Pay-Per-Click 101

Why Pay-Per-Click is the microwave of ad campaigns.

What is Pay-Per-Click?

Sponsored search — also known as “Pay-Per-Click,” “PPC,” and occasionally “Where have you been all my life?” is a method of online advertising that’s measurable, flexible and very fast. PPC ads are paid listings that appear above and to the right of free (organic) listings on Google, Yahoo, and the Seven Dwarfs. You can pay (that is, bid in an quasi-auction) to be listed in search engine results. You can quickly (often within hours) measure the effectiveness of each ad which, in turn, allows you to justify your budget. You pay only for those ads that are clicked on.

That’s one important difference between PPC and other kinds of paid advertising: you don’t pay until someone clicks. In a TV or radio campaign, you pay for eyeballs and ears, whether they pay attention or not. In PPC, mere impressions cost you nothing.

Let’s say, however, we ignore the PPC listings, and go straight to the free/organic links. Some people do, although they are not in the majority. (84% of eyes go to the top ad first.) The folks with the top organic listing are most likely to get clicked, but here it costs them nothing, because Google found them the most relevant result for this search.

If “organic” listings are free, we’d be better off there, right?

Absolutely. Rising to the top of organic listings, however, can take hard work, considerable expertise and time. See our White Paper on Search Engine Optimization for more detail.

Even if you’re doing well on free listings, however, you may also need PPC.

Eye-tracking studies have shown that 4 out of 5 searchers focus first on the top PPC listing. Fully one third of those searchers actually click on a PPC link. A substantial percentage of Web users are utterly unaware of the difference and assume the top sponsored search listing is the most relevant listing. Pay heed.

How long before we see some action?

If SEO is a slow bake, PPC is a microwave; you start measuring results in hours. At worst, you might consider PPC until your organic listing rises to the top. Then, if you’re lucky enough to rise to the top, should you continue to do both? The answer is usually yes. Research shows an improved likelihood of bringing in a customer when you are “validated” by appearing twice.

So what’s the BIG idea with PPC?

Today the Internet empowers users to shop for exactly what they’re looking for (products, services, ideas, news, etc.), without wasting time. PPC exposes users to your ad when they’re looking at specific search results — then, with one click, they’re taken to the exact page where your product or service is waiting patiently. Since these consumers are already on the hunt for your product, your customized landing page (not your home page!) can reassure them that they’ve come to the exact right place, then communicate benefits, and sometimes even close the sale.

When effective search terms have been determined and bid on properly, a daily budget selected with care, the campaign routinely measured, modified and remeasured, then voilà. You have yourself lined up for a great opportunity for success.

CPC? CTR? Hunh??

Let’s not get confused. Basic terms:

CPC — Cost per click. What you, the advertiser, pay each time your ad is clicked to bring someone to your site.

Impressions — The number of times an ad has been displayed – but not necessarily noticed. (If you’re the seventh or eighth PPC listing, no more than 10% of page viewers will see your ad.)

CTR — Clickthrough rate. This is the percentage of impressions where the link is actually clicked. For example: 5000 impressions, 124 clicks, CTR = 2.48%. The higher your CTR, the more often (and more prominently) Google will show your ad. If you have two versions of an ad, testing one headline versus another, Google will stop showing the less effective, less popular version over time. That is good.

ROI — Return on investment. If you have an e-commerce site, it’s easy. For example: 100,000 impressions, 1900 clickthroughs (a 1.90% CTR), 190 sales at an average of $31, a profit per sale of $14 = $2660 gross margin. The click’s average cost was $1.00, so the cost of the sale is $1900. The net profit is then $760. ROI = 760/1900 = 40%. Sweet.

Value — This is a little harder to compute. What’s the lifetime value of a customer or client? If you’re into big ticket sales (diesel engines, personal injury suits, mortgages, ad agency clients, whatever), one new customer might justify the expense of thousands of clicks. It’s too complex to explain in this White Paper. Call us.

Does this stuff really work?

Have you noticed the price of Google stock lately?

It’s all about search terms.

What words do prospects type to find your category? What terms can you select to match your services? How differentiated are they from competitors? What are your competitors not using? Specificity matters. Words that are too general can blow your budget. If you’re a travel agent who specializes in surfing safaris, say, you could waste a fortune bidding for the word “travel.” Choosing “surfing vacations Hawaii,” “surfing vacations Peru,” etc., would bring you fewer suspects and more prospects, at lower cost — a harvest of potential buyers in the bull’s-eye of what you offer.

How many terms should I bid on?

Depends. Usually, the more the merrier. Because this medium is so measurable, continual testing can determine the words and phrases that are profitable. Develop a control ad with predictable results, then test alternatives to see if one will produce more ROI. If one beats the control, it becomes the control.

You have to bid for the best search terms. It’s an auction.

It’s not a pure auction, since the top bidder doesn’t always get the top position. Google determines the minimum bid required for each term. Your ad won’t appear if your bid is too low. Increase your bid. If Google doesn’t think your words are relevant to your ad, it will increase the min-bid. Kind of like constructive criticism. Or a hint. If you attain a high CTR, your placement will rise. Google likes high CTRs. Over time, you should routinely adjust and measure, to get rid of the search terms that don’t measure up.

How much does a click cost?

It really depends. Many clicks can go at the minimum (pocket change) especially if they’re very specific, in less competitive areas, or you’re willing to be the 19th listing. The numbers climb as the competition heats up, and dollar payouts escalate. Real estate, mortgages, personal injury law, etc., require aggressive bidding to maintain high positions. The highest we have seen is $100 (that’s right, $100 per click) for “mesothelioma,” a kind of lung cancer associated with asbestos exposure. Yikes. What will the best bids be for your search terms? You can ask us.

The creation of your ad.

Most ads are text only. The headline is limited to 25 characters. The product or service description can be 2 lines up to 35 characters each. The URL can be up to 35 characters also. Within these severe limitations, you have to work hard to be visible, differentiated and relevant.

Your ad’s message.

A good strategy is to include your search terms in the headline. Beyond that obvious idea, a skilled copywriter can experiment, check results and experiment again. It’s a great laboratory for concept testing and copy testing.

Where do the ads appear?

PPC ads camp out alongside or above search results pages. They can also appear on relevant client sites, domains, blogs and Gmail. (Ah, yes, you’ve seen those.) Sometimes, if you’re highly relevant, Google will “blue box” you. These blue box ads appear occasionally (not every page) at the tops of pages. Only those ads with a strong bid and high CTR are eligible to receive this helpful boost.

What happens after the click, you ask?

Visitors arrive at your landing pages, which should convert them into buyers. Note the plural: solid landing pages, one for each important product or service, not your all-purpose home page. Make the visitor see, in the 5 or 6 seconds she’ll allow you, “exactly what I’m looking for.” You’ll get higher rates of conversions, A.K.A. actual sales. That is, after all, the whole point here. Clicking is good. Conversion is better.

Am I writing a blank check?

No. You can set daily/monthly budgets as a stop loss. If you say Everything is measurable, including impressions, clickthrough rates, returns by ad, by day of week, by time of day, and especially conversion sales. It doesn’t run out of control.

Can you do this yourself?

Of course.

You can also play the violin.

Just tuck the one thing under your chin, and rub that other thing over the top. Sounds happen. (A gentle reminder that when it comes to effective sponsored search campaigns, we’ve just had more training and practice.)

Manage. Track. Measure. Good words. Bad words! Adjust.

We can set up a PPC campaign with optimized search terms for you, create the appropriate ads, continually monitor and make changes as needed to turn clicks into sales. That’s a measurable way we make you money. It’s music to our ears.

To learn how you can have your own measurable, effective PPC campaign, contact the experts themselves at 312.836.0050.