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A Fresh Perspective - Using PPC |
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Contributed by Administration Team
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By Dave Brown
I see a lot of people asking questions lately about how to
use pay per click (PPC) search engines. Although it isn't
rocket science, there are some things you need to
understand in order to do it effectively.
Here are the basics. Then I'll get into some things that
aren't so basic.
If you're not familiar with PPC advertising, just go to
Google and search for something. Anything. Search for
"books" if you can't think of anything. Along the right
side of the page, you should see some colored boxes under
the title "Sponsored Links".
Those ads are Google's version of pay per click
advertising. If you search on Yahoo, you'll see some
sponsored listings at the top of the search results.
Pay per click advertising means that you submit an ad to
be displayed along with search results, and you pay the
search engine every time someone clicks your ad. So if you
click one of those colored ads on Google, someone will pay
for it.
That's how it works. Now let's talk about how to use them
effectively.
Today's Fresh Perspective: PPC Management - When To Give
Up On A Loser
Pay per click (PPC) advertising can be a dream come true.
You can get traffic almost immediately from some PPC search
engines. And it can be mighty cheap too. Next to joint
ventures, PPC search engines have been responsible for most
of my online income. I've gotten some great returns on PPC
campaigns. And I know other people who have too.
I've had one PPC campaign that made me $56.69 for every $1
I spent. I know, that's pretty incredible. And it's not
typical. But I have another that's making me $8.84 for
every $1 I spend. Yet another makes $7.73 for every $1.
But I have other campaigns that have lost me money. Making
money, instead of losing it, with pay per click search
engines involves wise management. There are many different
factors that decide whether you'll be in the red or in the
black. And you need to be aware of what these are.
In fact, there are times that even the best management of
your PPC campaign won't save it. Some of them will be
losers and there's nothing you can do about it. But you
need to know when to decide that you have a loser on your
hands. At what point should you bury it and move on?
There are a number of different factors to consider.
There's no simple answer. I can't tell you to simply
abandon your PPC campaign after 200 clicks without a sale.
Or to quit after you've lost $50.
First of all, you need to know how much your profit will be
on each sale (before advertising costs). For example, if
you're selling your own product for $47 through Clickbank,
then you'll make $42.48 on each sale after Clickbank takes
their fees.
But if you sell someone else's product for $47 through
Clickbank, and you get a 50% commission on each sale, then
you'd only get $21.24.
But you need to know even more than that. You also need to
decide how much of that $42.48 (or $21.24) you're willing
to spend on advertising. In other words, what's the least
you're willing to earn on each sale? This will determine
how much you can afford to spend on advertising.
Let's assume you make $42.48 per sale. If you decide that
you'd be happy with a $20 profit, then you can spend as
much as $22.48 to make each sale.
So now you know what your advertising budget is. Next,
estimate what your conversion rate will be. If this is a
brand new product you're promoting, then you may have no
idea. In those cases, I tend to use 1% as a rule of thumb.
That means that 1 out of every 100 people that visit the
site will buy. Let's use 1% for our example here.
So if you're willing to spend $22.48 to make each sale, and
you expect to make one sale out of every 100 visitors, then
you can afford to spend 22 cents to get each visitor to the
site. This means that you can afford to bid 22 cents on
each keyword on the PPC search engines (max).
At this point, you can go ahead and set up your PPC
campaigns. Find your keywords. Place bids. I won't cover
these issues right now because they're off the topic. The
purpose here is to know when to drop your campaign because
it's a loser.
Now, just because you *can* bid 22 cents on each keyword,
it doesn't mean you should. You should bid as low as you
can to get good traffic (whatever you consider *good* to
be).
In our example, let's fast forward. Imagine you've already
gotten 150 clicks, and your average bid has been 22 cents a
click. So you've spent $33, and you haven't made a sale
yet. Should you ditch this campaign?
No. *On average* you can spend $22 per sale. But that's an
average. Which means that sometimes you'll spend more, and
sometimes less. And if your conversion rate is 1%, then
that's also an *average*. So don't freak out if you haven't
made a sale after 150 clicks.
When you decide to drop a campaign though, make the
decision based on how much you're spending on it. Not the
conversion rate.
When I first start a campaign, I'll often wait until I
spend at least double my advertising budget with no sales
before I consider dropping it. Maybe even triple my budget
if I'm emotionally attached to it. ;-)
But if I haven't made any sales by then, I'll usually stop
the campaign. However, you may want to wait longer if
you're willing to spend more money to see if it works. I
think I'm probably more of a conservative.
At any rate, I *rarely* end a campaign before I get 300
clicks. 300 is typically the minimum number of clicks
before I feel I can judge whether a campaign will pay off.
And I will generally only end it then if I've had *zero*
sales.
Sometimes, though, you'll make a quick sale and get
excited. But then you see few or no sales after that. If
you find that you're consistently spending more than your
budget for the first few sales, then get ready to end it if
you don't figure out how to make it better.
I want you to realize, too, that when you bid less on your
keywords, you can afford to live with a lower conversion
rate. But when you bid more, your conversion rate has to be
higher to provide you with the profit you want.
I've only talked about *starting* a PPC campaign so far.
But sometimes, you may have a PPC campaign that's paying
off, and then it starts choking and gasping for air after a
while.
In that case, you need to decide when to pull the plug and
retire it. Otherwise, it may eat up all the profits you've
already made.
I'll usually be more lenient in this case. Since the
campaign has made me money in the past, I'm more likely to
give it the benefit of the doubt and keep it running. I
don't know if that's a good idea or not. But sometimes,
it's just hard to say goodbye to an old friend. After all,
maybe it's just a temporary downturn.
But you still have to cut it off at some point. If I find
myself breaking even (or even losing money) on each sale
for any length of time, then I'll start thinking about
ending the campaign.
In our example here, if you notice that you've been
spending $45 per sale lately, then start thinking about the
future of this campaign. Try to figure out what's changed
and see if you can fix it.
How long should you wait before you abandon it? Two weeks?
A month? Ten sales? A hundred sales?
It's completely dependent on your situation. If you make 20
sales a day, then obviously worrying after only 20 sales is
unwarranted. On the other hand, if it takes you 4 months to
make 20 sales, then maybe you shouldn't wait quite that
long. Listen to your gut.
In the end, be aware that PPC management is not a rigid
science. You have to use a certain amount of judgment. But
try not to be emotionally attached. If a little voice in
the back of your head is telling you that you're spending
too much for too little, then listen to it.
What I've given you here are guidelines based on my own
practices. I'm sure there are other people who do it
differently and are also successful. But these strategies
work for me. And I'm sure you can adapt them to work for
you.
This article was written by Dave Brown. To visit his website
go to http://www.dave-brown.com.
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