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What Is Pay Per Click Advertising? (Google AdWords)


Author: Mark Birkett

(see also: What Is Search Engine Optimisation - SEO?)
(see also: How To Succeed In Google?)
(see also: How To Promote Your Website?)
(see also: 25 On-Page Optimisation Tips)
(see also: 25 Off-Page Optimisation Tips)

There are generally two methods you can take when you're trying to advertise your business website on search engines:

Both methods have their advantages and disadvantages and it's perfectly possible to use both methods simultaneously. So we'll outline the advantages and disadvantages of each method here.

PPC - Advantages and disadvantages:

Pay-Per-Click can be considered as the 'fast track' to search engine visibility. If you have a marketing budget you can pay to place adverts on search engines like Google and have it appear instantly - rather than the more gradual increase in search ranking you get with SEO. If someone clicks on the advert to get to your website you will pay a (previously-agreed) fee. If no-one clicks on it, you don't pay anything at all.

With PPC, you can choose exactly which phrases your advert will show up as a result for. For example, if you sell red widgets, you might want your advert to appear when someone types 'red widgets' into Google. Your paid 'sponsored link' will then appear either at the top or the right side of the results page, allowing the visitor to 'click through' and get to your website. .

However, you probably won't want to pay for your advert to appear when someone types in 'blue widgets'. Why? Because you only sell red ones. So you can choose to have your ad appear for 'red widgets' searches and avoid appearing for 'blue widgets' searches.

You can also decide for yourself how much you are willing to pay for the position of your advert when a given search phrase has been entered into the search engine. For example, you might be willing to pay £2.50 for each 'click through' that comes to your website. If your competitor was only willing to pay £1.80 per click then your advert will appear higher up the sponsored links list than theirs. On the other hand, you may think it better to come second or third in the list of links and therefore pay a lower fee-per-click.

Calculating Return On Investment (ROI):

Of course, deciding what fee is worth paying for a 'click-through' is important. After all, businesses require a decent Return On Investment (ROI). The simplest way to calculate what is worth paying is first to estimate what the average customer is worth to you in gross profit. We'll try to do this with some 'real' figures;

Let's say that your average customer is worth £1,000 of gross profit in a given year. Let's also say that the average 'conversion rate' of site visitor into a real customer is 2%. This is arguably a reasonably pessimistic assumption for a well-designed, customer-friendly retail website (in 2012, the Financial Times figured a UK retail-website conversion rate of around 4%).

Let's also suppose that your site attracts 1,000 visitors a month. So, if your site managed to 'convert' just 2% of those visitors into a customer you'd have 20 new customers per month. And if each of those is worth £1,000 gross profit per year each then (before deducting the cost of the click-through campaign itself) your ROI after one year would theoretically be 20 x £1,000 = £20,000. So, using these (admittedly-theoretical) figures, you could make a good case for allocating some sort of monthly budget for online PPC advertising.

But how much?

One could argue that achieving that £20,000 gross profit per year is worth speculating (say) £500 per month on. i.e. by year end, you'd have spent 12 x £500 = £6,000 to make £20,000 gross profit, leaving a net profit of £14,000.

If that were the case, you'd set up a maximum PPC budget of £500 in order to attract those 1,000 'as-yet- unconverted' visitors. That spend could then dictate the cost-per-click you were willing to pay. i.e. £500/1,000 visitos = £0.50 being worth paying for each 'click-through'.

If that was the fee you were prepared to pay for each click-through, then you'd advise Google AdWords accordingly. Now, you might find that this £0.50 maximum payment for your click-throughs placed your adverts at the top of the 'Sponsored' Ads' results for your chosen keyphrase. However, if your competitor was 'bidding' £0.51 per click for the same phrase, their advert would be above yours on the Google results page. The business 'bidding' only £0.49 would appear beneath yours.

In the end, you'd have to make a reasoned decision on what it's really worth to you for each click, then set your maximum daily-expenditure budget and the cost-per-click you were prepared to 'bid' for accordingly. For more information on this subject, go to Google AdWords.

PPC - Advantages and disadvantages (cont):

So, we can see that another advantage of the PPC model is that it allows you to set a maximum daily budget for any campaign. Whatever cost-per-click you agreed to, your advert would simply disappear once your daily budget was exhausted. You can even determine the time of day you want your adverts to appear. Therefore PPC allows you to retain complete control of when and where your advert appears. It also allows you to determine how much you are prepared to pay for any 'click throughs'.

The biggest provider of Pay-Per-Cick advertising is Google AdWords. You can read more here about how to set up a PPC campaign with Google.

Summary of PPC:

The great advantage of PPC is that these results can happen within minutes, are quite easy to set up and allow you to retain complete control of advertising expenditure. However, unlike SEO which drives the 'generic' results on search engines, the key disadvantage is that the moment your agreed budget for a given 'sponsored advert' is used up your advert - and any visible link to your website - will disappear.

SEO - Advantages and disadvantages:

In general, SEO is the more cost-effective approach for most businesses in the long term. That's because you don't have to pay the search engine any money for appearing in its generic results ('generic' = the non-paid website link results that appear in the centre column of Google).

Also, any SEO efforts you make in one year can often 'pay dividends' many years later. For example, if you wrote an authoritative and / or entertaining article on a given subject this year, people may well still be linking to it (or citing it) on their websites many years later. And since each inbound link to your article is considered as 'vote' for your content, Google and many other search engines will still be crediting your website with that 'electronic vote' long after the article was published.

However, SEO is often a slow process. After all, writing a great article for your website often requires considerable research, background knowledge and effective writing skills. And it can also take some time before search engines have indexed every article on your site. What's more, if your competitors are appearing higher up in the results pages than you are then your article will be harder for potential customers / readers to find.

So if your intention is to sell tickets on your website for a concert that's happening next week, SEO is not the answer. The concert will be long over before you've had a chance to sell any. In that scenarios, you'd be better off with Pay-Per-Click advertising (PPC) because the results can usually be seen within minutes.

Summary of SEO:

If your desire is to improve your website's performance in search engines over the longer term, and avoid having to pay for your results, then SEO is the answer for you.

Overall Summary of PPC versus SEO:

PPC and SEO are equally-valid approaches when it comes to advertising your business. You can choose to work with either or both of them depending on your budget and time constraints.

For further information on PPC and SEO call us on 01706 345648 today!

(see also: What Is Search Engine Optimisation - SEO?)
(see also: How To Succeed In Google?)
(see also: How To Promote Your Website?)
(see also: 25 On-Page Optimisation Tips)
(see also: 25 Off-Page Optimisation Tips)

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