Is Pay Per Click Advertising Still Relevant?

by John Eberhard

I was talking to a friend recently who is a salesman for a company similar to mine, and he told me that he is running into more people lately who have a negative reaction when he brings up pay per click advertising (PPC) on Google AdWords or MSN Ad Center.

I have been giving this some thought as to why this would be, and whether many people have given up on PPC. My theory on this is that PPC has been getting more and more competitive over the last few years, in that there are more people using it and that drives bids higher. So it makes PPC more difficult to do, especially if you’re managing it yourself or if you have a company “managing” it who only looks at your account every couple months.

What Companies Are a Good Fit?

There is also the factor of whether your company and product are a good fit for PPC advertising in the first place.

I have said in past articles that PPC works best for high ticket items, and let’s arbitrarily set that at say, $200 or more. If you are selling a book or a CD or some other similar low ticket item, pay per click advertising is not right for you. The reason for this is driven by the bid levels. Bids are driven by how many companies are competing for any given keyword.

Let’s say that the bid level for a keyword that you want is $1.00. That’s not unusual today. That means that every time someone clicks on one of your ads, you will get charged $1.00. The days when you could get a competitive keyword for 15 or 20 cents are long gone. I saw a book recently claiming to give the real skinny on how to do pay per click management and throughout it was talking about getting people to click on your ads for 5 to 10 cents. That just doesn’t exist any more so it really threw the whole “system” this guy was selling out the window.

From my experience managing many accounts over the last few years, PPC works extremely well for companies like home improvement, for example, where the average sale is in the thousands, and especially in cases where the product is something you really need and not a luxury item. It works well in health care, but there you really have to know what you’re doing because there is so much competition.

Conversions

The purpose of setting up a PPC advertising account is to drive in a steady flow of leads or sales to a business. In PPC terminology we call this a “conversion,” which is defined as someone who calls in from the campaign or fills out a form on the web site asking for more information, an appointment, etc.

It is vital with both Google AdWords and MSN Ad Center to set up what is called “conversion code” and put that on certain pages on your site. This allows the Google or MSN interface to track the number of conversions you are getting, and you can see which campaign, which ads, and which keywords your conversions are coming from. This also allows you to see what your cost per conversion is.

It is also a good idea to set up phone call tracking, so that you can know how many phone call conversions you are getting. There are a number of companies that do this, where a new toll free or local number is set up, that bounces to your phone number, and you put that number on your PPC landing pages. If you have multiple campaigns you can set up multiple numbers to track them all. Most of these companies can also record all the calls so you can review them later if desired.

Managing

The first task of managing a pay per click account once it is set up, is to get it to the point where it is producing a steady and viable flow of leads or sales. You have to select a budget for your account, and this has to be adequate to produce enough people clicking on your ad and coming to your landing page, so that a percentage will fill out the form or call and become a conversion.

If your average cost per click is $1.00, and your monthly budget is $100, that’s not going to produce very many conversions. I read somewhere that the average nationally for conversions for lead generation campaigns is 3%. So in the above scenario, with a monthly budget of $100, you are only going to get 3 conversions per month. So you have to select a budget that is enough to produce enough leads to make it worth doing.

With online sales, Ed Dale says that the average conversion percentage is 0.5%. So with 200 people clicking through to your landing page, you would get one sale.

With many keywords, the average bid, or cost per clickthrough, is much higher than $1.00. It depends on the industry.

Here are some general fixes for specific problems:

Low Impressions: Add more keywords

Good Impressions but Low Clickthrough Rates: Write new text ads and test them against your current ads. This is called an A-B test when you test multiple ads or landing pages against each other.

Good Clickthrough Rates but Poor Conversions: Look at your landing pages. If the conversions are poor your landing page is to blame. Write new copy, or come up with a new offer. Then put up one or more new landing pages.

High Cost per Conversion: Adjust your bids. Look for expensive keywords where you are getting high clickthroughs and spending a lot of money but getting no conversions. Pause those keywords.

Still Relevant?

So in answer to the question in the title of this article, is pay per click advertising still relevant today? The answer is – absolutely. As long as it is a good fit for your product or industry, PPC can produce a steady flow of leads or sales for your business.

But if you are managing it yourself and not getting any joy, before throwing your hands up in despair and turning your account off, have a professional PPC manager work on your account. And make sure he will actually manage your account weekly. I have recently run into people who had PPC managers who seemed to be asleep at the wheel and were not tracking what was happening with the accounts. One allowed the cost per conversion to double over the course of a year. Another was only looking at the account every other month.

A professional PPC manager can get the best possible results out of your account.

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