We Just Clicked


Cost-per-click advertising hits the bulls-eye when targeting potential clients.


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We Just Clicked

What is Cost-Per-Click Advertising?

Cost-per-click advertising (CPC) is one of the most popular forms of advertising on the Web. Created by Overture in June 1998, CPC allows businesses to bid against each other for the top spot on the search engine results page, under a special heading, such as “Sponsored Links”. Also known as pay-per-click advertising, this method provides a win-win situation for all those involved. Consumers access companies that are providing specific products and services. Businesses only pay to reach a targeted audience — one more likely to buy. And search engines providing this service profit every time a link is clicked. Usually, companies that use this form of advertising report positive results, mainly because they are not spending money on advertising that may be reaching non-targeted prospects.

How It Works

Consumers who are looking for something specific, for example Web hosting, go to a search engine and type in their query. Included with the results is a list of “Sponsored Links” (on the right-hand side), which lists companies that offer Web hosting services. Voila! The consumer gets a specific company selling exactly what they are looking for.

The ad appears after businesses create their listing (description and URL); choose keywords (words that apply to the listing); and a bid (amount paid per click). The highest bidder usually moves to the top of the list, however business owners are not charged unless a targeted consumer clicks on the link.

Some believe that remaining the number-one ranked company in the free search engines should be enough, without having to pay for a higher position. However, studies have shown that unless a business appears in the top 10 listings, chances are the consumer will never find it. They will click on those that appear within this frame, and most often will settle for a company’s competitor. That is why having a sponsored link is very important — it ensures that whomever is conducting the search will find the Web site.

Writing Up The Advertisement

There are six things to remember when writing text for a CPC campaign:

  1. Ads with similar keywords in the title and text perform better.
  2. The first five words in the description are the most important — some search engines only show these terms because of space restrictions. Get the brand name, domain or selling feature here.
  3. Testing is key. Several ads should be created and run at the same time for at least a week. Once the week is up, check to see which one performed best.
  4. Use precise, targeted words in the text: call-to-action ("download"); descriptions that should solve all problems; or a free trial. Do not use exclamation points or capitals. Use only the type of language that would be used in an essay or letter.
  5. Link all CPCs to a separate page on the Web site, one that is designed specifically for this purpose (unless the site is too small). Present more details of what the business is offering, because without it the consumer may go to elsewhere.

Advantages

Return on Investment
CPC is a very effective marketing tool. The efficiency of the advertising is easy to track, therefore making the return on investment (ROI) figures easy to determine. ROI is determined by how many click-throughs resulted in a sale. Unlike print advertising, where a company may spend thousands of dollars on one ad that very few people may see, CPC allows business owners to see exactly how many people clicked on the ad and what percentage of those decided to purchase something. If the revenue exceeds the costs involved with getting the customers to the site, then the business is making money.

Auto-Bidding
Many CPC engines are now offering “auto-bidding” to make things even easier for their clients. If Company A puts in a maximum bid of 10 cents, they have determined their limit per click. However, at the moment they may only be paying five cents. If Company B decides that they want to move to the number one spot and ups their click-through rate to six cents, the auto-bidding feature will up Company A’s bid to seven cents so that they will remain in the first position. And they didn’t have to constantly monitor the situation.

Attracting Visitors
CPC is the most direct way to attract visitors to a site. Choosing specific keywords means that only those who are most interested will click on the link. Because businesses only pay for those who click through, all the other times that the link appears, it is free advertising.

Increasing Branding
Fifty percent of sales occur when a customer visits a Web site for the first time. The other 50 percent generally occurs on subsequent visits. If a customer sees a company listed at the top of the sponsored links section, chances are that business will get the sale. But even if the sale isn’t made right away, there is still the advantage of branding — building awareness of the site for future needs.

Having Full Control
Advertisers choose the terms that describe their company; what the click-through rate is worth; how much they are willing to pay each day; and how long the campaign will last. All of this is managed on their own time, not set by deadlines created by an outside source.

Disadvantages

Budget Limitations
Because businesses only have so much to spend on their campaigns, they need to set a budget for not only how much they will pay for each click, but also what their daily maximum will be. Because there is a set limit on the money that can be spent, this also limits the amount of exposure the ad will have. Once the daily maximum has been reached, the ad is no longer shown and potential customers could be lost.

For those on limited budgets, this can mean that some of the larger players will gain more exposure because of their financial ability to pay more per click. But having the budget doesn’t necessarily mean becoming number one. It takes patience, determination, creativity, keyword selection and daily analysis to be successful.

Just Looking…
Just because someone clicks on a link, it doesn’t necessarily mean that they will buy. Some people are just doing some research and may click through to see what else is being offered at another spot. It might even be a competitor who is nosey.

Is It Working?

The best way to figure out if CPC is working for a particular business is the acquisition costs — how much does it cost to get a new customer? Basically, identify what the sale is worth: sales price – (cost of goods + overhead) = sale. Keep all CPC costs below this point.

Major Players

The two most successful CPC search engines on the Web are Google and Overture, although there are others.

Google AdWords
There are some keys to producing a great CPC ad in the Google AdWords search engine. Because Google ranks its CPC advertisers on a different scale than the others, it is sometimes difficult to determine who will get the top spot. With Google, the sum of the CPC bid, times the click-through rate, is what determines the number one position.

The key to this engine is to start the bidding high, just to see where the market is. Because Google only shows the top eight spots frequently, it is important to figure out how the search is running. Bids that are too low will not produce a high click-through rate so Google might cancel the ad.

It is also important to monitor the cost for each click, depending on how the ad is performing. For example, if the click-through rate drops, up the CPC for a short time until the business is back in the top range. This will result in some click-throughs and the ad will again be successful, reaching nearly 60 million Web surfers worldwide.

Overture
Through its pioneering advertising campaign, Overture enabled businesses to pick (and pay for) specific keywords so that they could appear in the number one spot for the particular subject. Businesses who join with Overture reach 80 percent of the Internet and the group receives a total of 170 million sales lead each month. Overture’s goal is always to find new ways for customers and businesses to connect online.

In the second quarter of 2003, Overture had facilitated 608 million paid introductions.

Other Keys To Success

The most important thing is to have a plan. Without a plan, the CPC method will never make money. In addition, it is important to utilize the tools offered by search engines when choosing which keywords will be used. Since the most popular keywords are ultimately going to be the most expensive (costs are driven up to get the click-throughs), ROI tracking is very important.