This Pay Per Click Advertising Guide (PPC Advertising Guide) provides tips and strategies to maximize profits from keyword advertising on the search engines that sell sponsored pay per click advertising.

Pay-per-click advertising is a quick way to establish relevancy and establish national or regional prominence for your product or service. There are a number of key elements to an effective Pay Per Click advertising campaign:

1. Quality of the Search Engine

2. Keyword choices

3. Keyword Cost-per-click (CPC)

4. Quality of Ad and Click-Through-Rate (CTR)

5. Quality of site advertised

6. Return on Investment (ROI)

Quality of Search Network

Right now the two top tier Pay Per Click Networks are Yahoo! Search Marketing and Google Adwords.

Yahoo! Search Marketing (formerly called Overture) sponsors links on Yahoo!, MSN, Altavista, CNN, and Infospace. It allows your keyword sponsored ads to be seen by the vast majority of Internet users. Ad placement is based on bid amount per keyword.

Google Adwords sponsors links on Google and with their search and content network of subscribers such as AOL and other prominent websites. Ad placement is based on bid amount and Click-Through-Rate (CTR). Google will de-activate low-performing keywords.

Yahoo! Search Marketing and Google Adwords will soon be joined in the top tier of Pay Per Click Networks by MSN when they launch their new service soon.

The two top tier Search Engines have broad distribution, lots of features, fast feedback, and are easy to maintain. The main disadvantage is cost – broad reach = competition = expensive for some keywords.

Middle tier Search Networks include Miva, Kanoodle, Enhance Interactive, Search123, 7Search.com, LookSmart, etc. These Search Engines have cheaper click prices than Google or Yahoo! Search Marketing and may work on some keywords that are expensive there. Some meta search engines mix PPC listings from these search engines with other search results making your listing on these more useful at times. The big disadvantage is the quality of the traffic sometimes suffers and there is much more click fraud on these search engines.

Smaller Pay-per-click Search Engines should be avoided. I learned this the hard way. You’re better off paying for web traffic than listing with small PPC Search Engines. There are always exceptions to the rule but the rule is that you will get a lot of clicks, spend a lot of money, and see very little Return on Investment. These search engines are very susceptible to click fraud. Instead of including that topic in this Pay Per Click advertising guide I have created an article on that form of fraud as well as on impression spam.

Keyword Choices

Remember, with Pay Per Click Advertising, you are paying every time somebody clicks on your ad. You want to make sure you choose keywords related to the content of the page that the searcher will be visiting. If you have a web page you want to advertise that is about cars then you don’t want to be advertising with the keyword “bicycles” because, although somebody might click through out of mere curiosity, you’re not targeting the right audience. Yahoo! Search Marketing will not let you bid on keywords unrelated to your content (which helps you) but others might. Don’t waste your money on clicks that won’t convert to customers.

Another aspect of keyword choice is variety and specificity. It is usually better to bid on many different very specific keywords related to your content than it is to bid on a very few general keywords. One reason is cost – very general keywords that lots of people are searching on are generally more expensive while variations or more specific keyword combinations may be cheaper and allow your ad to be placed more favorably.

Yahoo! Search Marketing and most other PPC engines work on a bidding system – the highest bid for a particular keyword always appears at the top of sponsored results. Google Adwords works with a combination of Cost-per-click you are willing to spend combined with the click-through-rate for your keywords. If you choose very general keywords on Yahoo! Search Marketing you are likely to spend a great deal getting to the top. If you choose very general keywords on Google, your Click-through-rate is likely to suffer because your ad will appear frequently but will be unrelated to a specific niche. In either model, your performance will suffer.

If you really must compete with popluar keywords, instead of less popular variations, then make sure you set up your search account to only “fire” on the exact match for that keyword. In Google, for example, you might want to compete for the specific keyword “web page”. With a broad match setting, your ad will show up if somebody types anything with either web or page in the search. You can narrow it down further by having your ad show only when “web page” appears somewhere in the search string. Finally, with exact match, you can have your ad appear only when the string “web page” is typed and nothing else is searched for.

With popular keywords, I recommend you stick to exact match for two reasons: cost and ad delivery. On one hand with broad match you may end up paying for a ton of clicks from visitors that figure out your product was not what they were looking for. On the other hand, you may receive too few clicks to maintain an acceptable click-through-rate (CTR) and have your ad disabled by Google. It is better to come up with very speciific exact match keywords (and lots of them) that relate to your site and have your ad appear only for those specific keywords.

Google offers free advice on how to optimize your keywords here.

Cost per Click

With Yahoo! Search Marketing and other PPC engines, your ad position is dictated purely by how much you are willing to spend for every click – this is called a bid amount for a keyword or sometimes called a Cost per Click (CPC) for some engines. Google uses an algorithm that factors in CPC along with how “successful” a keyword is for your ad (also known as Click through Rate – CTR).

There is not a single answer to the question – what should my maximum Cost-per-Click (CPC) be. Some very specific keywords fetch exorbitant click prices because the advertisers get a huge sale for every one that buys that product. Many people lose money based on their bid prices. Because there are so many people trying to sponsor ads, there are also many new entrepeneurs who will push the click prices way up. What you need to do is be smart about the bid amounts and figure out how much you can afford to spend per click. To do that, you will have to experiment.

There are services such as Atlas Onepoint that allow you to track keywords from click to sale to determine how profitable they are. These tools figure out which keywords have led to a sale and how much you had to pay for each click. You can also use the free conversion tools provided by Google and Yahoo! Search Marketing to determine which keywords are converting and how much you had to pay for each click before you got a sale. Your conversion rate is the number of sales (conversions) divided by the number of clicks for a keyword before you got a sale (sales/click). Cost per conversion is how much you had to pay on average for each sale (cost per click x number of clicks/ number of sales). If you can keep your cost per conversion below the amount of money you are making per sale then you are making a profit.

Tracking this information will allow you to determine which keywords are worth “upgrading” and which are dogs that are just costing you money. You may determine that a keyword converts really well and it is worth upgrading the max CPC in order to get it higher in the sponsored results. You may also lower the CPC price in order to make a keyword profitable.

Quality of Ad and Click Through Rate

In order to get clicks, people will have to want to click on your ad. Some sites allow a good amount of text but my experience indicates that less is more. Google’s restrictions to 3 lines with only about 30-40 characters per line is a good guideline. If you cannot grab the attention of the reader in that space then you will get few clicks. A few thoughts:

Click through rate (CTR) is a measure of how many clicks you receive on your ad divided by the number of times your ad appears (also called impressions). Yahoo! Search Marketing does not care about your CTR and will continue to give your ad placement based solely on CPC or bid amount. Google places your ad based on a combination of your CPC and how well your ad is performing (CTR). If your ad falls below a 0.5% click through rate (1 click for every 200 impressions) your ad gets in danger of being slowed down and eventually disabled for that keyword.

Make sure your ad title contains the keyword you are advertising for. PPC search engines bold the keyword in the search results and make your ad stand out. It also is an indication to the searcher that your content relates to their search term. Have many different ads for different search combinations to improve your ad performance.

Ads that appear on the first page of search results (positions 1-7 in sponsored results) have better CTR’s than ads that appear in the 2nd page or further of results. Folks assume that if it’s not in the first page then your site must not be as “important”.

With Google, if your CTR is really high you can pay far less in terms of CPC than others do for the same level of placement. This is especially true if a keyword has been disabled multiple times based on poor CTR. If your ad regularly gets a CTR for a keyword that exceeds 0.5% then you can try gradually lowering the max CPC and still achieve great performance. Some days are better than others so it’s always wise to track ad performance and “throttle” the max CPC for keywords based on how they’re performing for a given day. The basic rule of thumb is to try to keep your ad in the first page of search results and to change your CPC to do that. If your budget can’t afford that then turn off your ad on those days when you’re getting clobbered.

A final note on CTR in Google has to do with what I call impression spam (I’ve actually been interviewed about this phenomenom). I have had keywords disabled because there are huge spikes in searches for my keywords. On a typical day for my most popular keyword, there are about 6000 impressions for an exact match search. On occassion, I’ve seen as many as 30,000 impressions for the exact match in a single hour. Google repeatedly denies glitches in their system or click fraud but it is impossible to account for it based on “normal” traffic. The net result is that, because Google tends to measure keyword performance (CTR) every 1000 clicks, these spikes in traffic tend to disable keywords based on poor CTR. I’ve learned that these spikes tend to happen at night and in the morning hours and, so for very popular keywords, I don’t turn on ads until after 10 pm EST. I don’t know why it works but it just does. You’ll have to do a bit of experimentation to figure out if you have any keywords that tend to spike in the same way.

Quality of Site Advertised

So far the discussion has been limited to those factors that affect how well ads perform on Google or Yahoo! Search Marketing or other Pay Per Click engines. It is certainly true that you need to optimize your ads so they perform well and get you the highest quality clicks at the best prices. Equally, or perhaps more important is the quality of the site once the searcher lands on the site after clicking on the advertisement.

If your site does not have what the person is looking for, if the site layout is confusing, if the text isn’t compelling, or if the site is unprofessional your visitors may just visit quickly and leave the site. Conversion rate is as much about the quality of your web site as it is about keyword choice and cost per click. You need to build a site that people will want to read and make them want to purchase whatever you have to offer. I discuss the principles of a profitable web site in making money from your web site.

Return on Investment (ROI)

No Pay Per Click Advertising Guide is complete without a discussion of Return on Investment because the most important thing, in the end, is the bottom line when advertising: am I taking in more than I’m paying out? If the answer is No, then unless your motivations for your site are altruistic, then you need to come up with a better advertising strategy. ROI is a measure of profit realized from your use of advertising dollars. It is very easy to spend $50 at a time and have it add up to thousands of dollars a month wasted if you are not tracking the factors that contribute to profit and loss in Pay Per Click advertising. One dollar per click may not seem like much but if you’re paying for 1800 clicks per month and it leads to no sales then you have just contributed $1800 to your favorite search engine. The Pay per Click Reviews page gives some real world data that shows ROI for the major PPC networks and recommendations on the networks that seem to perform the best.

The maximize ROI you need to follow the strategies outlined above. I also highly recommend the SEOBook and SiteBuildIt! as my strategies are a distillation of the tomes of information provided with their products.