The Truth About PPC Dayparting

Posted by Richard Stokes on December 4, 2009 to AdWords, Day Parting, PPC

High up on the list of overhyped pay-per-click practices is dayparting, the practice of increasing bids during the hours of the day when conversions are at their highest. At other hours of the day (usually during the wee early-morning hours), bids are lowered or keywords may be paused altogether.

This idea is a holdover from the world of broadcast ("push") advertising. In the traditional media world, dayparting is the practice of dividing the day into several parts, each of which caters to a different audience. Television and radio stations could then charge different prices based on the audience that was expected to see an ad at any given time.

This not only gives media buyers the ability to stretch their ad dollars, they can also use it to better reach the people who are most interested in their products. This is why commercials for family products run during the day (better demographic targeting) and infomercials run at night (the ad spots are cheap.)

Unfortunately, neither of these concepts translates well into pay-per-click marketing.

The Demographic Marketers

Dayparters tend to fall into two camps. Let’s consider the first: demographic targeters. These marketers use dayparting in an attempt to maximize the number of impressions they are serving to their target audience. They believe that because there are more sales when traffic is highest, this is a sign that their target demographic is more active. Thus, they raise their bids or activate their campaigns during the busiest hours of the day.

However, pay-per-click allows us to directly measure the correlation between a searcher’s interest in a product and their decision to buy. We no longer have to make guesses about our audience using the indirect relationship that exists in broadcast advertising. We can measure this relationship directly.

And measurement almost always shows that there is no direct correlation between the time when things are busy and when people are ready to buy. These days, people may be ready to buy at noon during their lunch break, or they may be ready to buy at 2am when they can’t sleep because they are so worried about their problems (which your product will solve, right?)

The internet is an instant-gratification medium. Advertisers who try to use day-parting to segment their audience just don’t get this fundamental fact.

This doesn’t mean that you shouldn’t try to better target your ads. It just means that you should be using proven methods which work (such as keyword matching.)

The Cost Cutters

The other camp of dayparters consists of those who use it as a means of cutting costs (and conversely, increasing ROI.)

They argue that if conversion rates are lower at night, then money they save by pausing their campaigns at that time outweigh the opportunity cost of the sales they missed. This results in an effective net profit.

This argument holds a lot more water than the first, to be sure. But just because a boat has smaller holes, doesn’t mean it will float.

Here are a few of the reasons why dayparting doesn’t make for an effective cost-cutting measure.

Dayparting Ignores “Assists”

Not every one of your keywords will appear to be a winner. There may be dozens of keywords to which you can never attribute a sale, but as soon as you remove them from your campaign, your conversions drop like a rock.

When a visitor fails to buy the first time they click on one of your ads, but does so later after clicking another ad, it is known as an Assist. These keywords assist other keywords in doing their job. They are the Scotty Pippen to your Michael Jordan.

Unless you install special tracking, however, you will fail to see the assist at work. And herein lies the reason why so many people mistakenly try to cut costs during low-conversion hours. They fail to see that many of those late-night visitors come back the next day with their wallets out, ready to buy from that site they found the night before.

Dayparting Doesn’t Cut Costs As Much As You Think

You’ve already seen how CPC prices are determined in no small part by the overall demand for a keyword. Because demand for ad placement goes down at night, CPC prices tend to drop during this time. In addition, traffic volumes are much lower at night.

The combination of low search volume and reduced average CPC means that the total cost savings realized by pausing campaigns during non-peak hours is often small in comparison with the spend during peak hours. It almost doesn’t seem worth it.
Dayparting Helps Your Competitors

Conversely, when you pause your campaigns, you reduce the competitive bidding pressure for the remaining advertisers. You are actually making it cheaper for them to advertise in your absence.

In essence, you’re increasing the efficiency of their campaigns, probably far more than your own.

Dayparting Adds Management Overhead

All three of the big search engines offer dayparting in their feature set these days, so the cost overhead of buying a third-party solution to manage dayparting has largely gone away. However, there are still some lingering complications that require your attention.

Chief among these are the differing ways in which the search engines handle dayparting. With Google, dayparting is based on the time zone where your campaign was set up. If you’re a California advertiser who’s dayparting your campaign from 8AM to 5PM, your ads will actually appear from 11AM to 8PM in New York. It’s for this reason that dayparting becomes far less useful as the geographic footprint of your customer base grows. (Note that Bing works the way it should – dayparting is based on your visitors’ time zone.)

As the pay-per-click algorithms evolve over time, you’ll need to assess the impact of any changes on your dayparting strategy. For example, Google used to use your absolute clickthrough rate (regardless of the position of your ads) when calculating the relevance of your campaign. If you used dayparting to lower your bids, your campaign-level quality score would be negatively impacted. This is (allegedly) no longer the case, but there will always be subtle complications that you need to stay on top of.

Richard Stokes is the CEO of AdGooroo and a long-time internet marketer and entrepreneur. This article is an excerpt from his upcoming book, "The Ultimate Guide to Pay-Per-Click Advertising" (Entrepreneur Press, May 2010).