As an online business, you may be familiar with or currently utilize pay for performance search engines to send visitor traffic to your website. Also known as pay-per-click, PPC or paid search, it has literally taken the online marketing world by storm especially the two largest players, Overture and Google Adwords.
A 2004 New Methods in Search Marketing study by Piper Jaffray stated that paid search constitutes more than 87% of U.S. search market revenues. This staggering statistic begs the question, Are advertisers achieving a positive return on their paid search investment In other words, are sales being generated or is money just being spent
The answer to this question may stem from understanding the role of the two critical performance metrics generated by all paid search campaigns (1) click-through rate and (2) website conversion.
The click-through rate is defined as the percentage of times a paid search ad is clicked on out of the total number of paid search ad views within a given period of time.
Click-throughs (i.e. Total Visitors) / Impressions = Click-through Rate (a.k.a. CTR)
For example, if your paid search ad is seen by 10 users and one user clicks on your ad, the click-through rate is 10 percent.
Website conversion is defined as the percentage of users who visit your website and complete your primary objective (i.e. purchased a product) out of the total number of users who visit your website in a given period of time.
Sales / Click-throughs (i.e. Total Visitors) = Website Conversion (a.k.a. sales conversion)
So what role does each play in understanding the effectiveness of a paid search campaign
Standard practice among advertisers is to concentrate on writing ads that achieve a high click-through rate to send more visitor traffic to their website. Unfortunately this general assumption, more traffic equals greater positive results, is flawed.
Consider this. Which click-through rate is better
A 20% click-through rate for a paid search ad that achieves zero sales (0% website conversion.)
OR
A 0.2% click-through rate for a paid search ad that achieves 10 sales (10% website conversion).
The answer is obvious. The click-through rate, especially for newly setup PPC campaigns, is relative it is the website conversion rate resulting from visitors clicking through a particular paid search ad that defines success or failure.
Successful paid search advertisers take a different approach. They start with the end in mind by asking, what primary objective do I want a visitor to complete on my website and then they work backwards. They identify the type of visitor and buying behavior that will most likely result in a completed action (i.e. sale, registration, etc.)
In addition, they perceive their ads as automated salespeople who qualify visitors. Regardless of a high or low click-through rates, the focus is on generating a positive return from the advertising dollars spent.
For instance, lets review two different ads. Ask yourself, which ad best qualifies visitors
A. Pride ScootersLow prices and huge selection of scooters and other mobility equipment.
B. Pride ScootersFrom $1850 while stocks last. Houston, Texas, USA.
If you selected B. you are correct.
Ad B. qualifies visitors based on their buying behaviors and customer type most likely to purchase a Pride Scooter from the business website.
First, the ad states a price point (i.e. from $1850) to attract visitors seeking the websites premium product while disqualifying ones seeking discounted or lower-priced scooters. A user researching scooters does not have to click-through the ad to find out a general price range.
Second, the ad targets a geographic region since the majority of people who buy scooters demand an actual test ride. If the company is located in Houston, Texas then users from other locations will not feel compelled to click-through the ad. (Ideally a geographically-targeted PPC campaign like using Google Adwords Regional-targeting works best in this situation).
In essence, ad B.s goal is to pay per click for only visitors most likely to purchase their product. This ad attempts to filter unqualified visitors thereby increasing the return on investment per click-through.
Ad A. instead spends money on attracting and generating click-throughs from all visitors and relies on the website to filter qualified versus unqualified ones. This is not a wise economical approach especially if no visitor exit strategies are pursued.
Last, successful paid search advertisers rely on testing different ads to determine which appeal generates the best website conversion for a particular keyword. They rely on actual visitor feedback to help them determine which appeals are most effective. Once a positive return is achieved then focus is shifted to increasing the click-through rate for the best converting keywords so more sales can be realized.
So Are you spending money to bring just anybody to your website or visitors ready to buy from you Think about ..is Your Paid Search Advertising Generating Positive Financial Results for your website
Kevin Gold is CEO of Enhanced Concepts, specializing in turning website visitors into leads or sales, co-editor of WebSalesability.com and published writer. Get a free report, 12 Sure-fire Ways to Increase Your Website Sales and an exclusive 5-day website conversion email course by visiting .
Pay per click (PPC) advertising was pioneered in 1997 by GoTo.com, which was later renamed Overture Services. Forrester Research recently forecast the pay per click advertising spend to reach $11.6 billon in 2010 becoming the dominant form of advertising on the Internet. Today the market is dominated by Google and Yahoo!, who bought out Overture in 2003. Ask Jeeves recently launched their own proprietary system and MSN will be entering the market in late 2005-early 2006. There are also a number of second tier players, including FindWhat and LookSmart that have been competing in the market for a number of years.
Pay per click advertising allows a company to bid on a keyword in a live auction marketplace. These keywords along with ad copy appear on the results page that a search engine returns for a user query. PPC ads are usually displayed at the top and bottom of each search return page and along the right hand side surrounding the natural / organic search returns. PPC ads can also be displayed on web pages that incorporate contextual marketing links, such as Googles AdSense program and the new Yahoo! Publisher Network. The ads are displayed based on the web pages content and are regulated by the same bidding mechanism that is used for determining ad placement within the search results pages.
Pay Per Click Benefits
PPC advertising offers several benefits to advertisers. First and foremost PPC is an effective tool for driving sales in a short period of time. Unlike SEO campaigns which can take months before any significant results are seen, pay per click advertising campaigns can start generating leads within minutes of launch. Advertisers only pay when an ad is clicked on so in theory every click is a potential sale. The reality of the market is somewhat different but nonetheless PPC advertising has proven itself to be a highly effective direct sales vehicle.
Pay per click advertising is also effective for increasing brand awareness. A recent Internet Advertising Bureau (IAB) study tracking the branding effect of search engine ads and PPC contextual ads found that on average respondents asked to name a specific leading brand within a tested industry were 27 percent more likely to name the brand displayed in the top spot in the PPC search results compared to a control group not exposed to the ad. For PPC contextually targeted text advertising the text ad caused a 23 percent brand awareness lift among respondents that saw the ads. As more ad spending switches from television to the Internet the importance of branding through PPC ads will become even greater.
Paid Inclusion Trusted Feeds
Currently the only major search engine to offer a paid inclusion program is Yahoo! with their Search Submit program. Paid inclusion guarantees that your pages will be indexed by the Yahoo! search spider but it does not guarantee where your listing will appear in the search results. Each time someone clicks on a listing a fee is paid to Yahoo! for including it in the search results.
Sites that use dynamically generated pages often have a hard time getting indexed. For these types of sites paid inclusion can be an effective means for garnering listings but merely getting pages indexed does not guarantee that they will generate traffic to the site. Paid inclusion is best used in conjunction with SEO and is not normally a standalone solution for garnering new potential customers.
Toren Ajk is the President of the The TAC Group, . The TAC Group offers a variety of services including
, and Internet marketing consulting.