PPC advertising - is it for everyone?

[Oman]

I was listening to a piece on NPR the other day regarding the merits of PPC advertising. The folks interviewed described how their businesses grew by leaps and bounds based upon Google's Adword program. I gritted my teeth, shook my head and remembered my PPC ad program. I had to wonder; are these folks novices in the PPC world, do they function in a different reality or are they honestly benefitting from PPC advertising.

Last year we jumped into PPC advertising with Overture. We were a young company, hungry for growth. We sunk 15% of our gross into Overture. It was the thing to do, right? We tracked our results and found sure, we had more traffice, but our click to purchase ratio was smaller than anticipated. Our overall return, 1:1.

This year we're working with a much more traditional business design. Traditional? We'll, diversified for one thing. We now look for long term, consistent growth. We realize that folks arrive at our site looking for answers to their questions and solutions for their problems, essentially for information. That we offer for free. But we also would like to make a buck or two along the way.

Any thoughts on the PPC advertising? Anyone else find it ineffective?

[Rethgual]

Oman, like you, I sunk quite a bit of money into PPC advertising as a young online company. I tried Overture, 7Search, Findwhat, Kanoodle, Sprinks, Ah-ha, and, like you, the return on investment was so negligible as to be laughable. Eventually, I came to the realization that I might as well stand in my back yard and throw money into a burning barrel since the results would have been about the same. Money was being depleted from my accounts so fast that I could barely keep up with the refills. This especially became true once Overture began their "automatic positioning function". I saw one of my main keywords go from 20 cents to well over $1.00 per click overnight. I pulled all of my PPC accounts and have not looked back. To date, dropping those accounts has not hurt us one iota, and it has been almost a year now.

I think, perhaps, that PPC advertising might still be of some value to new companies trying to gain "visibility" while they work on the more traditional methods to achieve it in the search engines. However, IMHO, it should just be a short-term strategy.

[nivia]

I have been using Overture as well as Adwords. The benefit is in the exposure. Top placement on a search engine with over 15 million visitors daily is invaluable. We do not expect direct sales because most people who go to our site are looking for further information and a reason to call us.
I would not discount the exposure of PPC, but it is expensive and placement through optimization is preferrable.

[lwalsh]

I have to say I have had a much different experience with search engines. I run the search engine advertising for our company, which we started 6 months ago. I was a relative novice to the area, but we figured it was worth a try.

We went from making $9K/mo at the beginning to $35K/mo currently with a marketing cost of between 20-30%. This is a much better marketing cost over all than most of our other investments. We are an online company, so that helps. Also, I manage our campaigns as a full-time job, not as a side thing. Search has the potential to bring in just as much money as email, textlinks, and pop-ups, so why is it always relegated to an after-thought?

Just a few tips from my experience: start slowly, at low costs. The top bid in our area runs from $1-3, though we make a killing only bidding from $.30 to $.80. From there, build up your keyword set. We currently use over 10,000 keywords throughout our CPC campaigns, though we started with about 200. 10K is probably a bit much for most sites, but the idea is to expand on your core set of keywords with prefix and suffix words in order to catch your whole audience. While building up keywords, I would suggest going for misspelled words and uncommon words as these will get you the best return on investment. Once that is all done, pump up your CPC and watch the money roll in.

Hope this helps!

[gameseek]

Ok i am going to jump straight in and say: What a Rip off!

CPC for us (yes it may be worth it for other companies) is so expensive its a joke how much these search engines or directories even consider asking for. If we did CPC we would go bankrupt within 6 months. Our average sale is about £40 and the CPC rates are around 30p per keyword. Hahahaha - i cannot beleive people do it. Merchant - Affiliate marketing is miles, miles better value!!!!!!!!!!!!!!!! Then you pay by performance, there is no way you can lose (unless you sign with a really rip off newtork - but in the UK there are some great ones at great prices - may be different in USA)

Anyway CPC - its a Rip off and i hate to think its the future of the internet. I hope its not.

[nivia]

PPC visitors don't always buy directly from the landing page. They may return at a future time or call instead. So always check for indirect sales from searches using PPC

[Oman]

You're right about the return visits, Nivia..hard to track but realistically a future customer.

Yup, I'd agree that PPC could be a integral portion of an overall promotion campaign. But for small businesses it's an expensive proposition to simply experiment with your hard earned gross receipts (let alone trying to take anything home). So there has to be a formula that could define the company (me for instance) and the expectations of PPC by the company. Know what I mean? Can I meet those expectations and if so, what'll it take to get there. What defines a company that'll succeed in PPC vs the one that'll tank? Talk about breaking the back of the PPC industry.

A written busniess plan for sure is the starting point. The first variable that would need to be defined would be the click through to purchase ratio. But if you don't have deep pockets and you absolutely need a return to survive, how can you project a click to purchase ration? Anyone know of a source for industry standards for click through to purchase ratios (CPR)? Without an industry standard, we're all independantly left to develope our own CPR. You follow where I'm trying to go with this?

Oman

[Titus]

I used PPC on Google a few months ago, right when my business had just begun. I only had a small budget, $50 USD (heh..), so I hoarded it and only went with keywords that were sub 30c per click.. Within two weeks my money was gone, I had received several hundred clicks, and I had zero return.

Since then I've focused on traditional search engine positioning techniques, and word of mouth to sell my web design services. I've got nominally high ratings on Google though, second page for most general searches

[nivia]

When I worked in spam emailing (please don't hate me, I've since resigned), our target CPR was 1-5% depending on the campaign. I don't know what the PPC industry target is but I'm sure it's low.
BTW, Does anyone else have the feeling that Overture is better than Adwords?

[Jim-Grill]

I would like to challenge anyone who has had a bad experience with PPC, or any other online advertising campaign by asking a few questions and making some points about marketing in general.

1) First of all, do you (did you) track your advertising campaigns? Before you answer, realize that I am not talking about looking at log files or web stats.

2) Do you know the specifics of each one of your campaigns and keywords for a given period? i.e. total visits, CPC (cost per click), visits per sale (conversion ratio), total sales and margin, ROI (return on investment)

3) Did you test long enough to know your residual sales from a given period? Do you know your average duration (time from first visit to first sale)?

The reason I challenge you in these areas is because I see the same mistakes made over and again by new-comers/DIY web masters.

The first step, above all, when considering online advertising is how you intend to track your results. This is not limited to small start-ups as I see very large companies advertising "blind" as well.

Another thing to consider is that advertising is not the answer for over-night success. You have to come up with a long-term commitment. You have to find your duration before you can calculate the overall performance of a campaign. I have witnessed this mistake more than any other with start-ups. You cannot advertise only on weekends, rainy days, or parts of May and expect to gain anything but a depleted bank account.

My advice is to find tracking software, whether it's third party, a custom program, or an open source program. You must track each advertising campaign separately. If you use Google Adwords and the key word "widget" you can create a separate URL for that campaign that might look like http://www.mysite.com?ref=adwords&kw=widget. When the link is clicked from an affiliate site the user would get a cookie. That cookie is then used to track their repeat visits to your site and, ultimately, the date and time of their purchase and the dollar amount of that purchase. There is much more involved, but I'm not going to go into exacting specs. I'll stay on topic.

If you commit until you know your average duration you will start to see the reality. If you sell an impulse item like CD's or DVD's your average duration might be 5 days or less. If you sell a higher priced product or a service you might see a duration of up to 6 months. And don't forget about repeat customers. If you take into account the facts you will know beyond a doubt which keywords are paying off and which are not. You then adjust your advertising budget and allocation based on facts - not guesses.

If you are bidding against large companies there is a chance they are tracking and they know where to put their money and they know how to beat you. If you are going to succeed at anything in this competitive world you have to do it better than your competitors.

I read all the time about people who claim to be in the know and I always ask: If you are an SEO guru, how many domains do you own? If you are a big-time ecommerce site, what is your ROI? ...cost to sale? ...do you know what job costing is? ...Do you have an accountant? Will you be around in 5 years, or will your competitors eat your little web site for breakfast?

To win at this game you must be on top of YOUR game.

Any thoughts?

[soaps_sundries]

As a brand new DIY website, I immediately jumped on the Kanoodle bandwagon - because they had PPC rates I could afford. With the competitive field of soap and bath products, Overture's PPC rates are through the roof. However, after a month, my budget has nearly run out and I have not gotten a single order. I have gotten quite a bit of looks on my index page but not much interest on the remainder of my site. I am beginning to feel that the only ones looking are those that I am bidding against. Have I not given it enough time? Is my website not "catchy" enough. This is a topic which has begun to thoroughly disgust me.

Aimee
www.soaps-sundries.com

[apisdesign]

First off, I'd like to thank psycle for his/her post. Very informative - pay attention, kids!

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Secondly, I would like to reiterate psycle's faith in PPC programs. It would not be a multi-billion dollar a year industry if it didn't work. Certainly, people who use 10,000 keywords (10,000 - my God! What do you sell? Everything? Ridiculous) will invariable throw their money away. 10,000 keywords is obviously a lack of focus and 200 to 'start with' is also ridiculous. Go for the low-hanging fruit, people. If 'cds' and 'dvds' are going for $5.00 per click, try 'cds for sale in Canada' or 'limited edition science fiction dvds'. You don't need all 130 million visitors. 1 million should do fine. Heck, 10,000 should do fine.

Don't know what the low hanging fruit is? Buy a subscription to wordtracker.com.

Want to track your PPC effectively? Most of the big companies like Google and Overture have free tracking utilities you can implement or you could try using HitBox.com's services.

Anyway, I don't want to say everything that psycle said, but I will just add that by combining common sense with tools like wordtracker.com and hitbox.com you can garnish a very nice return on your PPC investment.

[rlrouse]

Based on the experience that I have gained by working with my clients, I would have to say the single biggest downfall for many PPC advertisers is simple vanity.

They have to be first in the listings at all costs. I had one client who (against my advice) placed a top bid of $12 on Overture for a competitve keyword. The item that she was selling on the landing page sold for $17.97.

After 4 months of losing money to her many new customers (from the PPC campaign) she dropped PPC altogether and posted a rant on her website about how PPC doesn't work and should be avoided.

My PPC rule #1: Never try to be the top bidder. You probably will and you'll pay too much.

PPC rule #2: Place your maximum bid only after considering the profit margin on each widget sold and the average number of clicks that it takes to sell one.

PPC rule #3: Make your ad as relevant as possible. If your ad says click here for small green widgets that are handmade by gnomes in the Catskills, make sure that's exactly what your visitors find after you pay a fee to a search engine to get them there.

If you follow these rules, PPC can be a very effective way to go for many online businesses. If done properly, PPC is effective and the results are immediate. And as was mentioned before, track everything! If something isn't working, change it. Don't keep spending good money using the same bad tactics. Experiment until you find a winning bid amount coupled with a killer ad.

[comicspick]

I have used PPC from Overture,I need Hits etc. Basically if you look at the setup only the more CASH rich companies can afford to play in that arena anymore. The Overtures have priced a lot of the smaller companies out of the PPC market. I have a small website I have been building over the last year basically geared to selling comics, magazines paperback books etc. Over all it has been very disapointing in as far as getting folks to even look at my website. Was Overture worth it. A resounding NO. A money drain at best.
Gary

[TrafficProducer]

Affiliate marketing ?

A couple of people mention this method.

It was my understanding that you have to pay for each click with this method as well as a commission to the Agent, (Commission Junction etc.), and a commission to the site owner. Also there is a set up charge.

This makes this method very expensive, much more than just PPC.

Have I got this correct?

[gameseek]

I would personally stay away from CJ (Commission Junction) I dont know exactly how much they charge now but i am pretty sure they are the most expensive out there.

Ok I know most of you on here will probably be from USA but there must be alternatives than Commission Junction.

Over here in the UK there are some great networks (eg. Affiliate Window, Affiliate Future, Trade Doubler, UK Affiliates etc.) Those give fantastic results.

Don’t forget all networks are open to negotiation, I am not naming names but with abit of negotiation you wont have to pay £0 set up fee, at best you will pay a small monthly charge to the network - all other outgoings will be for your sales.

£0 for clicks aswell - Paying for clicks is up to you, you can offer affiliates X amount per click. We think that offering them 0p is best because there is alot of cowboy websites out there that are set up just to make money from clicks etc.

But offering them a generous commission for the sale is best and it covers you - you will still make a profit for the sale if you make a sale etc!

CPC is much more dangerous. For us if we don’t get a sale within 7 clicks we are making a loss!!!!!!!!!!!

Finally, since we started affiliate marketing 4 months ago we have had 42,474 good clicks to our site. Weve spent £650 so far on affiliate marketing and made 100's of sales.

42,474 clicks - this would cost us £12,742 if we were on CPC with Kelkoo or Dealtime! (They charge 30p per click min)

£12,742!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!

[nefitco]

Spending 15% of your gross on PPC (advertising) is not a very wise business decision. We started with Overture 3 years ago. Sales increased by 30-40% the first month. We've been with them ever since and work use Google Adwords as well. PPC charges never exceed 5-6% or our gross. As PPC cost per keywords increase we are now focusing more on page optimization to achieve higher organic keyword search results rankings. Click through rates are much higher with Overture than Google. Google box ads are less effective since they don't appear as a listing above or below organic search results. Google wants to protect the legitimacy of their search results and in many ways I applaud them for it.

Microsoft will not standby and let Google and Yahoo (Overture) rake in the lucrative PPC dollars. I understand they're working on launching there own search engine/PPC model in the near future.

By the way, Bruce Clay of Bruce Clay, LLC has done an excellent job of visually laying out the internet in his Search Engine Relationship Chart.

Google just launched a regional advertising PPC feature in AdWords.

[mm99]

What I have observerd over and over again are people that dump money into ppc and the like, simply using the program to compensate for lack of good ranking and seo techniques. They figure that they'll spend money on these programs and it will solve everything.

One thing you really have to remember, if you are using ppc or not, when someone visits your site, only a certain number will buy or convert either way. They don't know or care if you paid to get them there or not. These are not "premium" customers. They got there searching for a word(s). If you pay to get more people to get to your site for a givin key word, you are just getting MORE people, not better people.

In my wonderful world of casinos, I have to have something around 200-400 clicks before someone does anything. If they manage to do anything, only about 10% actually become paying clients. This is pretty much the norm for my business. It makes no diff if I pay for them or not...it's just the way it is. My business depends on getting lots of traffic and getting a few takers along the way.

That is why by default, I had to learn something about seo, because getting traffic any other way just won't work for me. If I wanted to double my traffic, I could pay for it, or position myself better.

Recently, I went through my sites to determine which have the most potential to double traffic and that seem to have good conversion rates. I worked on them and am just now seeing the fruits of my efforts. Out of 5, three of them are now double the traffic, 1 is alnost there (3/4 more) and one I'm still trying to figure out (1/3 more). This did not cost a dime.

For the most part, I generally view ppc and the like as a cop out, that can be very expensive and can easily get out of control. Do the basics first. Then look at ppc as a way to further enhance your business at some point rather than something to jumpstart your business. Look at it as advertising in the yellow pages. You wouldn't spend $2000/mo to get things going...you'd go broke. You might do it if you had an established business and were simply budgeting a portion of your profits to build your business further.

I do hear success stories about ppc, sure I do. The ratio of good to bad seems to be somewhere around 1:8, off the top of head. If you are doing a ppc program, there should be meaning, planing, and purpose in doing so. It should not be "well, let's buy us up a s*** load of traffic an' git this damn thing a goin'". Won't work. Sorry.

peace...Paul

[Oman]

Thanks psycle for taking the time to lay it all down. Your post really does outline the fundamentals.

1) First of all, do you (did you) track your advertising campaigns? Before you answer, realize that I am not talking about looking at log files or web stats.

Yes we did. We assigned an associate ID from our affiliate program to each of the companies we worked with. In that manner we could track Zugbo vs Bay9 vs Overture etc.

2) Do you know the specifics of each one of your campaigns and keywords for a given period? i.e. total visits, CPC (cost per click), visits per sale (conversion ratio), total sales and margin, ROI (return on investment)

Yes. We tracked and compared sales by key word and referring site to find our margin and ROI. We also tried to maintain 3rd place. In that way we were not the top payer, but we werestill able to be listed in Yahoo's affiliation with Overture.

3) Did you test long enough to know your residual sales from a given period? Do you know your average duration (time from first visit to first sale)?

Our business plan called for a year and we stuck to our guns. We'e seen no loss of quarterly sales volume since stopping our PPC campaign.

A couple of items we didn't do? Cookies. We weren't able to track return visits. Nor were we able to track referrals that may have been made by a customer who came to us from a key word and referred a friend.

The other variable is SEO, how fast pages load, graphics...you know the intangibles. You know darn well they're going to influence a purchase regardless of how the customer got to your site.

Jim, the bottom line depends upon what you're trying to accomplish. If you're looking to increase market presence, perhaps a 1:1 ROI is reasonable. But if you're also looking for profit, I think I think you have to focus on CPR. I think there's a minimum CPR that makes PPC advertising work.

Bottom line..if you have your site optimized and your CPR is low, I think your ship will run aground trying to make it with a PPC ad campaign.

Oman

[Jim-Grill]

Another note regarding advertising in general.

Let's say I told you that for every dollar you gave me I could make .20 cents. Let's say that I'm willing to split a percentage with you. Now think to yourself for a minute and consider what you had to do to make your percentage. You had to do nothing!

Now let's look into the real world of business - slightly outside of the box for owner operators.

A business man owns a company that has a P&L report that's always in the black. He shows a strong history of making money with his business. An investor who wants a guaranteed return on his investment can give the business man seed money to grow his business. This seed money will be spent on advertising. They have meetings to discuss ROI and profitability. They figure out that after all expenses (payroll and everything) they will have an ROI of 6%. This is a license to print money!

As a small business this is not acceptable, but to Dellhost, or Pepsi this is great.

This is your biggest competition. You have to think about making money. The business is nothing more than a vehicle for the rich to get richer. If I had 10 million to invest I would not care if you sold CD's or underwater basket weaving club memberships. All I want to know is if I can make a return on my investment.

ROI factoid: s&p 500 has an ROI of 15% over 10 years.

[Bizwala]

My advice to our customers on PPC Campaigns, is stay away... Unless you wish to run a "Mind Awareness" Campaign, it's pretty much a lost investment.

I've done several site tests on both Google and Overture PPC's and neither of them deliver what I expected. In fact, business slowed down for some of the sites; however, visits were higher.

After 60 days of gaining no results from Overture, other than a higher ranking on Google (believe it or not, it actually affected our ranking from 12 to 4 in some of the keyword phrases.) I pulled Overture and we dropped back to normal (on google).. This was fine for me, the keyword phrase we dropped was a non conversion keyword...

I ran several tests with software created by myself on determining which keywords created results and which keywords simply created clicks. I found the keywords I needed and again ran the test on Overture and Google... A slight change but barely noticable. I then pulled overture out completely, except for 1 keyword phrase which I felt gave the highest payout as well as continued to affect my google ranking, I retain 5 out of 100 clicks in conversions on this keyword phrase, where others yielded 0 conversions. I dropped back to the normal hits, and our results were much better, and we're ahead of last year. Go figure...

I'm all for PPC if you want to get noticed and gain popularity on your product or products. But if it's sales you are after, then I'll opt out of PPC and stick with smart SEO.

None of my clients pay for PPC campaigns, yet each are doing very well as far as website exposure and business. Several of them, rely 100% on their website for income, I've never failed to deliver and I never waste their money on PPC.

It's interesting, I met with a Casino here in Las Vegas, and the Internet Manager stated he spent 5000 a month on Google Ads and he was doing well. If you have that type of budget, I can show you a ton of ways to earn equal or greater return on your dollar other than running Google Ads. :o

[publicgadfly]

As a brand new DIY website, I immediately jumped on the Kanoodle bandwagon - because they had PPC rates I could afford.

Your meta words have spaces after every comma~

It's my understanding that this won't work.

Other than that-