With millions of people using Google and Yahoo! for their pay-per-click (PPC) campaigns, it is no wonder there is an endless supply of new techniques for improving on your campaigns. These can include,
Choosing the ideal position for your advertisements.
Improving your click through rate (CTR) (how many times your ad is clicked on divided by how many times it is shown) by writing catchy advertisements to grab the searchers attention.
Choosing broad, phrase, exact or negative keyword matching options.
Multiple bidding options – preferred bidding, max cost per click bidding or the budget optimizer.
Choosing the time of day to show your ads.
This leads me to an interesting point – if people are so busy refining and improving their campaigns to get those lower costs, who is actually measuring if the time and costs are justified? Consider this; if you spend all of your time getting your CTR high and your click costs low but it isn’t leading to an increase in sales then it is quite possible that you are wasting your time and money.
As most advertisers know Google and Yahoo! will reward higher CTR’s with lower click costs, but at what expense? It is very common to see people writing catchy ads to get people to click, however if your ad is vague then what are the chances of you having exactly what the searcher is after, and for the right price. On the other hand you may have a low CTR because you place your price in the ad, if people see your price in the ad they do not need to click to compare you against your competition, which lowers your CTR. However if someone does click on your ad, at least you know that they are willing to pay the price that you are offering. This makes them more targeted and maybe worth the drop in CTR that results. But here we go again getting caught up in CTR rates.
The scary thing is that there are still many advertisers out there that do not even do simple ROI calculations on their PPC campaigns. ROI is return on investment, meaning how much money you make from your investment. For example if one of my campaigns cost me $100 for a month and made me $120 then:
a) ROI = (120/100)*100 = 120%
If you had a campaign that cost $200 for a month but only made you $120
b) ROI = (120/200)*100 = 60%
In example (a) you came out with a 20% return on your investment, however in example (b) you lost 40% of your investment.
You then go even further to break down the ROI on individual keywords and then make changes as needed.
Other measures of success can include:
Cost per Acquisition (CPA) i.e. if you spent $100 and had 3 orders the CPA is $33.33
Conversion Rate: You had 1000 clicks with 10 Orders the conversion rate is 1%
Average Order Size (AOS): $1000 in sales with 10 Orders the AOS is $100
You then use these figures to measure how successful your campaign is and then make changes to your ads and keywords to improve the results.
PPC is a tough industry, however if you continue to monitor your ROI on your campaigns and try not to get too caught up in CTR’s and click costs, you can ensure that poorly performing campaigns are refined and campaigns performing well get more of your investment. Remember to spend as much time monitoring your returns as you do monitoring campaign performance or you may find it becomes very costly indeed.