Pay Per Click Advertising

Introduction -  pay per click advertising (ppc) is a method of paying for individual prospects to visit your company website, every time they click on your online advertisement.  It is one of the fastest growing sectors of the advertising world and is dominated by the major search engines Google, Yahoo and MSN.  In this article we will explain how ppc works, the pros and cons of using online paid advertising, how to measure ppc return on investment and the critical success factors in managing a ppc campaign.

What is Pay Per Click? - pay per click advertising works by business users creating a short and compelling advertisement.  This usually appears online as a 'sponsored link' alongside the normal search engine results. The advert is displayed when ever the search engine user enters a particular search term that the advertiser has linked their advert too.   Advertisers bid on a 'cost per click' basis, on any search term they like.  When the prospect searches on that particular search term, the pay per click advert will also appear alongside the organic natural results.  If the search engine user clicks on the pay click advert the advertiser will pay the amount they have bid for that search term.  If the user chooses not to click on the advertisement, the advertiser pays nothing.  This is one of the most compelling reasons why pay per click is becoming the mainstream advertising spend of small businesses.   Advertisers only pay for real prospects who are interested in the content of the advert.  In other forms of advertising such as TV, radio and newspapers, there is no guarantee that the prospect will even see the advert, and yet advertisers still have to pay up front. Owners of small businesses seeking to use pay per click advertising to generate sales, need to educate themselves as to the practical online process required in setting up and managing a pay per click campaign....

Pay Per Click Networks - Pay per click advertising is primarily sold via the major search engines, who have developed integrated online 'pay per click networks'.  The most popular of these advertising networks are Google's 'Adsense', Yahoo's 'Overture' and Microsoft's 'Adcentre'. Small businesses can set up an online account with one of these networks and begin to create adverts. Adverts can either appear in search engines themselves or in one of the pay pay click networks approved 'content partner' websites.  Content partners are websites that pay per click networks have 'pre-approved' to display PPC adverts to appear on. Google's program is called Adwords and allows anyone with a website to potentially become a content partner and display PPC adverts from Adsense network.  Content partners receive a share of the commission once a prospect user clicks through to the advertisers website.  Adverts that appear on content partners websites will usually be displayed automatically using 'contextual' algorithmic technology.  This means the theme, topic or content of the advert will be very similar to that of the 'content partners' website.  In other words, potential prospects browsing a content partner website may also be interested in buying products and services from related organisations.  They see the ads appear and decide to click through to find out more.  

Targeting Prospects - PPC advertising networks also provide advertisers with the ability to exclude their advert appearing on inappropriate sites which may result in unnecessary clicks/ cost.  For instance, some networks allow advertisers to choose which geographies and which 'content partner' websites, the advert will, or will not be displayed.  These features help the marketer reduce their advertising budgets and improve the chances of genuine, interested prospects reaching their website i.e. improving the 'click through rate'.

Identifying and Bidding on Search Terms - advertiser entrepreneurs must identify the search terms used by their prospect audience, so that they can bid on those search terms.  Unfortunately, the online pay per click market for such search terms is well-established.  There is a high market rate for popular search terms in sectors such as financial services, travel and so on.  By undertaking a market research process using online 'keyword tools', advertisers can establish the most popular search phrases (and the likely cost per click), that are already being used by people across the world in search engines. By compiling a list of search terms related to the product or service being sold, it is possible to identify niche search terms that may not be as expensive as the most popular.  The  popular search terms such as ' mortgage quote', will have a very high cost per click and will more than likely be dominated by bids from larger organisations, with deeper pockets for a marketing budget.  Bidding on niche search terms provides access to the same prospects the multinationals are selling too, and at a lower rate. As the online auction for on search terms never ends and is open twenty four hours a day, advertisers must expect to log in to their account and adjust their bids accordingly either up or down.  Therefore, price of a search term is calculated by its popularity according to number of advertiser bidding on the same search term. There may be dozens of advertisers or only a few, depending upon how mainstream or niche the search term is.

Pros of Using PPC? - advertisers budgets can easily be controlled because they will only pay for a genuine 'click through' and campaigns can be switched off at any time.  Advertisers will only be charged when the prospect clicks on a pay per click advert and carries on through to the website to potentially buy something. Even if the adverts are displayed thousands of times (page impressions), it does not really matter.  Secondly, advertisers can enjoy more qualified business leads thanks to tracking statistics from the PPC networks allows advertisers to track which search term the user clicked on, how many times the advert was displayed, the click through ratio, as well as goal setting once the prospect buys the widget xyz from a specific landing page on the advertisers website.  Thirdly, there are many third-party tracking software packages available that will allow an advertiser to measure the return on investment. These work by linking the pay per click network statistics, with code in the advertisers website. For instance, if the advert is displayed 1000 times, and 100 people clicked through (at a cost of X per click), and 10 people actually bought something (at an average margin of Y per sale), it is a simple mathematical formula to work out the return on investment. Fourthly, pay per click advertising can be turned on and off as the changing needs of the business owner. As the economy slips into recession, there is a desire to maximise profitability from every pound invested in a pay per click campaign.  For businesses with cash-flow difficulties, PPC spending can be controlled or unleashed depending upon its effectiveness for advertisers.

Cons of Using PPC? - for the inexperienced and hassled small business person, pay per click can seem like an expensive experiment.  Many give up too soon, after burning lots of money too quickly, and without properly obtaining a longer set of statistics of investment return and advertising spend.  It does take time and patience which many small firms simply cant afford.  Usually, managing a campaign requires skill to identify the appropriate search terms, create compelling adverts, check feedback statistics by logging in a couple of times a day to see how much money is being spent. If the small firm does not have the IT management skills, confidence or time themselves, they may have to employ an SEO company to do it for hem.  Finding a good SEO firm can be extremely hit and miss.  Lastly, the moment the prospect click's through onto an advertiser's website, the advertiser must be ready to jump on the lead and respond. Failure to respond quickly is a major complaint of prospects, who have been speculatively searching for products and services using the internet. Another major complaint is that there is no telephone number on the website to speak to an adviser, where the prospect simply can't be bothered to fill out a long (and perhaps overly complicated) online form.  Either the advertiser sets up a properly resourced, out of hours telephone call-back process (to support PPC activity), or the impatient prospects are likely to get fed up of waiting for a telephone call back and try a different website instead.

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