This is the third in a series of introductory articles related to Internet marketing, following What is Web / Internet Marketing? and What is Search Engine Optimization / SEO? If you’ve read both of those then this article on Pay Per Click (PPC) advertising should be fairly easy to understand.

First, go do a search on Google. Sure, I could post a graphic, but it’s better if you go do it for yourself. Unless you search for something really obscure, you’ll notice that right below the Google logo and the word “Web” that there is a blue area with 2-3 links in it. This doesn’t show up 100% of the time so if you don’t see it then look to the right side of the screen and you should see a number of links with text underneath them going down the right side. These are PPC advertisements, and you can buy them on Google, Yahoo!, MSN, and just about any other search engine.

The reason they’re called “pay per click” is because the advertisers don’t have to pay anything to put the ad up there, they only pay when the ad is clicked on.

What makes PPC advertising so great is its relative simplicity, tracking capabilities, high ROI, and availability.

Simplicity. It is quite easy to set up a PPC campaign. You don’t have to know how to build a website, program in HTML, or anything of that nature. If you have ever bought anything online then I’m sure you can figure it out. That said, there are a lot of finer points to managing a PPC campaign, but anyone can jump into it and start learning without needing to read a book.

Tracking capabilities. What if you could not only estimate the amount of auto traffic going past your billboard, but know exactly how many people looked at it? What if you could know with absolute certainty how many people who purchased your product did it because of a certain ad you ran in a certain magazine last month? What if you knew to the exact penny the average return on investment you got from a radio or TV ad you ran for the past three months? That’s just the beginning of what you can track with PPC. You can test out a PPC campaign and know with absolute mathematical certainty within days, hours even, whether it’s working or not, and then continue it or pull it.

High ROI. Direct mail costs around $10 per lead. Online banner ads are about $2. Leads from a phone book will cost you $1.18, and email marketing will run around $0.55. Although it depends on your industry, PPC leads average about $0.45 per lead.

Availability. I’ve travelled out of state a bit lately, and I’ve been surprised at the lack of billboards relative to I-15 in Utah between Provo and Salt Lake City. And because I-15 is such a major corridor if you purchase a billboard here you can capture a huge chunk of the available market. It really is a great advertising opportunity. The only problem is that it’s so great that there isn’t much availability. You might wait several months to secure the spot you want because it’s sold out for the rest of the year. With PPC you can create an account and have a campaign up and running within minutes. And if you’re willing to pay you can get into a top position that fast as well.

How Does it Work?

The way these ads are sold is on what is more or less an auction system. I say more or less because in some cases, Google for example, it’s only partially an auction system, but to simplify things let’s leave it at that. In essence, if you pay more per click then your ad is shown closer and closer to the #1 spot, although if you find the #3 spot actually works better for you then you can specify that you only want your ad to show up there and nowhere else.

When you create a new ad you specify what you want the headline to be, the two short lines of text below it, where you want the link to go to, how much you’re willing to pay per click, and then you’re off and running. It really is that easy.

PPC vs. SEO

With PPC you’re competing with the “natural” or “organic” search results we discussed in the post on SEO. So which one is better? There’s no hard and fast answer to that question, but here are some pros and cons.

The first pro of PPC is that it’s faster to set up and start getting traffic to your site. SEO takes weeks at a minimum if not months. PPC is easier to set up and manage–you can do it yourself in a few minutes. SEO requires more professional expertise as well as a working knowledge of HTML.

On the con side PPC doesn’t get as many clicks as the organic search results, only about 30%. When you turn off your PPC campaign it disappears immediately, whereas with SEO you get residual benefits, possibly for years. And with PPC you pay for every click you get, whereas with SEO your costs don’t depend on clicks, so whether you get 1,000 clicks per month or 100,000 you still pay the same amount (although some people could be misled by this statement into thinking that you don’t have to pay as much to get 100,000 clicks per month as you do to get 1,000).

My opinion is why not do both? Even in cases where my firm ranks in the #1 organic spot for a keyword, I’ve noticed that if I buy the #1 PPC spot I still get clicks from both links, so I continue to use PPC.

Click Fraud

“What if I put up a PPC ad and my competitor clicks on it 100 times every day?” That’s a perfectly logical question, but think about it. If Google and the other search engines couldn’t solve that problem, not many people would pay them for PPC ads, right? While click fraud is very real, it shouldn’t keep you away from using PPC. Chances are that once in a while a competitor might click on your ad, but if they click on it ten times in one minute Google is only going to charge you for the first click. They spend millions trying to combat click fraud because the cost of fighting it is much less than the revenue they stand to lose if they get a bad name by not doing enough to prevent it. The latest research seems to point to click fraud on Google being less than 2%.

How Do I Get Started?

Each of the three major search engines have their own system for managing PPC. I’ve included links below that go directly to where you can learn more and create accounts for each one:

Google PPC

Yahoo! PPC

MSN PPC

In addition, I’d recommend the following resources if you want to learn more about creating and managing a PPC campaign:

9 Cost-Effective PPC Branding Strategies

New Eye Tracking Report

My personal blog on search engine marketing and PPC

Should I Do This Myself or Hire a Professional?

For anyone who hasn’t tried it before I would recommend they try it themselves first. Even if you decide after two days of doing it yourself that you want to hire someone, you’ll be better off for having tried. But why should you hire someone at all? The one and only reason you should hire someone is if the cost of paying them to manage it delivers better results for the same or lower cost than if you did it yourself, taking into consideration that your time is also worth something. But ideally hiring a professional or a firm to manage your PPC campaign will result in lower costs and better results at the same time. For example, my firm was contacted in 2005 by a company whose PPC campaign had climbed to $20,000 per month in click through costs. They liked the results they were getting, they just didn’t like what they were paying for them. They hired us, and we cut their costs down to around $7,000 per month while at the same time improving the results they were getting. I’m embarassed to tell you how little they are paying us to save them $13,000 per month while giving them more leads and higher quality leads.

You might not be spending anywhere close to $20,000 on PPC, but if you’re spending at least $1,000 per month then hiring a firm or a professional might be worth it. If you’re spending $2,000 or more per month then I would definitely talk to some experts and see what they can do for you. However, if you do decided to hire a firm or a professional, beware. There are a lot of people out there who don’t know what they are doing but who are glad to take your money. There are also plenty who will set up fishy agreements with you, such as wherein they get paid a percentage of how much you spend on the third-party click through costs. I would recommend hiring a firm that presents you with a flat monthly rate that doesn’t fluctuate. “But what if I want to tie their pay to their performance?” you ask. Great, then do it by firing them if they don’t perform. I’m not saying more creative arrangements can’t work out, but if you want to keep it simple then go with the flat monthly management fee.