Pay Per Click (PPC) Marketing is typically an auction based form of online advertising that appears in the natural (unpaid) search listings in Google, Bing, or Yahoo. Typically, you are making a monetary bid to have your advertising banner placed at a certain position on a page. The auction method is the most common form of pay-per-clicks while Google Adwords is the most popular medium for online advertising.We’ve heard of Search Engine Optimization and know it’s important, but there is also pay-per-click optimization and it is also important if you are running an online advertising campaign. Navigating through the configurations and making sense of the Clickthrough Rates (CTR), Conversions, & Costs-Per-Click (CPC) is not for the faint of heart.
How much Should you Spend?
Knowing how much to spend for PPC’s is probably the most important question. There is somewhat of a science to it, but it’s not that complex really. Typically you can determine how much you spend by taking your profit and multiplying it by the average conversion rate (# of sales divided by the number of clicks x 100).
Let’s Try a Scenario
Let’s say that my profit from a sale is $100 and it takes 20 clicks to get 1 sale. That puts my conversion rate at 5%.
$100 profit per sale
x .05 (5%) conversion rate
= $5 per click
Spending this amount of money per click is a maximum. Meaning if your conversion rate is not as good as you expect, you will lose money. Nobody wants to break even anyway, so let’s consider dividing your conversion rate by 50%. So instead of a 5% conversion rate, let’s say that we should bank on a 2.5% conversion. This would change our max cost per click to $2.50.
Just because you know this formula still does not mean you won’t waste a lot of money. It is more complex than this simple formula. In order to be successful, there are many tools and configurations that should be meticulously monitored in order to optimize your PPC advertising.
Advantages and Disadvantages of PPC Advertising
In comparison to the three major forms of online marketing – social media, pay-per-clicks, & SEO each one has its advantages & disadvantages. Let’s review the pros v. cons for pay-per-click online advertising.
- Immediate results
- If done right, ROI can be sustainable and consistent
- You can choose exactly where you want to appear.
- Specific targeting for either exact key phrases or exact locations
- Results are easily measurable
- Flexibility with your budget. You can spend as little as $10 or as much as $????
- You only pay for visits (clicks) not visibility
- If not done right, you can waste a lot of money
- Competition can be very aggressive
- You pay for clicks that do not materialize into sales including click-fraud.
- No lasting ROI such as SEO or Social Media Marketing
PPC Advertising might be good for your business if any of these apply…
- You need immediate sales
- You sell online goods
- You need to diversify your advertising budget
- You need more brand recognition