Pay Per Click Management Explained

How PPC Fits into Your Internet

Marketing Strategy

Pay per click advertising is a great way to get visitors when you need traffic
and you need it now. But its 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. Theres 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
thats the highest bid, youll 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. Its 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 highlysearched 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
youre 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. Its 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 youve placed a wellwritten 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 cant afford to solely rely on PPC advertising. Its too
expensive, and bid amounts inevitably climb. But pay per click can fill a few
important roles:
o

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 shortor 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. Whats a
conversion? Its any time a visitor to your website takes a desired action.
Examples of conversions might be:
o

Visitor makes a purchase

Visitor completes a sales inquiry form

Visitor downloads a white paper and registers

A conversion doesnt have to be a sale. But a conversion has to be worth

something to you. If you cant think of any measurable, useful outcome of a
visit to your site, do not spend money on pay per click advertising theres
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 youre using doesnt offer a conversion tracker,
and you cant 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, youre likely on the
right track. If not, then theres 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. Lets say, for example, that Im 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, Im only earning $12.00 per month on my PPC campaign, but its costing
me $200.00. I need to reduce my cost per click, a lot, or cancel the
campaign altogether.
Dont 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, Im 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
Im 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. Im earning
$52.00 per month.

If you cant 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 youre on the right track.
But if youre 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, its 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: Dont Ignore It

Most pay per click advertising requires that you write a couple short
descriptive phrases about your service. Dont 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, wont allow ads with superlatives (the best, the greatest, etc.),
with repeated keywords, or with excessive capitalization.

As an example, this is not so good:

his is much better:

See the difference? Get specific.

5. Go for quality
Remember what I said at the start of the article? Google and Bing now have
this nifty thing called aQuality Score. They examine:
o

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:
o

Build your history. The longer youve 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
dont move unless you absolutely have to.
o

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 youre buying the phrase nubwit, make
sure nubwit shows up in the ad.

Put keywords on your landing page. Make sure the page to which
youre 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 dont 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 isnt so much a rule as an overarching concern dont set up your ads
and then forget about them. You need to continuously manage your PPC
advertising campaign, or:
o

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, dont
immediately alter your campaign wait at least a few days to make sure you
arent seeing a statistical blip. But keep an eye on things, always, or you

might end up spending money unnecessarily. In my experience, even a welldesigned campaign will need to be adjusted weekly.

A Quick Case Study

Good PPC advertising management is an art form. Heres 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 didnt 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
doesnt make any strong value proposition anyone advertising on Google
can very likely take my order online, today. Finally, the ad doesnt 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. Heres how we changed it. We developed four ads, each
focusing on a single keyword combination or group:

Campagnolo Components
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.

New Tools You Need to Know About

When we first wrote this piece, PPC was pretty simple: Bid. Click.
Measure. Adjust.
But there are a lot of new (and not so new sorry, it took us a while to do this
update) offerings out there. Each is an opportunity to save money, build sales
or target niche customers more accurately than ever:
Remarketing lists for search ads arent that new. But if youre a beginner, you
may not know about them. Use RLSAs to target special ads and bids to
people who have previously visited your site.
Adwords Customer Match lets you target customers based on email addresses. Upload your list and you can serve different ads or bid a
different amount based on lifecycle stage. Serve one ad to an existing
customer. Serve another to a subscriber. And so on. Facebook offers a similar
tool, but this is the first appearance of e-mail-driven customer matching in pay
per click search.
Be sure to take a look at Bing Ad Extensions. Were particularly happy to use
the images extension, which lets you attach up to six photos or other images
to an ad.
Both Google and Bing have call extensions that let users click-to-call from
your ad. Again, not so new if youre in the know, but if youre new to PPC,
have a look.
If you run a brick-and-mortar or appointment-driven business, look at Google
Adwords Call Only campaigns. They let you bid for phone calls instead
of clicks.
Well keep adding to the list