Pay Per Click Advertising - Does It Still Work?
© John H. Dow

In theory, using the search engines sponsored Pay Per Click advertising is a quick and easy way to provide immediate and targeted traffic to your web site. And historically this has always been a good option for new web sites that have not had time for search engine optimization methods to come into play.

Buying traffic via a Pay Per Click advertising 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 $100, sell $400-600) on a well-designed campaign. Now it’s much more difficult to get that high of a return.

Why is it so difficult to get a good payback now? It is still is possible but you need to really understand the process now. There are several factors that are having 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 sales copy.

These factors have all caused the price of a keyword to skyrocket. If you look at a basic $35 digital product 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 conversion rate).

Just so we all are on the same page, let’s look at the basic goal of pay per click 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). Your profit per sale must be within the cost of your keyword expense.

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 $35.00, 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 $35 is paid you only net $33 or less. So if you spent $35 on 100 clicks, you just went backwards.

Which means if you have a $35 product and a .35 keyword cost, 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 that.

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 products with solid value helps too. I know people who get a 6% conversion rate so depending on their profit margin, they can spend a little more for keywords.

I also know people who have no problem spending $1000 to make $2000. 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 $3000-4,000 and more a day on their pay per click campaigns. And they are at least doubling that cost in the return on investment. But the sad thing is they used to spend $1000-2000 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. You need to analyze every possible factor these days due to the higher keyword cost.

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 pay per click 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.

If you want to learn more about Pay Per Click and Google Adwords in particular, I have two ebooks that I recommend. Click here for more: Pay Per Click and Google Adwords Recommendations

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Pay Per Click Advertising - Does It Still Work? © John H. Dow

Pay Per Click Advertising - Does It Still Work?
© John H. Dow