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Is PPC Worth The Money?

Last Updated on Feb 4, 2011 by Jeff Lew

Pay-per-click, or cost-per-click advertising is becoming a big part of a company’s marketing campaign. For those who don’t know, PPC advertising goes like this: You pay a certain amount of money for a keyword or keyword phrase such as “Rare baseball cards”. When someone types your keyword into a search engine, and ad which contains a link to your web page will be displayed in the margin of the search results page. If that ad is clicked on, and the user is sent to your page, you are charged the previous amount agreed upon. That is a quick explanation of how it all works. The real question at hand becomes “Is PPC worth the money?” I have found both cheerleaders and naysayers with a great deal of passion on this subject. To determine if PPC is worth the money, we have to look at cost, conversion, and content.

The Cost of PPC Campaigns

The cost of a pay-per-click campaign can vary widely depending on a number of factors including:

  • Popularity of the keyword-bidding on general words can get very expensive, more targeted keywords are less costly.
  • How much traffic your page gets-You will need to monitor this and adjust your campaigns accordingly
  • How many sales you make-This is a direct result of conversions, which we will talk about later
  • How much you want to spend-Set a budget and stick to it.
  • Flat rate versus bid-You can get yourself into real trouble if you get in a bidding war over a particular keyword. Keep the ego in check!

A simple way to make sure that your PPC campaign is worth the money is to use this formula:

% of conversions*number of clicks*average sale > number of clicks*PPC rate

So let’s say “Rare baseball cards” costs me 20 cents per click, and that I get about 200 clicks per day. Out of those 200 clicks per day, two people buy something and the average sale is 50 dollars. So, we have

.01*200*50=100 dollars per day .20*200=40 dollars per day

So this example, I spend 40 dollars per day on PPC advertising, and it gets me 100 dollars per day in sales. In this particular case, PPC would be good for my business.

As you can see from this simple example, the key to PPC is in conversions, not clicks.

Conversions Are The Key

Just like with Search Engine Optimization, the key to measuring the effectiveness of a PPC campaign is in the conversions that are produced as a result. If you are using a keyword that is too general, or your ad copy is not great, people might come to your site, but not buy anything, sign up for anything, or do anything else that is helpful. This is where the cost of PPC can skyrocket. If you have thousands of visitors to your site each day, but only a few actually make purchases, pay-per-click advertising is going to drive you to the poorhouse! The best way to know how well you are doing is to use an analysis tool like Google Analytics. You can check on a regular basis how many of the clicks on your ad are actually converting to sales, and you can adjust your campaign accordingly. Make sure you are clear about what you consider a conversion for your particular type of site.

Great Content Produces Great Results

This is not the first time I have mentioned the necessity of excellent content, nor will it be the last. You must make sure that the ad you write is intriguing, engaging, and entices potential visitors to go to your page. The page they arrive at must have great content as well, and incorporate the keywords they are looking for. It should also make it as easy as possible for someone to become a conversion, i.e. make a purchase, sign-up for a newsletter, etc.

So the answer to the question is: It depends! A well thought-out and managed PPC campaign will have tremendous benefits for you. A poorly conceived and managed campaign will cost you a lot of money, and produce very little. So make sure you educate yourself on how to properly conduct a PPC campaign, or hire professionals to do the job for you. It will save you tons of time, money, and frustration in the end.

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