Two Effective Ways To Overcome Rising Pay-Per-Click Advertising Costs

September 9, 2008

As more and more people start online businesses, your pay-per-click advertising (PPC ad) costs will increase. It’s inevitable as new internet entrepreneurs start pouring money into Google AdWords and Yahoo Search Marketing.

And the increase in PPC ad costs will definitely affect your bottomline. For instance, if you’re currently paying 20 cents a click and getting a 1% conversion rate for a $50 ebook, you’re making a profit of $30 for every sale.

Now, what happens if the cost per click is driven up to 50 cents?

With a 1% conversion rate, you’re just breaking even on your $50 ebook.

And what happens if the cost per click goes up to $1?

Now, you’re losing $50 for every sale!

So, how do you overcome this inevitable challenge?

Well, here are two proven strategies to overcome rising PPC ad costs:

1. Extend your customer lifetime value

Customer lifetime value (CLV) refers to the total amount of profits you’ll generate from your customer’s expenditure on your products and services in her lifetime. Using the earlier example, if you’re making a profit of $30 from a $50 ebook, your CLV is $30.

So, to overcome rising PPC ad costs, you’ll have to extend your CLV. In other words, you’ll need to generate repeat business by selling additional products and services to your customers.

Here are two ways to extend your CLV:

Tactic #1: Create and sell high ticket information products.

I highly recommend that you create a $97 to $497 information product and promote it via email to your customer list. The fastest way to create a high ticket information product is to conduct a live or teleseminar and record it on video or audio. And when you charge a fee for the seminar, you’re actually getting paid to create your product.

Tactic #2: Sell services.

For example, if you’re selling an ebook on job hunting, you should also sell resume writing or interview coaching services. You don’t necessarily have to be the service provider. You can always set up a joint venture with a service professional and collect a commission for every sale you generate.

2. Share advertising costs with complementary businesses

This is an old strategy used by franchises like McDonald’s. You see, every McDonald’s franchisee has to contribute to an advertising fund. A portion of their sales is automatically deducted for advertising expenses.

The reason is because each franchisee by itself wouldn’t be able to afford to produce television and print advertisements and buy airtime on national television or ad space in national newspapers.

But when they combine their financial resources together, they can afford to create a multi-million dollar advertising campaign. In other words, their leveraging on each other’s resources.

Now, here’s how you can adapt this strategy for your own business:

1. Find and approach one to three complementary businesses to share PPC ad costs.

2. Create a landing page that will promote your business as well as your joint venture partners’ businesses. If the landing page collects visitors’ contact information, each partner has access to the information. The landing page will have to be hosted on a neutral domain to be fair to all parties.

3. Set up PPC ads to send traffic to this landing page. One of the partners will have to be appointed to set up and manage the ad campaign. And that partner should be compensated for her effort. Alternately, you and your partners can outsource the task to a virtual assistant or a professional search marketing firm.

So, with these two strategies, the rising PPC ad costs will not be much of a problem for your business.

How To Set Up A Pay Per Click Advertising Campaign

June 18, 2008

Here is a basic 5-step guide to setting up your pay per click advertising campaign.

Step 1: Determine your advertising budget and the level of risk you are willing to take.

  • Larger search engines (e.g. Google, Yahoo) are less risky as they already have excellent market coverage and typically offer excellent customer service.
  • On the other hand, the larger search engines cost more to achieve a top ranking.

Step 2: Decide which search engines you wish to advertise on.

  • Find out which search engines your competition is advertising on.
  • Do your homework – research each option carefully. Read more

Introduction To Pay Per Click Advertising

June 12, 2008

Pay per click advertising (also know as PPC advertising) is a form of advertisement where you only pay if your prospects click on it.

That’s right. If your prospects see your ad but do NOT click on it, you don’t pay.

These ads can usually be seen on search engines like Google, MSN and Yahoo. The ads are called “Sponsored links” or “Sponsored ads” depending on which search engine you are using. They will appear next to or above the results of the original search.

Obviously, the higher the ad’s placement on the results page, the higher the chances of it being seen and clicked on.

So, to determine the ranking of the ads, advertisers have to bid on the “keywords” that they think their prospects would type in search engines when they are looking for a specific product or service.

There are currently more than 500 pay per click search engines. However, the top ten search engines produce over 85% of pay per click searches. Bidding for ad space on these search engines is extremely competitive resulting in higher advertising costs. The top three pay per click search engines that you should focus on are:

  1. Google AdWords
  2. Yahoo! Search Marketing
  3. Microsoft adCenter

Types Of Pay Per Click Advertising

There are several types of pay per click advertising.

1. The most popular form of PPC advertising is keyword advertising. The keywords that are bid on can be words, phrases, or even model numbers. The advertisements will appear in the order of the bid amount, from highest to lowest.

2. Product pay per click advertising lets advertisers provide “feeds” of their product databases to search engines. When users search for a product, advertisers’ links will appear with the highest bidder appearing most prominently. The user is able to sort by price and then click on a feed to make a purchase. BizRate.com, Shopzilla.com, Nextag, Pricegrabber.com and Shopping.com are popular product comparison engines, also known as price comparison engines.

3. Service pay per click advertising is very similar to product PPC ads. “Service engines”, such as Nextag, SideStep and TripAdvisor, offer advertisers the opportunity to provide feeds of their service databases which will appear when users search for that particular service. As usual, advertisers who pay more are given better ad placement. However, users can sort their results by price or other methods.

4. Pay per call advertising is similar to pay per click advertising. Ads are listed in search engines and directories. Publishers charge local advertisers for each call they receive as a result of their listing. This form of advertising is not just limited to local advertisers as many of the pay per call search engines allow nationwide companies to create advertisements with local telephone numbers.

Advantages Of PPC Advertising

  1. Pay per click can generate traffic immediately.
  2. Pay per click ads can be adjusted within hours or days in response to market behavior.
  3. Pay per click advertising can be a bargain if you choose your keywords wisely.
  4. Pay per click can guarantee ad placement for a relatively small portion of your marketing budget.

Disadvantages Of PPC Advertising

  1. It is very easy to get caught up in a bidding war over keywords and spend way more than you could ever recoup.
  2. The return on your investment can be very hard to measure. Some PPC search engines provide customers with measurement tools but they aren’t always accurate. Most of the smaller PPC companies don’t even provide tracking methods.
  3. You can spend advertising dollars just to generate junk traffic. PPC services distribute some of their results to other search engines allowing your listing to show up in the nether regions of the Internet.
  4. PPC advertising requires you to pay more money when more traffic is generated. On the other hand, natural search engine optimization allows you to invest a set amount of time and money to achieve a better rank and your cost will go down as you attract more traffic.