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Posted: 2006-09-11 / Author: John Dow

Does Pay Per Click Advertising Still Pay?

Does Pay Per click advertising still pay?:In theory, using the search engines sponsored Pay Per Click
advertising is a quick and easy way to provide instant and
targeted traffic to your web site. And historically this has
always been a good option for new web sites that don’t have any
other way to get traffic.

Buying traffic via a Pay Per Click can be a viable way to get
instant-targeted traffic. And a few years ago it was quite cost
effective. It was fairly easy to hit a 4-6 times pay through
(spend R100, sell R4-600) on a well-designed campaign. Now it’s
tough to get 2 or 3 times your investment back.

Why is it so difficult to get a good payback now? There are
several factors that can have a huge impact on results.

Competition – There are many more advertisers and web sites now
vying for the same keywords

Google Arbitrage – This is mainly an Adsense ploy to buy clicks
to create higher paying Adsense clicks

Affiliate Sales – These are folks who advertise products for
others and make a commission on the sales

Google Crack Down – Google has realigned their algorithms to
insure more accuracy in search results

Google CTR Factor – If you don’t get a good ratio of clicks
verses views, your cost goes up

Also throw in the fact that you need to write a short ad (25
characters for the headline, 35 for the two lines of copy) that
gets clicks, and find keywords that are very target driven
before you even get to the cost.

These factors have all caused the price of a keyword to
skyrocket. If you look at a basic R35 digital product and below
price level, it’s getting pretty tough to make a profit on high
cost keywords. And consider the fact that many web sites sell a
physical product that may only have a 50% markup, this can get
real ugly if your campaign is tight (low return).

Just so we all are on the same page, let’s look at the basic
goal of PPC campaign. It’s all about the conversion rate.
That’s how many products you sell per the number of visitors
(200 visitors and 4 sales gives you a 2% conversion rate).

You need to determine if the keyword cost will pay through on
the revenue generated by the sales (example: if each click
costs you .35, and your product sells for R35.00, and you only
convert 1 in 100 - you will lose money). Keep in mind that you
will normally pay 2-6% to your payment processor so even though
R35 is paid you only net R33 or less. So if you spent R35 on 100
clicks, you just went backwards.

Which means if you have a R35 product, you need to convert at
least 2 out of 100 to make a profit on the campaign. Several
years ago it was very possible to stay around .05-.25 per
keyword click cost. Now it is much more difficult to find
keywords below the .30 and many times it’s much higher than

There are other means to improve your conversion rate. A
well-written and effective sales pitch can increase sales.
Running promotions, offering special incentives, and offering
solid value helps too. I know people who get a 6% conversion
rate so it is possible to have a larger budget for keywords.

I also know people who have no problem spending R1000 to make
R2000. If you look at it in a pure business sense, you’re
doubling your money. But if something goes awry, or Google
makes a right turn and you still go straight ahead it can get
darn expensive.

I know folks who are spending R3-4,000 a day on their PPC
campaigns. And they are at least doubling and more the return
on investment. But the sad thing is they used to spend R1-2000
a day to make the same amount of money. So in many cases the
cost has doubled, the profit remained the same.

This does cut a lot of people out of the game. Between the high
dollar costs and the lower return, many won’t or can’t risk that
type of money. And learning how to find the right keywords, and
then write an effective ad is no walk in the park for most.

Pay Per Click advertising can and does work. But you really
have to have a well thought out campaign from start to finish.
Good products, sales pitch, incentives, keyword research,
effective ad writing, and conversion rates that can pay through
are necessary now more than ever with the high costs.

But you should have a well-rounded marketing plan that includes
PPC along with other methods to bring targeted visitors to your
web site. Organic search engine traffic (basic SEO), a good
linking strategy, and even offline advertising are all
necessary for generating a constant stream of potential buyers.

About The Author: John Dow owns, a
website that specializes in web site design tools, computer
troubleshooting, and security. His WebMaster Essentials CD has
helped many new and existing website owners. Go here to learn

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