A key factor when choosing a pay-per-click network (aka ppc network) and embarking upon an advertising campaign should be return on investment (ROI). There is an old adage that says you have to spend money to make money. While true, it is also true that you can spend more money than you make and put yourself out of business if you cannot measure the effectiveness of your advertising. Simply put, ROI is a measure of how much return (profit) you make on a given investment (advertising dollars).

So how to you maximize ROI on Pay Per Click networks?

In my Pay Per Click Advertising Guide you will notice the many different Pay Per Click networks available to advertise your products and services. Pay Per Click advertising can be deceptively expensive especially since some advertising networks have bid prices as low as $0.01 per click. It adds up more quickly than you think and if you’re using a very rough gauge of success (i.e. “Gee, it seems like my sales went up when I started that ad.”) and cannot more precisely gauge the success of particular campaigns or specific keywords then you could be throwing away hundreds or thousands of dollars per month. That is not how you maximize ROI, in fact, you have a negative ROI at that point.

Here are a couple of scenarios in two extremes. First, on the one extreme is a keyword on Yahoo! Search Marketing that costs $8.00 per click to be in top position. Paying this amount could cost you $8000/day. Just because somebody is bidding this amount does not mean they are profiting – in fact, many lose a lot of money quickly on Adwords or Yahoo! Search Marketing and then give up on Pay Per Click networks. Of course, there’s always enough new people flocking to these networks all the time that drive up the price per click and make it unprofitable. That $8/click may very well be profitable but how can you know unless you measured that after every 10 clicks you made a $100 sale or some other metric?

An opposite extreme is a network like Xuppa. You can pay $0.02 per click for the same term you would have to pay $8 per click on Yahoo! Search Marketing. What a deal! That is until you are paying $50 for 5000 clicks and you still haven’t gotten a single sale from the leads on that network. I have actually measured Kanoodle keyword target ads ROI – I had 400 clicks without a single user leaving my landing page. In fact, half of those “visitors” never even let the page fully load. The reason is click fraud. I don’t do keyword targeted ads on that network anymore and it only took me a couple of days of data instead of months of “I wonder if I’m getting any sales” to figure out Kanoodle was not for me.

The reason I can pick and choose keyword prices on Yahoo! Search Marketing and Adwords or pick and choose which networks work is because I measure ROI. There are two tools I recommend:

1. Google Analytics – Free with your Google Account. Measure campaign performance and keyworkd performance on your web site.

2. AtlasOnePoint – a real powerhouse. It costs about $80+ per month which seems like a lot of money but it comes with more sophisticated tools than you can shake a stick at. Their documentation alone is really good to look at just to see the different kinds of advertising strategies that are out there and even pitfalls like bidding wars that occur on those networks. If you are a business that will be advertising heavily on the major search engines, you ought to really consider the services. $80 is a drop in the bucket compared to most Pay Per Click advertising budgets.

Once you begin measuring ROI with either of the above services you will better be able to tell which ad networks work best and which campaigns within those ad networks work. This will help you better determine how to price your keywords and whether to give up on some campaigns to maximize ROI. I was actually pleasantly surprised recently to see how great ROI was on the 7search network. Results vary so measure ROI for your own ads.

Click Fraud = clicks on a Pay-Per-Click Network Ad by a user who has no interest in the information advertised toward the end of either profiting from those clicks or harming their competition.

Your bottom line: you seem to have lots of visitors from Pay Per Click networks but no sales or interest. Lots of visitors reach your landing page but never click beyond the page they visit. Your costs go up with no income generated from the visitors.

Category 1: The Unscrupulous Affiliate

The first type of click fraud stems from the profit motives of the fraudulent “clicker” who makes money every time your ad is clicked. The large, medium, and small Pay Per Click networks all have affiliate programs whereby the search engine offers to pay the affiliate a commission or percentage of the income generated from each click on the customers that are enrolled through them. Alternatively, Pay Per Click networks pay websites to place Pay Per Click ads on their pages and they receive a commission on every ad clicked on their page.

I need not connect the dots on why this fraud occurs. If Joe the webmaster knows he can make a profit when somebody clicks on ads on his site, might he figure out a way to see to it that those ads are clicked and he makes income. There have been reports of “click farms” using cheap labor in underdeveloped nations with people visiting sites and clicking on ads. The fraud is distributed to evade detection.

This first category of Click fraud seems to be inversely proportional to the size and reputation of the network (in other words, the smaller and more obscure the Pay Per Click network, the more click fraud occurs). Yahoo! Search Marketing is probably most immune to this because they do not offer any affiliate incentives for ads clicked on their network. Google, on the other hand, has been known to have problems with their Content Network (aka AdSense). Google pays sites to provide sponsored results on their web pages and pays them a portion of the ad revenue generated when users click on those ads. Google tries to detect this and combat it by taking legal action against those who engage in it but it still goes on. Google even noted, in their SEC filing, that this fraud could end up hurting their business model.

In my own experience, I stay away from smaller Pay Per Click networks until I can measure ROI and click fraud (more later on that). I’ve learned this the hard way having spent over $1K on networks that provided thousands of clicks but no real interest in my site. As for Google, I love their regular and search network results when I set up Ad campaigns but I stay away from their content network (AdSense). I simply have not had any success – lots of clicks but no real interest that extends beyond the landing page. My experience is not unique.

Category 2: The Dishonest Competitor

If you are bidding on a competitive keyword then so are a lot of other people. Sorry to make a purely analagous statement that seems to go without saying but because you have a lot of competition, you also have plenty of opportunity to be competing against competitors that don’t play fair.

Because competition can get very tight, the bid amounts for keywords rises which causes profits to shrink for those keywords. If you make $60 per sale and it costs you $3 for every visitor to your site, you must make a sale for every 20 visitors (on average) in order to break even. You have a competitor with the same product and same profit margin but he wants you off the Pay Per Click network so he begins clicking on your ads hoping to drive your Pay Per Click costs up to where you decide it’s not worth the investment and leave. He makes no money, per se, off the direct profit from those clicks. His only interest is harming his competition.

Google and Yahoo! Search Marketing are probably the most susceptible to this type of click fraud because they are popular and where most of the real competition occurs. They both make extensive efforts to detect and eliminate click fraud (and will even refund money to you if they figure it out) but it still occurs.

Click Fraud Reduction

There are two basic strategies to reduce the impact of click fraud on your business model:

1. Use conversion tracking – Use the free conversion tracking tools provided by Google and Yahoo! Search Marketing or pay for conversion tracking and ad management with a company like Atlas OnePoint. Conversion tracking allows you to measure how many people are clicking on your ads but, more importantly, how many of those clicks from each Pay Per Click engine, or for a particular keyword, are converting into sales. Click fraud is not the only reason to use conversion tracking but it is a tool to help measure it. If you are getting no or very few conversions from tons of visitors from an ad network then it may be an indicator of click fraud. Of course, even with click fraud in the mix, you may measure that you still make a profit on average and keep the ad up but you won’t know anything if you don’t at least measure conversions and see which ads make money and which are just costing you money.

2. Use a Pay Per Click Auditing Service– I use a pay-per-click auditing service called WhosClickingWho. The system allows the customer to detect multiple visitors from the same or different networks using any keyword to visit your site. The system has multiple benefits. First, it’s actually a great tool to see where your visitors are coming from (even your legit ones). Second, it is useful to see multiple visits from one user and note patterns of fraud. The third party results from the service are very useful when you submit a click fraud claim to the Pay Per Click networks to get a refund. Lastly, it deters the unscrupulous because they know you’re monitoring the fraud. You have the option of triggering a popup asking them to bookmark your site because you’ve noticed them visiting your site repeatedly through Pay Per Click ads. It’s like having a sign for a security alarm in your front yard – it doesn’t frighten away all burglars but it does deter most. If you are going to be spending more than a few hundred dollars a month on PPC advertising then you really should make the investment.

If you’ve advertised on Google for any length of time you will likely have experienced a myriad of frustrations trying to keep your ads in top position. My Pay Per Click Advertising Guide discusses some of the factors to remain relevant on Google Adwords.

A key factor when choosing a pay-per-click network (aka ppc network) and embarking upon an advertising campaign should be return on investment (ROI). There is an old adage that says you have to spend money to make money. While true, it is also true that you can spend more money than you make and put yourself out of business if you cannot measure the effectiveness of your advertising. Simply put, ROI is a measure of how much return (profit) you make on a given investment (advertising dollars).

So how to you maximize ROI on Pay Per Click networks?

In my Pay Per Click Advertising Guide you will notice the many different Pay Per Click networks available to advertise your products and services. Pay Per Click advertising can be deceptively expensive especially since some advertising networks have bid prices as low as $0.01 per click. It adds up more quickly than you think and if you’re using a very rough gauge of success (i.e. “Gee, it seems like my sales went up when I started that ad.”) and cannot more precisely gauge the success of particular campaigns or specific keywords then you could be throwing away hundreds or thousands of dollars per month. That is not how you maximize ROI, in fact, you have a negative ROI at that point.

Here are a couple of scenarios in two extremes. First, on the one extreme is a keyword on Yahoo! Search Marketing that costs $8.00 per click to be in top position. Paying this amount could cost you $8000/day. Just because somebody is bidding this amount does not mean they are profiting – in fact, many lose a lot of money quickly on Adwords or Yahoo! Search Marketing and then give up on Pay Per Click networks. Of course, there’s always enough new people flocking to these networks all the time that drive up the price per click and make it unprofitable. That $8/click may very well be profitable but how can you know unless you measured that after every 10 clicks you made a $100 sale or some other metric?

An opposite extreme is a network like Xuppa. You can pay $0.02 per click for the same term you would have to pay $8 per click on Yahoo! Search Marketing. What a deal! That is until you are paying $50 for 5000 clicks and you still haven’t gotten a single sale from the leads on that network. I have actually measured Kanoodle keyword target ads ROI – I had 400 clicks without a single user leaving my landing page. In fact, half of those “visitors” never even let the page fully load. The reason is click fraud. I don’t do keyword targeted ads on that network anymore and it only took me a couple of days of data instead of months of “I wonder if I’m getting any sales” to figure out Kanoodle was not for me.

The reason I can pick and choose keyword prices on Yahoo! Search Marketing and Adwords or pick and choose which networks work is because I measure ROI. There are two tools I recommend:

1.  Google Analytics – Free with your Google Account. Measure campaign performance and keyworkd performance on your web site.

2. AtlasOnePoint – a real powerhouse. It costs about $80+ per month which seems like a lot of money but it comes with more sophisticated tools than you can shake a stick at. Their documentation alone is really good to look at just to see the different kinds of advertising strategies that are out there and even pitfalls like bidding wars that occur on those networks. If you are a business that will be advertising heavily on the major search engines, you ought to really consider the services. $80 is a drop in the bucket compared to most Pay Per Click advertising budgets.

Once you begin measuring ROI with either of the above services you will better be able to tell which ad networks work best and which campaigns within those ad networks work. This will help you better determine how to price your keywords and whether to give up on some campaigns to maximize ROI. I was actually pleasantly surprised recently to see how great ROI was on the 7search network. Results vary so measure ROI for your own ads.

Google uses a combination of Click-Through-Rate (CTR) and Maximum Cost-per-Click (CPC) to determine ad position. Just because an ad is in top position does not mean it is making money for the advertiser, nor does it mean they are paying the most in terms of CPC. CTR is determined by dividing the number of times a searcher clicks on an ad by the number of times the ad is displayed (called impressions). Advertisers with high CTR can pay a lower CPC to maintain first page ad status. In my own experience, I’ve seen ads that can’t stay on the first page with a low CTR for over $2.50 per click while during high CTR periods it would be relevant for less than $1.50 per click.

In a perfect world, honest advertisers and searchers would always see the best ads float to the top as their ad text and content is most relevant to the search – or so Google hopes. In reality, there are many unsrupulous advertisers who want to knock their competition out of top position and do it by two means – click fraud and impression fraud.

Click fraud occurs when an advertiser repeatedly clicks on a competitor’s ads to drive up his costs. The advertiser gets lots of clicks, which drives up his CTR, but they’re useless clicks that cost a lot of money. Google sometimes detects these and will refund money.

Just as insidious is impression spam. The dishonest competitor will continually load the page with the search term others are bidding on. Tons of impressions will occur without a single click. This will drive CTR into the floor and affected ads will be slowed and eventually disabled. I have seen impression spam cause CTR on my ads go from 1% to .1% in a matter of hours with 49,000 impressions for an ad with a daily average of only 8,000 impressions.

Unfortunately, Google is slow in responding to impression spam. Though I have seen it occur at least a dozen times, I’ve never received a notice from Google that they ackowledged the problem as I reported it to them. Further, they do not “credit” bogus impressions or erase them from your account. Net result is that your ad suffers forcing you to resubmit the ad at a higher CPC than before and spend days rehabilitating the ad to get it to the point it was for months before it was decimated by impression spam in a matter of hours.

This is typically only a problem for popular keywords. My advice is to do a search before you make your ad active during the day and make sure the “normal” advertisers are all there. Secondly, don’t run competitive keywords at night or in the early morning – for what it’s worth my experience is that this stuff tends to happen most during these hours. Lastly, keep the pressure on Google – their business is supported by your ads and you deserve a product you can rely upon.