James Boyle
Elemental Services
July 2005
The final piece of the website marketing puzzle is Pay-Per-Click (PPC) advertising. Pay-Per-Click enables advertisers to pay only when a visitor clicks on their advertisement and takes them to their website. The benefit of using PPC versus other forms of online advertising is that you only pay when your ad works in getting someone to visit your website.
PPC is commonly done in conjunction with search engine results so that relevant ads can be presented based on the search terms entered. Advertisers compete for advertising space and bid what they are willing to pay for each click for those keywords. The higher you bid the higher up in the listings you appear for those keywords.
This article explains the concepts and terms used in pay per click advertising, and then examines the two biggest players in this market.
Here are some terms that will help you understand the world of PPC advertising.
Impression: Each time your ad is displayed on a PPC site is said to be an impression. In PPC you do not pay for impressions but rather only when your ad is clicked.
Click Each time a visitor clicks on your advertisement.
Cost per Click (CPC): The amount you are charged when a visitor clicks on your advertisement.
Click Through Rate (CTR): The ratio of the number of clicks over the number of impressions usually expressed as a percentage. The PPC system often calculates this for you.
Conversion Rate: The ratio of the number of ‘successful’ visits to your site over the number of clicks. What constitutes a successful visit is defined by you and can mean any measure of success such as a sale, a membership signup or a referral. This number cannot be calculated by the PPC site as only you know when a visit to your website is deemed to be successful.
Click Fraud: The practice of clicking on an ad with the sole purpose of artificially increasing the number of chargeable clicks. Most reputable PPC systems have procedures in place to detect and reduce click fraud and have mechanisms to ensure that advertisers are not billed when the same person goes back and forth between pages clicking on the same link.
Google AdWords is the PPC arm of the Google search engine. You have probably seen the AdWords results as ‘Sponsored Links’ in the search results in Google. Because Google is the biggest search engine on the Internet, AdWords is probably the most important PPC player.
AdWords works by listing ads related to the keywords specified in a search. All advertisers specify the keywords that they want their advertisement associated with and Google ranks these ads based on a number of factors (explored below). As with all PPC advertising you only pay when a user clicks on your ad and is taken to the your website.
When you start an advertising campaign with AdWords you specify certain variables that dictate when and where your ads will appear, some of these are:
When setting up an ad campaign, Google gives you a “Traffic Estimator” tool that estimates where your ad will be positioned, how much you will pay for your clicks, and how many clicks you will get. You can modify the three variables above and re-estimate traffic to get what you consider to be the best value for money out of your advertising.
As there are usually a number of ads that are relevant for a specific search term, the ads are ranked and displayed in order of relevancy. This ranking takes into account several factors:
Because ranking is not based entirely on what you bid (maximum CPC) then you cannot get locked out of the top position because of price. It means a fairer system where the smaller players can compete alongside the big players.
Starting a campaign in Google AdWords is quite easy and can all be done entirely online. You need only pay a $10 activation fee and you simply pay-per-click after that. You can set up campaigns to run for any length of time and the online tools take you through your selection of the keyword/cost variables as well as creating your ad with relative ease.
AdWords also allows you to target specific countries and restrict your ad from appearing unless the visitor is located in that country. For Australian businesses with a domestic focus this is very useful because chances are you only want Australians clicking on your ad.
If you wish, Google can enable your ads to be shown on more than just the Google search page. You can opt into any number of sites from the Google Network, or a selection of content sites, which display AdWords advertising. From our limited experience this is of little use for Australian businesses and you are better focusing your money in advertising on the search pages.
Overture is the PPC arm of Yahoo! and is the original PPC company on the web. In Australia Overture advertisers appear on sites such as Yahoo!, NineMSN and the f2 Network (sites such as The Age).
Overture works in a similar way to AdWords in that it presents paid listings amongst search results on the sites specified above. Unlike AdWords though the ranking of ads is entirely based on the maximum CPC. The advantage of this is simplicity. You can set up your account, specify your keywords and see immediately how much your competitors have bid. Then you can bid appropriately to appear where you want in the list.
The other major difference between AdWords and Overture is the editorial process. In both systems editors examine ads to ensure they comply with their guidelines. AdWords assumes you are doing the right thing, allows your ads to go online and then lets you know if they have a problem with them. Overture, on the other hand, requires that editors approve ads before going live. This means that the time between deciding on an ad and seeing it up in lights is longer with Overture.
Overture does not allow you to start a campaign online and see your ads immediately as AdWords does. Instead, you can choose between a FastTrack service, which involves a consultant helping you through the process but also costs you $199. Your ads will be active within three business days in that case. You can alternatively use the Self Service sign up which does not involve a consultant and takes ten days to get up and running.
With Overture you will also need a $100 deposit and there is a $25 minimum spend per month.
As you can probably tell we prefer AdWords. Despite the fact that the bidding mechanism is less transparent, the way that AdWords ranks its results means that small players cannot be pushed out on price. Add to this the fact that there is a smaller set up fee and no minimum spend makes it great for small businesses and allows you to try different ad campaigns to refine your marketing approach.
