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PPC Methodology

In Pay Per Click (PPC) advertising, an advertiser creates an ad and then pays an advertising network a fixed amount of money for Web traffic that originates through that ad. The PPC ad is usually listed on major search engine sites such as Google and Yahoo!, and may be referred to as a paid listing or sponsored link. Advertising networks, such as Google AdWords or Yahoo! Search Marketing, place the ad at the top or sides of the listings results page after a visitor has used a search engine to perform a word search. Ad placement is also determined by how much money the advertiser has paid the advertising network for each potential visitor click, or cost per click (CPC). The higher the ad's CPC, the more prominently, and often, the ad is displayed on the search engine results page (SERP).

PPC advertising has grown in popularity due to a number of advantages it offers over traditional offline (and online) advertising models, including:

- The ability to set a defined campaign budget and CPC.
- Control over which web sites display the ad.
- Significant cost savings per product sale when compared with other advertising means.

When starting a PPC ad campaign, it is imperative that one perform the necessary market research, competitor analysis, and take into account how the campaign will fit into and help fulfill business goals (e.g., 20% increase in product sales, 30% reduction in advertising expenses, etc.). Also, the ad campaign should conform to a fixed budget. Once these steps have been finished, one can plan a PPC ad strategy using the following methodology:

Keyword research

Much of PPC ad optimization involves the selection of effective keywords/phrases that lead to a successful online product sale by a visitor, also known as a conversion. In essence, an advertising network like Google AdWords will prompt the advertiser to select from two to three words/phrases when generating the PPC ad campaign. These keywords/phrases should be matched, or targeted to, the keywords/phrases that a Web user would type while searching for the advertiser's product and/or business. If the keywords/phrases on which the PPC ad are based are targeted to the user's input text, the PPC ad is displayed on the SERP. If they are not targeted, then the ad is not shown, and the potential conversion is lost. Alternatively, keywords/phrases may target the wrong visitors, also leading to missed conversions, and wasted time and money for the advertiser.

Choosing keywords/phrases that generate a high click-through rate (CTR) is not enough; one must target the Web traffic that results in actual sales. For example, a PPC ad about alternators that is centered on the keyword "cars" will certainly draw visitors; however, it might be the key phrase "car alternator" that generates conversions from a smaller, more targeted consumer group.

Keyword/phrase testing and targeting is important for another reason: CPC. Because search engines assign given costs to keywords/phrases based on their popularity with advertisers, it is important that one select lower cost keywords/phrases whenever possible. Otherwise, visitor CTR on a particular PPC ad may quickly deplete one's advertising budget without resulting in any conversions.

One common method for determining which keywords/phrases will work with a given ad campaign is to use the keyword selector tools provided on advertising networks such as Google AdWords and Yahoo! Search Marketing. These tools generate not only keyword ideas, but also keyword CPC, advertiser competition, and even information on seasonal search trends.

After using a keyword selector, one may follow-up with an analysis tool such as Google Analytics. This tool can be integrated into a business's web pages, allowing one to determine which keywords/phrases visitors are using when being directed to the company web site.

Finally, one might even look up competitors' web pages and research the meta tags and keywords that are being used on those sites. This tactic also helps with gathering keyword/phrase ideas.

With this knowledge in hand, one can start selecting from a word/phrase pool of perhaps 10-20 terms using different text combinations, such as "rebuilt car alternator" and "alternators for cars". These combinations can be used to launch a few test PPC ads for several days or weeks. Depending on the ad costs, traffic, and conversion results, one or more ads may be chosen as the ROI "winner(s)".

PPC engine selection

Once the candidate keywords/phrases are chosen, the PPC engine can be selected. There are hundreds of PPC engines in operation, with each one promising to deliver traffic and conversions. Most engines also collaborate with affiliate marketers, or third-party webmasters and bloggers who post PPC ads to their sites and collect referral commissions when visitors click on or buy a product through those ads. Before making a final decision on a particular PPC engine, one should investigate the following:

Keyword CPC: PPC engines often charge different CPC rates for the same keywords/phrases. This might be due to bigger businesses not being present to compete for popular keywords, leaving smaller businesses with a better chance of attracting visitors for a lower cost. However, if keyword CPC is too low, this could also indicate a low quality PPC engine.

Tools: Google AdWords and Yahoo! Search Marketing are two PPC engines that are known for offering advertisers all kinds of keyword selector, tracking, and analysis tools. Such tools greatly facilitate an effective
PPC ad campaign.

Fraud protection: Affiliate marketers and competitors have been known to purposely click on PPC ads in order to generate income and deplete an advertiser's budget, respectively. The PPC engine should have fraud detection measures in place and be prepared to compensate an advertiser should this occur.

Coverage: Low-cost PPC engines may not be widely used by visitors, and will therefore not lead to high conversions. Likewise, these engines may not deal with well-established affiliate marketers. While one need not choose a Google or Yahoo! PPC engine for every campaign, a medium traffic level PPC engine should be utilized.

Promotional offers: Many PPC engines offer free trial periods or PPC credits to new advertisers. This allows one to test different ads for their effectiveness. Likewise, one can determine if a particular PPC engine is truly generating targeted traffic without losing money.

Customer support: A PPC engine should have readily available and competent customer support. This can be tested by sending several e-mails or by making calls to the respective PPC engine site before launching the PPC ad.

PPC ad creation

Creating a PPC ad with engaging and relevant content is critical for generating traffic, increasing conversions, and lowering CPC. Unless presented as a video (such as through YouTube), most PPC text ads provide only 125 characters of space for writing the ad. This means that one has a very limited opportunity to attract a visitor and obtain an ad click. However, there are ways to increase the chances of this occurring.

Addressing the visitor's need in the form a question is a good way to attract attention. For example, one might title a financial services PPC ad with "Trying to Get Out of Debt? We Can Help!" Also, placing keywords/phrases into the title and/or text of the ad help position the ad at the top of the SERP should a visitor input the same keywords/phrases during a web search.

Ad relevance to Web user input keywords/phrases not only helps place the ad at the top of the SERP, but also lowers its CPC. This is because many PPC engines, such as Google AdWords, assign a Quality Score (QS) to the PPC ad based on its keyword use, the CTR, and landing page relevance. The better the QS, the lower the ad's CPC.

To improve QS, one should first analyze whether the ad's keywords/phrases match those that a visitor would use while searching for the advertised product or business. Likewise, keywords/phrases should be relevant to their ad group (text and landing page URL). Finally, the ad's landing page should be relevant to and contain the chosen keywords/phrases.

If these qualities are lacking, then the PPC engine calculates a higher CPC based on the fact that the PPC ad does not completely address visitor needs. An advertiser can change a low QS by incorporating keywords/phrases into the ad title, text, and landing page(s), by link building and performing search engine optimization (SEO) on the business's landing and web pages, and by adding a site map. Such changes will result in a better QS. Also, as Web users are increasingly directed to the now more relevant PPC ad, its CTR will increase, resulting in a further boost to the QS and a lower CPC.

CPC bidding

Each selected keyword/phrase has its own associated CPC, which may be purchased through either a fixed-rate or bid-based method. With the fixed-rate purchasing method, advertisers are usually presented with a rate card that features discrete areas of a listings page and the associated CPC rates for each area. In the bid-based purchasing method, advertisers bid against each other for the use of selected keywords/phrases in a given PPC ad. Winners of this bidding process are typically determined by the maximum CPC they are willing to pay; however, optimal placement of the PPC ads will also depend on ad QS.

Advertisers who intend to engage in keyword/phrase bidding should first assess their visitor/conversion ratio. For example, if 2 visitors out of 100 make a purchase, then bidding 10 cents/click will cost $5/conversion. If the advertiser's profit margin is $10/sale, then the 10 cents bid is feasible. However, if the profit margin for each conversion is $5 or less, then a CPC of 10 cents results in a negative return on investment (ROI).

Another factor to consider is that there can be more than one bid winner. Most SERPs provide two, three, or even more PPC ad slots, and an ad does not have to occupy the first listing in order to be noticed.

Finally, as mentioned previously, a PPC ad's placement can be changed by improving its QS. When the QS is improved, this feeds into a positive feedback loop and lowers CPC, giving the advertiser more prominent ads for less money.

PPC ad testing

During the first days or weeks of a new ad campaign, it is important that several different PPC ad parameters be tested for traffic, CTR, and conversions. Many PPC engines facilitate the testing process by providing free trial periods or credits. Most PPC engines also allow advertisers to run simultaneous ads by dividing the account funds among the ads and displaying each ad the same number of times.

During the testing process, one should first launch the already designed and optimized campaign, which is often called the "A" or control campaign. After selecting other candidate keywords/phrases and incorporating them into the ad copy and landing pages, one can launch the "B" or experimental campaign. Such A/B testing allows for the systematic comparison and improvement of PPC ad CTR and conversions.

A/B testing can be implemented through many different ways. One can create split copies of PPC ad landing pages, use different verbs and calls to action, split keywords/phrases into smaller ad groups, and select for broad versus specific keyword/phrase matching options. One might also test the same ad campaign via two (or more) different PPC engines to determine which service is more cost-effective and optimal for ROI. Depending on the outcome of the A/B tests, the most profitable PPC ad(s) can remain online while the others can be deleted from the ad account.

Monitoring/Analysis

Once the PPC ad has been deployed, its performance over time should be tracked and reported on a daily or at least weekly basis. Most PPC engine sites facilitate this process by offering various online analysis programs to the advertiser. Private software programs also abound.

Using these programs, one can obtain reports of ad campaign, ad group, and keyword performances, identify emerging trends, and monitor financial transactions. By installing a tracking URL into the PPC ad and its landing pages, search query information can be obtained. Analysis tools allow one to track conversion parameters such as the number of clicks leading to a conversion, and even site activity following an ad click. ROI calculators allow for the measurement of PPC ad profitability.

A PPC ad's QS will change over time as the CTR fluctuates because of market saturation, seasonal demand, company announcements, etc. When this occurs, one must step in and adjust the keywords/phrases, landing and web pages, and other features accordingly in order to maintain a high QS and low CPC. It is also important to continually track who is clicking on the PPC ads, from which geographic region the clicks are originating, what keyword/phrase searches are being used, and which ads are generating sales. Without such knowledge, making changes to the ad campaign in order to increase traffic, conversions, and ROI will be difficult, if not impossible.

Because the creation, launch, and monitoring of an effective PPC ad campaign takes an enormous amount of time and expertise, many advertisers entrust third-party PPC specialists and companies with their online advertising needs. While this initially raises the costs of the ad campaign, it does offer the advantage of better and faster conversions and higher sales. Most advertisers who choose third-party agencies to handle their PPC ad campaign needs are pleasantly surprised by the positive impact of such a decision on their bottom line.

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