PPC Advertising - Minimizing the Cost
by Michael Bloch
Copyright © Michael Bloch. All rights reserved. Published at websitetips.com with permission.
If you've ever been turned off participating in PPC (Pay Per Click) campaigns, it's quite understandable. It's not unusual to pay several dollars for each click depending on the industry involved. If you're new to the world of pay to play, read my introductory article on pay per click.
Why do Companies Pay such High PPC Prices?
If you examine PPC prices, you'd be left thinking that everyone involved has squillions to invest. It's not the case. There are plenty of little guys who, out of ignorance, take the plunge only to drop out shortly afterwards - and it would appear that there's always someone waiting to take their place.
The high cost of PPC usually boils down to a few reasons:
- Advertiser 1 makes a bid
- Advertiser 2 outbids him
- Advertiser 1 outbids Advertiser 1 to get top ranking back
- Advertiser 3 comes on the scene and outbids them both
- Advertiser 1 & 2 rise to the challenge
While everyone is getting caught up with the bidding process, many advertisers wouldn't have researched their COA (Cost of Acquisition) for each new client.. they are spending more than they are bringing in terms of profit.
At the end of the cycle, advertisers 1,2 & 3 run out of cash - but there are plenty more of these kinds of advertisers out there... they get auction fever.
Many large organizations are willing to spend megabucks just to get their brand name in front of people - sales are just a bonus. A good example organization such as Coca Cola... one of the best know brand names in the world - yet they still pump huge amounts into advertising each year.
The Acquisition Boys
In a town I lived in, there was an independent grocery store. A couple of executives from a large supermarket chain gave him a check and told him that this was the amount their company was going to pay him to sell up.
If the grocer refused, they threatened to open up a store across the road from him, run it at a loss until they sent him bankrupt - and they made good on this threat. The same sort of strategy can be used in the pay per click game.. the bigger companies try to starve out the smaller ones.
Large Quantities at Small Profits
Business owners have an increasing tendency to pursue turnover at the expense of profit margins. They are prepared to have very narrow markup, sometimes none at all - with the aim of acquiring customers in bulk in order to hopefully push other products onto them at a later stage. It doesn't always always work out this way. Many companies end up with a huge client base and then don't have the resources to properly resource their services. Meanwhile, they've “polluted” PPC bidding with outlandishly high bids that have a negative affect on all advertisers.
How to Avoid Paying High PPC Prices
PPC advertising for highly competitive keywords isn't for the those who are faint hearted and on tight budgets. Advertisers should carefully calculate their COA before they step into this arena and start bidding against the big boys for choice terms.
Bidding on Popular Keywords
The experienced and those advertisers who don't monitor their PPC listings can be easily spotted. As an example, the following is a sample bid listing on a keyphrase that I saw recently:
- 1: $10
- 2: $8.50
- 3: $8.49
- 4: $5.50
Advertiser 3 has fallen asleep at the wheel, he could have that position for only $5.51 - even if he bid $6, that may sufficient to prevent advertiser 4 trying to outbid him. Because he isn't monitoring this also forces Merchant 1 & 2 to maintain their high bids in order to stay in their respective positions - this happens *very regularly* - it's totally insane.
If you are determined to bid on high value, popular keywords, ensure you monitor bids very closely, you can save a heap of money.
Bid on Less Popular Keywords / Targeting
While “flombles” may be the most popular keyword in your industry, why not try for “red flombles” instead - you may not get as many visitors, but more descriptive, multiple keyword terms can cost a packet less and bring you more targeted traffic. Then all you need to do is to have multiple listings on different keyphrases to give you the level of traffic you require. Here's a real-life example from a popular PPC network:
- Keyphrase: ringtones
- No.1 ranking cost: 48c
- No. of times searched in the last month: 928588
- Keyphrase: siemens ringtones
- No.1 ranking cost: 11c
- No. of times searched in the last month: 3221
- Keyphrase: mobile phone ringtones
- No.1 ranking cost: 29c
- No. of times searched in the last month: 3331
- Keyphrase: motorola v60 ringtones
- No.1 ranking cost: 12c
- No. of times searched in the last month: 4776
If you average out the cost of the 3 less popular keywords, it comes out to around 17.6c per click. That's nearly 2/3 cheaper. Over 1000 clicks, using minor keywords and phrases in this example would save the advertiser around $300 and these less popular keywords / phrases can generate better targeted traffic; driving down the cost of acquisition for each new client.
Don't Aim for a No.1 Ranking
So may advertisers unnecessarily give themselves ulcers over a no.1 ranking. A number of studies have shown that as long as you're within the first 5, your chances of a successful campaign are still very good. Think about your own shopping habits - do you buy the first thing you see, or do you tend to compare prices? Perhaps by dropping the level of your bid and therefore your ranking, you can give prospective clients a more compelling reason to buy from you by offering them a discount via the money you save on your PPC campaign!
Effective Fraud Monitoring And Filtering
Each time engages in click fraud in relation to your campaign, it drives up the real PPC price for you. One or two clicks probably doesn't matter, but what if it's hundreds? Fraudulent clicks happen more regularly than you may think. Read my article on click fraud for a more detailed discussion and strategies, including information on the use of filters and other tools supplied by PPC companies.
Create Custom Landing Pages
Bear in mind that anything that helps you to convert visitors into customers effectively reduces your COA, making each click “cheaper.” Instead of directing visitors straight to your home page, create special pages that focus on the keywords you used to direct them to your site. Learn more about creating effective landing pages.
Keep Ad / Landing Page Quality High
Some PPC networks such as AdWords now apply “quality scoring.” This is where your ad and landing page are run through an algorithm and if you come up short, i.e. the algorithm arrives at the conclusion of poor quality, your minimum bid will be higher.
Watch for Special Offers
Most PPC companies run special offers quite regularly e.g, deposit $50, get an extra $50 in credits. Read the newsletters sent to you regularly and take advantage of these kinds of savings.
If you're just starting out in PPC, try a few companies that offer signup credits and discounts so that you can experiment. A listing of some of these companies and other valuable tips can be found in my introductory guide to PPC advertising.
PPC is not for everyone, but don't be scared to give it a whirl. Treat it as 50% strategy and 50% gambling - i.e. don't invest more than you can afford to lose.
Related Learning Resources
- PPC - Introduction, tips and resources
- PPC fraud - detection and prevention strategies
- Minimizing shopping cart abandonment
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