Optimize My Website - PPC - How does it work?

PPC - How does it work?

Pay-Per-Click (PPC) or Sponsored listings are used in order to help establish a website on a search engine's result pages when the common generic listings are not providing top positioning. By paying a PPC provider a fee it is possible to have a listing within the top few results given by a search engine. For this reason, PPC is a nice solution when a website is starting to establish a relationship with these search engines, which has developed into a sometimes long term project. But like everything, there is more to the process than just paying a fee.

Budget:

If you have a bottomless budget than the issues of PPC are virtually eliminated. Of course, this is seldom the case. Lets use Google as our default search engine in this discussion. When you search on Google for "LA Dentist" you are going to see over 2 million competing webpages. This would be a good candidate for PPC. But, it is not the whole answer. Currently, the phrase "LA Dentist" will cost you $11.78 per click with the average of 33 people a day clicking on the PPC add. You would have to keep a budget of almost $400 a day or $12,000 a month to catch all of these clicks. Add to this the fact that most people are going to want multiple phrases be advertised for and you quickly need a budget in the millions of dollars.This is simply not possible for most businesses. So, the solution is to lower the budget to a more realistic amount. This causes another issue though; competition.

Competition:

There are dozens of people advertising for the PPC phrase "LA Dentist" and Google is only going to display a few of these at any given time. Who is eliminated when not everyone can be displayed? Google looks at several factors. 1) Google is going to display those that have a bigger budget. They are looking at making as big a profit as possible, so Google is going to display the adds that bring in the most money for them. 2) When the higher paying PPC clients exhaust their budget then they are dropped from the list and the lesser budget advertisements get a chance. 3) Google is also worried about relevance. They will choose to display adds that have been clicked on more often. To Google, clicks prove relevance. If a site or an add is picked by a wide margin more than another then it must truly be about that searched for subject. 4) Another factor is randomization. If you were to rely simply on the above factors then a newly added PPC add with a smaller budget would never appear, especially when there are dozens or more deep pocket PPC clients to compete with. In LA you can expect many, many dozens of competing clients. So, a small percentage of adds are displayed randomly, or once in a while, to give them a chance for occasional click through. When they are clicked on a few times then factor 3 above promotes their rate of display. 5) History; the longer an add has been running the greater the relevance granted.

PPC Fraud:

It is a sad fact that about half of the clicks are fraudulent. In fact, most studies claim that click fraud is greater than 50%. When a person's budget is used up then they no longer appear. Most people who first start using PPC learn how all this works and will click on their competitors adds just to delete him from the daily mix, or just cost him some money for a quick laugh. These are sad facts.

Monthly Budgets:

Once the adds start being displayed there is another issue; over spending. You would think that if you set a monthly budget then you would stay within that monthly budget. Again, we find more issues. Even though these PPC providers allow for monthly budgeting, it is a daily click budget that they truly offer and it is not a very smart budget at that. Let us assume there is a monthly budget of $30 for Google. This would equate to $1 per day. If an add costs $0.80 then you would think that only another 20 cents worth of click was possible. Instead, Google is going to allow any click to occur no matter what its cost because the budget is still open. If another 80 cent add is chosen then the budget is then met and the account is treated as done for the day. We have seen budgets exceeded by 300% for the month because of this budget weirdness. The provider promises that they will guarantee roughly a 20% accuracy rate for budgeting, but it requires a long phone call and proof that the budget was not changed and further arguments, because how do you prove that you did not change the budget and... you get the point. We are going to be stuck with this overage. What we do to avoid this is monitor all of the accounts for all of our clients all month long and turn them off when they are exceeded. Of course this causes the add not to be shown again until next month. Currently we are only using Google and Overture. MSN will be added to the mix very soon requiring yet another account to watch. Very troubling.

Reporting:

Even this is complicated. You would think that you could look at the server logs of a site and know how many clicks occurred from a PPC add. Not the case. These providers also allow personal sites to display PPC adds and the generic listings. Even when using customized javascripts provided by these PPC engines many of the PPC referals are not always traceable.

Conclusion:

When a client starts a PPC campaign they usually expect to see their advertisement right away, and they want to see that add every time they look for every phrase they want supported and even for phrases that were not discussed. The fact of the matter is; it is not going to happen. It might take a few thousand searches before that randomizer kicks in and displays the add for the first time. The second time might not be any better until the add is clicked on. Maybe dozens of clicks might be needed depending on how rooted your competition is.

PPC can be a very successful tool. In order for this to be the case we need a decent budget and enough time to get the needed relationship between the PPC provider and the site. A month or two is normal, but not always the case. It all depends on the site and its competition.

Written by Administrator
Thursday, 02 August 2007
PPC - How does it work? Pay-Per-Click (PPC) or Sponsored listings are used in order to help establish a website on a search engine's result pages when the common generic listings are not providing top positioning. By paying a PPC provider a fee it is possible to have a listing within the top few results given by a search engine. For this reason, PPC is a nice solution when a website is starting to establish a relationship with these search engines, which has developed into a sometimes long term project. But like everything, there is more to the process than just paying a fee. Budget: If you have a bottomless budget than the issues of PPC are virtually eliminated. Of course, this is seldom the case. Lets use Google as our default search engine in this discussion. When you search on Google for "LA Dentist" you are going to see over 2 million competing webpages. This would be a good candidate for PPC. But, it is not the whole answer. Currently, the phrase "LA Dentist" will cost you $11.78 per click with the average of 33 people a day clicking on the PPC add. You would have to keep a budget of almost $400 a day or $12,000 a month to catch all of these clicks. Add to this the fact that most people are going to want multiple phrases be advertised for and you quickly need a budget in the millions of dollars.This is simply not possible for most businesses. So, the solution is to lower the budget to a more realistic amount. This causes another issue though; competition. Competition: There are dozens of people advertising for the PPC phrase "LA Dentist" and Google is only going to display a few of these at any given time. Who is eliminated when not everyone can be displayed? Google looks at several factors. 1) Google is going to display those that have a bigger budget. They are looking at making as big a profit as possible, so Google is going to display the adds that bring in the most money for them. 2) When the higher paying PPC clients exhaust their budget then they are dropped from the list and the lesser budget advertisements get a chance. 3) Google is also worried about relevance. They will choose to display adds that have been clicked on more often. To Google, clicks prove relevance. If a site or an add is picked by a wide margin more than another then it must truly be about that searched for subject. 4) Another factor is randomization. If you were to rely simply on the above factors then a newly added PPC add with a smaller budget would never appear, especially when there are dozens or more deep pocket PPC clients to compete with. In LA you can expect many, many dozens of competing clients. So, a small percentage of adds are displayed randomly, or once in a while, to give them a chance for occasional click through. When they are clicked on a few times then factor 3 above promotes their rate of display. 5) History; the longer an add has been running the greater the relevance granted. PPC Fraud: It is a sad fact that about half of the clicks are fraudulent. In fact, most studies claim that click fraud is greater than 50%. When a person's budget is used up then they no longer appear. Most people who first start using PPC learn how all this works and will click on their competitors adds just to delete him from the daily mix, or just cost him some money for a quick laugh. These are sad facts. Monthly Budgets: Once the adds start being displayed there is another issue; over spending. You would think that if you set a monthly budget then you would stay within that monthly budget. Again, we find more issues. Even though these PPC providers allow for monthly budgeting, it is a daily click budget that they truly offer and it is not a very smart budget at that. Let us assume there is a monthly budget of $30 for Google. This would equate to $1 per day. If an add costs $0.80 then you would think that only another 20 cents worth of click was possible. Instead, Google is going to allow any click to occur no matter what its cost because the budget is still open. If another 80 cent add is chosen then the budget is then met and the account is treated as done for the day. We have seen budgets exceeded by 300% for the month because of this budget weirdness. The provider promises that they will guarantee roughly a 20% accuracy rate for budgeting, but it requires a long phone call and proof that the budget was not changed and further arguments, because how do you prove that you did not change the budget and... you get the point. We are going to be stuck with this overage. What we do to avoid this is monitor all of the accounts for all of our clients all month long and turn them off when they are exceeded. Of course this causes the add not to be shown again until next month. Currently we are only using Google and Overture. MSN will be added to the mix very soon requiring yet another account to watch. Very troubling. Reporting: Even this is complicated. You would think that you could look at the server logs of a site and know how many clicks occurred from a PPC add. Not the case. These providers also allow personal sites to display PPC adds and the generic listings. Even when using customized javascripts provided by these PPC engines many of the PPC referals are not always traceable. Conclusion: When a client starts a PPC campaign they usually expect to see their advertisement right away, and they want to see that add every time they look for every phrase they want supported and even for phrases that were not discussed. The fact of the matter is; it is not going to happen. It might take a few thousand searches before that randomizer kicks in and displays the add for the first time. The second time might not be any better until the add is clicked on. Maybe dozens of clicks might be needed depending on how rooted your competition is. PPC can be a very successful tool. In order for this to be the case we need a decent budget and enough time to get the needed relationship between the PPC provider and the site. A month or two is normal, but not always the case. It all depends on the site and its competition.
Last Updated ( Thursday, 02 August 2007 )