earned a PhD in Mathematics from the University of Texas.

²is primarily focused on developing Business Intelligence & Web Analytics frameworks that identify and realise opportunities for growth. He is Director of Business Intelligence & Analytics at Travelocity Global, one of the leading online travel retailers in the world. Before joining Travelocity, Shankar spent 10 years with Sabre Airline Solutions, working on pricing and revenue management solutions for airline industry, including the first origin and destination-based revenue management solution. Shankar holds a PhD in Operations Research from North Carolina State University.

Received 27 November 2008; Revised 27 November 2008.

Abstract

Sponsored search is a large and growing advertising channel for online retailers. Although advertisers appreciate that search engines can serve ads triggered by particular search terms that only need to be paid for when the ad delivers a potential customer, we suspect that many advertisers are not capturing all the benefits of paid search because they do not have a clear picture of what they are trying to accomplish. In order to help advertisers improve their search spend, we provide an overview of Google's adWords, which is the dominant paid search program, and describe the fundamental metrics of paid search and their relationships with one another. We identify three different goals an advertiser might have for a particular keyword: traffic growth, profit and a hybrid approach we term self-funding. Finally, we provide recommendations for how to treat some broad categories of keywords.