Pay Per Click Management Explained
How PPC Fits into Your Internet Marketing Strategy
Note: This is a background piece teaching folks about pay per click advertising (PPC). It’s also an opportunity for you to learn a bit about Portent’s pay per click management style. If you’re looking for help managing your pay per click campaign, please contact us.
Pay per click advertising is a great way to get visitors when you need traffic and you need it now. But it’s risky: With poor management, you can spend a fortune, generate many visits, and end up with nothing to show for it. This article will provide you with a high-level view of pay per click advertising, and some general strategies and provide an example of what to do, and what not to do.
What is Pay Per Click Advertising?
Pay per click marketing, or PPC, is pretty simple: Search engines like Google and Bing allow businesses and individuals to buy listings in their search results. These listings appear along with the natural, non-paid search results.
These ads are sold in an auction. You bid what you want to pay for a click on the ad. Bid the most and you have a chance of ranking number 1 in the sponsored results. Note that I said a chance. There’s also something called quality score that can impact your ranking. More on that in a minute.
If someone clicks on your PPC listing, they arrive at your website, and you are charged the amount you bid. So, if you bid $.15 per click on ‘widgets’, and that’s the highest bid, you’ll probably show up first in line. If 100 people click on your PPC listing, then the search engine or PPC service will charge you $15.00.
Why PPC Advertising is Bad
But PPC advertising can cost a fortune. It’s easy to get caught up in a bidding war over a particular keyword and end up spending far more than your potential return. ‘Ego-based’ bidding, where a CEO/marketer/someone else decides they Must Be Number One no matter what, can cost thousands of dollars. Also, bid inflation consistently raises the per-click cost for highly-searched phrases.
This inflation is caused by ego-based bidding and by the search engines themselves, who impose quality restrictions on many keywords. These quality restrictions increase the cost per click even if no one else is bidding.
Junk traffic can suck the life out of your campaign. Most pay per click services distribute a segment of their results to several search engines and other sites via their search partners and content networks. While you certainly want your listing displayed on Google and/or Bing, you may not want your listings showing up and generating clicks from some of the deeper, darker corners of the Internet. The resulting traffic may look good in statistics reports, but you have to separate out partner network campaigns and carefully manage them if you’re going to see a return.
Finally, pay per click advertising does not scale. If you get more traffic, you pay more money in nearly direct proportion to that traffic – your cost per click stays constant, and your overall cost increases. Compare that to search engine optimization, where you invest a fixed amount of time and/or money to achieve a better rank, and your cost per click goes down as you draw more traffic.
Why PPC is Good
Pay per click advertising can generate traffic right away. It’s simple: Spend enough, get top placement, and potential customers will see you first. If folks are searching for the key phrases on which you bid and you’ve placed a well-written ad, you will get clicks the moment the ad is activated.
So PPC advertising is fast: With some systems, such as Google AdWords, you can generate targeted traffic within a few minutes of opening an account.
PPC advertising is also nimble: Where natural search engine marketing or other forms of advertising can lag weeks or months behind changing audience behavior, you can adjust most pay per click campaigns in hours or days. That provides unmatched ability to adjust to market conditions.
PPC can also be a bargain: Sometimes, you can find keyword ‘niches’ for which the top bid is around $.10 – in that case, PPC is a great option, because you can generate traffic to your site for a fraction of the cost of any other form of paid advertising.
So, balancing the good and the bad, where does PPC fit in? As a focused advertising tool.
The Role of PPC Advertising
Most businesses can’t afford to solely rely on PPC advertising. It’s too expensive, and bid amounts inevitably climb. But pay per click can fill a few important roles:
- Campaign- and issue-based traffic: If you have a short-term campaign for a new product, service or special issue, pay per click can be a great way to generate buzz. You can start a pay per click campaign within, at most, 24-48 hours, and you can generally change the text of your ad in mid-campaign, so adjusting your message is easy. If you need to focus attention for a finite amount of time, PPC is perfect.
- Direct-response business: If you sell a product or offer a service that folks can purchase the moment they arrive at your web site, pay per click is a great tool. Online stores are a great example: You know that each click generated is a real potential customer, so spending money to increase the number of clicks makes sense.
- Niche terms: If you are trying to generate traffic for a highly specific keyphrase, PPC can often provide bargains. For example, you might not want to pay the top bid for ‘bicycles’, but ‘Landshark Bicycles’ is probably a lot less expensive ($.10 per click as of this writing, actually).
The overall rule of thumb? Focus, focus, focus. Natural search engine optimization is a PR-based, long-term attempt to grow your brand and image. Pay per click advertising, however, should be handled like any other form of paid advertising: gingerly, and with a clear, quantifiable short- or medium-term goal in mind. In other words, concentrate on conversions, not clicks.
Making it Work: Conversions, Not clicks
How do you engineer a successful pay per click advertising campaign? By paying more attention to conversions, and less to clicks. Keep five rules in mind:
1. Track Conversions
If you want to stay on budget, you have to track conversions. What’s a ‘conversion’? It’s any time a visitor to your website takes a desired action. Examples of conversions might be:
- Visitor makes a purchase
- Visitor completes a sales inquiry form
- Visitor downloads a white paper and registers
A conversion doesn’t have to be a sale. But a conversion has to be worth something to you. If you can’t think of any measurable, useful outcome of a visit to your site, do not spend money on pay per click advertising – there’s no point.
Google and Bing provide basic conversion tracking in their platform, but not for revenue. Take a look at Google Analytics for a free tracking system that will let you measure conversions from all PPC sources and let you track spend, revenue and conversions.
If the PPC advertising service you’re using doesn’t offer a conversion tracker, and you can’t set up Google Analytics, try something more basic: In a spreadsheet, track the number of conversions, total, per day. Do the conversions increase after you start your campaign? If so, you’re likely on the right track. If not, then there’s very little chance that your pay per click investment is working.
2. Manage Your PPC Dollars: Set a Sensible Budget
A lot of folks ask me how much I typically spend on clients’ PPC campaigns. My answer is always “just a bit less than too much.”
A little glib, I know, but the there is no ‘right’ amount. It all depends on your circumstances. A good formula, though, is:
cost per click is less than: conversion rate * total clicks * profit per conversion
In other words, the amount you spend per click should always be less than the total profit earned per click. Let’s say, for example, that I’m spending $1.00 per click to bring customers to my (totally fictitious) bicycle shop website.
I know that 2% of those visitors contact me regarding products, and that 30% of those potential customers actually purchase something. I also know that I average $10.00 profit on those purchases. Finally, I also know that I get 200 clicks per month.
That puts my pay per click campaign in this light:
.6% * 200 * $10.00 = $12.00
So, I’m only earning $12.00 per month on my PPC campaign, but it’s costing me $200.00. I need to reduce my cost per click, a lot, or cancel the campaign altogether.
Don’t make this a hard-and-fast rule, though. While your initial, direct profit from your PPC campaign may disappoint, you might be acquiring loyal customers.
Going back to my bicycle shop example: At this point, I’m ready to cancel my PPC account and never look back. But I dig a bit deeper, and notice that customers acquired from the PPC campaign spend another $800 each, per year, on higher-margin items that deliver an average profit of $200 per sale – I’m getting loyal, long-term business. That changes the picture significantly:
.6% * 200 * $210.00 = $252.00
Suddenly, my PPC campaign is a narrow but definite success. I’m earning $52.00 per month.
If you can’t get this kind of precision, pay close attention to your metrics over time: If your sales, leads or other desired visitor actions increased right after you began your pay-per-click campaign, chances are you’re on the right track.
But if you’re selling a product or service, I strongly recommend that you invest the time and energy to collect this data and crunch the numbers – it will pay off in the long run.
3. Find Niche Keywords
A lot of folks aim their ads at the broadest possible terms, such as “dresses,” or “bike parts,” or “search engine optimization.” Since the broader terms get far more searches, it’s a strong temptation – with a big disadvantage. Since everyone bids on the broad terms, the cost per click is generally quite high. And the chances of a conversion, even if someone clicks on your ad, is lower.
Focus instead on narrow, focused keywords: ‘Bridesmaids dresses’, ‘road racing tires’ or ‘Seattle search engine optimization’. These terms will cost less, and searchers who use them will be far more likely to buy.
Google, Bing and most other PPC services will show you estimated cost per click and searches per day for keywords – use these tools to test for the best focus, cost and clickthrough combination.
4. Good Writing: Don’t Ignore It
Most pay per click advertising requires that you write a couple short descriptive phrases about your service. Don’t underestimate the importance of this – make sure, at a minimum, that your grammar, spelling and overall language is correct and appropriate for your audience. Also verify that your language adheres to the rules enforced by the pay per click service – Google, for example, won’t allow ads with superlatives (“the best,” “the greatest,” etc.), with repeated keywords, or with excessive capitalization.
As an example, this is not so good:
This is much better:
See the difference? Get specific. Why would the reader want to click on this ad? See Elizabeth’s excellent post about Writing Killer Ad Copy for more about this.
5. Go for quality
Remember what I said at the start of the article? Google and Bing now have this nifty thing called a Quality Score. They examine:
- Your ad
- Ad performance
- The quality of the page to which the ad points
Based on various factors in all three places, search engines will either increase or decrease the bid amount necessary for you to gain a specific position.
If you want a great quality score, you need to:
- Build your history. The longer you’ve run a specific campaign, ad group and ad without changes, the better your history. If you move to a new account, your entire history goes POOF and you have to start over. So don’t move unless you absolutely have to.
- Never stop testing ad copy. Constantly test ad copy for the best clickthrough rate. A higher clickthrough rate will probably give you a better quality score.
- Put keywords in your ads. If you’re buying the phrase “nubwit,” make sure “nubwit” shows up in the ad.
- Put keywords on your landing page. Make sure the page to which you’re pointing your PPC ad has those keywords, too.
- Split good keywords from bad ones. Put high-performing ads and keywords in their own campaign. Otherwise the bad performers will drag down the good ones.
- Focus!!! Focus your campaign by time of day, geography, search network, etc.. If you don’t know what this means, you need to hire someone who does. Like us, maybe. Just sayin’.
Quality score can easily reduce costs by 20-30%, if not more. A bad quality score can knock you right out of the rankings, too.
Adjust, Adjust, Adjust: A Corollary
This isn’t so much a rule as an overarching concern – don’t set up your ads and then forget about them. You need to continuously manage your PPC advertising campaign, or:
- Someone might outbid you.
- Someone might have dropped out of the top spot, meaning you can reduce your bid and keep a #3 rank.
- Search patterns may have changed.
If search patterns change and your keywords are searched less often, don’t immediately alter your campaign – wait at least a few days to make sure you aren’t seeing a statistical ‘blip.’ But keep an eye on things, always, or you might end up spending money unnecessarily. In my experience, even a well-designed campaign will need to be adjusted weekly.
A Quick Case Study
Good PPC advertising management is an art form. Here’s an example of one Google ad (modified to protect the innocent) that we edited for a client. Their original AdWords spot read:
Low Cost Bicycle Parts
Order online today
These ads didn’t perform well – their ranking, clickthrough and conversion rates were very, very poor. Why? Three reasons: First, the ad is far too general – someone searching for a bicycle part on Google will most likely search for the specific part, not for sites that sell everything. Second, the ad doesn’t make any strong value proposition – anyone advertising on Google can very likely take my order online, today. Finally, the ad doesn’t optimize for the search terms used to find it.
The result? They were paying about $1 per click for a #1 rank, with 800 clicks per day and less than a 1% conversion rate and an average profit per order of $6. No chance of making any profits with that kind of performance:
1% clickthrough rate
1% conversion rate
800 clicks per day
800 clicks * $1.00 per click = $800 cost per day
.01 * 800 * $6 = $48 profit per day
Not good at all. Here’s how we changed it. We developed four ads, each focusing on a single keyword combination or group:
A Complete Selection, Delivered Overnight!
Shimano STI Component Sets
Overnight Delivery on Dura Ace.
Tubular Racing Tires
Continental, Michelin, Delivered Overnight!
Phil Wood Bearing Grease
32oz Jars and Cases Delivered Overnight.
Each ad targets a keyword combination (in the title) that we found is searched more than 50 times per day. A number 3 rank for each ad costs $.15 per click or less. Within a few days, their performance looked like this:
12% clickthrough rate
8% conversion rate
200 clicks per day
Average profit per order: $6.00
200 clicks * $.11 per click = $22 cost per day
.08 * 200 * $6 = $96 profit per day
The bids we placed earned them a #3 rank, but their high clickthrough percentage bumped them up to the #2 or #1 spot for every keyword and phrase (see ‘Play to Come In Third’, on the previous page, for an explanation).
It was a solid turnaround, built on basic principles: Good niche keywords, solid writing, a smart budget and intelligent placement. By focusing on conversions, instead of clicks, our client got a better result.
Where to Go From Here
Pay per click is now a basic Internet marketing tool. Very few businesses can afford to ignore it. But you have to avoid the more-clicks-is-better mentality. Focus on conversion and return on investment, rather than clicks, and you can build a profitable campaign.
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