Pay-per-click advertising is one of the most cost-effective
methods of getting leads known to Internet business owners. It gives you
instant traffic, and allows you to test your business model in real
time.
At the same time, pay-per-click advertising (or
PPC) is not as simple to use as the
PPC
companies will have you believe. If you jump into the system without
preparing for 'tracking' your results, doing deep keyword research,
establishing your ROI and most importantly, testing your ads, you'll
lose a lot of money really fast.
The PPC Model
In the
PPC advertising model, you have three
core elements - keywords , ads , and bids . These three elements are
combined with ' placement ' to create an advertising model that displays
'relevant' ads on search engines (in response to keyword searches),
portals and websites that opt to display such ads on their pages (the
ads to be shown are determined by a keyword analysis of the page).
For a
PPC campaign, you need to know the
keywords that you are targeting. For example, for a niche site that
promotes a time management product, I would create a list of keywords
that included keyword groups containing terms related to time
management, productivity, saving time, self improvement and maybe even
business soft skills. As I've told you before about keyword research,
you should have a big list so that you capture most, if not all, of
your target traffic.
The next step is to write the ad copy for the ads that will be
displayed for your searches. The ad copy is extremely important because
along with your bid amount, this will determine the 'conversion rate'
(explained below) of your ads. Write concise, compelling ad copy that
highlights the benefits of your website / product, and avoid fluff.
Once you've written your ads, it's time to bid . The bidding mechanism differs from
PPC
engine to engine, but the idea is the same - your bid amount is the
maximum cost (usually calculated in U.S. dollars) that you are willing
to pay for each keyword. It's important to know how much you can afford
in terms of bidding costs so that you avoid going into bidding wars
with your competitors, and also so that you don't spend more than you
make through this campaign.
Cost-Per-Click
Cost-Per-Click ( CPC ) is the amount you pay each time a
potential customer 'clicks' on one of your ads that they see on their
search engine results or on websites. This is often less than the
maximum bid amount you set for each keyword.
Conversion Rate
Conversion Rate is the ratio of clicks over impressions (the
number of times your ad is displayed on searches or page loads on
websites). A typical conversion rate is between 2 to 3 percent - that
is, for every 100 impressions, you get 2-3 clicks on your ads.
Placement
If there is more than one person bidding for a keyword (as is
almost always the case), the placement of the ads (which ad comes in on
the first slot, which comes in on the second, etc.) is determined by bid
amounts of each competitor. The higher your bid, the better your
placement (Google adds the conversion rate into their placement
calculations, and I'll tell you how later). Your conversion rate to a
certain extent depends on how high your ad is placed on the 'rankings'
and this leads advertisers to place high bids just to rank at the top.
The trouble with this approach is that you might enter into a bidding
war with your competitors and lose a lot of money.
Tracking
Tracking refers to measuring which keywords are bringing you the
best leads or sales, and which keywords are bringing you 'window
shoppers' - people who are 'compulsive clickers' and don't buy or sign
up. Tracking your ad campaign will help you further fine-tune your ads
and improve your ROI.
ROI
Your Return-on-Investment (ROI) is determined by how much you
are spending over how much you are earning in net profits from your ad
campaign. It's important to establish a base ROI before your start your
ad campaign - assume a conversion rate of 1 percent - so that you don't
over-spend and are able to run this campaign within your budget.
The Pay Per Click World
Currently, there are two major PPC engines,
Google AdWords and
Overture (now known as
Yahoo! Search Marketing
). While there are many alternatives such as Espotting (now Miva),
MetricsDirect and Kanoodle, the top two PPC engines are a class apart
when it comes to delivering results.
However, one of the first pieces of advice you'll hear from most people is that bigger
PPC
engines such as AdWords and Overture are too 'expensive' to break into
(with CPC for top positions easily passing $3-$4 for many keywords, and
reaching $10 for really competitive keywords).
In reality, if you are just starting out, it's critical that you pick one of the top two
PPC engines. Why?
Traditionally marketers judge
PPC engines on the following criteria:
- Reach - How large your potential target market is.
- Cost-per-click
- Quality of traffic - Do the leads fit your customer profile? Are the willing to spend on your products?
- Quality of service - The tools and help offered by the PPC engines.
Overture and AdWords beat their competition on all of these
metrics except CPC. However, the benefits of 'cheaper' clicks are more
than compensated for by the ease of use of the big two, and more
importantly, as any
PPC expert will tell you, the quality of traffic from Overture and AdWords is far better than from other
PPC engines.
Overture
Overture was purchased by Yahoo!, and recently renamed to Yahoo!
Search Marketing. The name's not catchy, but with Yahoo! Behind the
'second-largest'
PPC engine on the Internet, you can expect that the quality of traffic and
services
will improve over the next year. Yahoo's acquisition of Overture is the
single biggest reason advertisers have started paying attention to
Overture again, although Google AdWords still commands leading respect.
Overture is a manually edited
PPC engine. When
you write ads for your website, these ads (and the keywords you specify)
have to be approved by human editors before they can appear in search
results on Overture partner websites. While this ensures that the
quality of ads remains above a certain level, this is also a hassle, as
new ad campaigns can take several days to be approved, and there is a
distinct lag between the time you plan to improve a section of your
campaign (for testing) and the time those changes actually go live.
Overture keyword bids are totally transparent, meaning that any
advertiser can see at any time what other advertisers are paying for
that particular keyword. This is both useful and harmful - advertisers
can accurately target their 'ad placement' positions, but knowledge of
the top 2 or top 3 bid amounts can easily lead into a bidding war, and
competitors undercutting your ads by posting a bid that is $0.01 higher
than yours.
Google Adwords
Google AdWords is the leading
PPC engine on the Internet, although it's closely followed by Overture. Combined, the two
PPC networks are distributed on nearly every search engine or portal.
Google is totally automated - your ads go live within minutes of
being written. This is one of the two significant advantages AdWords has
over its competition - no need to wait for 'approval' of your keywords
and ads, which can take a few days on other
PPC engines.
Google AdWords, like Overture, does not charge you your maximum
bid amount, but just one cent more than the bid lower than yours. On the
other hand, AdWords bids are not transparent like Overture - bidders
have no idea what their competition is bidding. This reduces the threat
of bidding wars.
The second advantage of AdWords is that it includes conversion
rate calculations in its ad-ranking algorithm. Simply put, your ad may
rank higher than your competitors' even if you are bidding lower, just
because you have a higher conversion rate. AdWords rewards ads that are
better written, and thus provides a subtle barrier against ad spam.
PPC advertising has become the ultimate
marketing tool for testing new ad campaigns, business models and landing
pages without spending too much money. Where else can you test a sales
page by sending it 100 leads for $5?
If you are looking to promote your website / product effectively
but cannot wait for your search engine rankings to show on Google or
Yahoo, you should seriously consider
PPC advertising as
an advertising tool that not only brings in instant traffic (and
sales), but is a hedge against ranking fluctuations by ensuring that you
stay on the top page for your target keywords.
This is just a general overview of
Pay Per Click
and marketing/strategies. Stay tuned for Part 2 coming soon, where
I'll go into some much more advanced techniques to really ramp up your
traffic, all the while spending less money!