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Pay-Per-Click Advertising - How to Lose Your Shirt Fast
Copyright 2006, Dan B. Cauthron

A well-oiled pay-per-click search engine campaign can land
hundreds of highly targeted visitors on practically any website within
a matter of days. Of itself, that isn't new information.

But pay-per-click marketing is also one of the quickest ways to lose
money, if it isn't done right. At the surface level, the process appears
to be as simple as writing an advertisement, bidding for keywords,
and waiting for traffic and sales to come rolling in. Nothing could be
farther from the truth, particularly with today's heated degree of
competition for relevant keywords.

So, let us explore some of the common pitfalls encountered by
hopeful but inexperienced pay-per-click advertisers.

1. - Making Advertising Decisions Based on Emotion

The excitement of tapping a new market, and the much anticipated
thrill of watching click counters working overtime, can and often does
lead to a hasty decision making process. Add to this a pressing need
for a cash infusion, plus a bit of the gambler spirit, and failure can be
a frequent result.

2. - Overly Generalized Keyword Selection

Keywords that are too broad in scope can lead to an excess of non-
profitable clicks, driving an otherwise profitable campaign into the
red.

For example, a website selling athletic shoes should omit the simple
term "shoes" from the keyword list. That term alone may generate a
massive number of click-throughs. However, a good
portion of the resulting traffic will likely be looking for sandals, dress
shoes, or some type of shoe other than athletic designs.

3. - Poorly Worded Advertisements

Pay-per-click ads are notorious for restrictions on allowed word
count. While the headline and ad body should contain as many prime
keywords as possible, every single word in the ad should be weighed
and measured for effect.

A vague or loosely related advertisement may pull throngs of curious
visitors, but the ultimate value of each of those visitors must also be
considered. The only purpose of a great ad is to attract interest - and
only from those who have a purchase already in mind.


4. - Failure to Calculate True Bid Value

An untested ad leaves much of this process to theory, but even a
theoretical profit model is better than none at all. Otherwise, the urge
to bid wildly for top positioning may spell an overall loss of profit.

Three critical points to consider are:

- product pricing
- an acceptable profit margin per sale
- a realistic clicks to sales ratio (CSR)

Let's say a modest CSR of 1% may be expected, meaning one out of
each one-hundred visitors will order immediately. The product is
priced at $69 and a 50% profit margin per sale is acceptable. Given
these factors, up to 50% of the product price ($34.50) can be spent
to achieve the sale and deliver the product.

For the sake of this example, consider that delivery costs are nil.
Therefore, $34.50 divided by 100 clicks = $0.345 as an absolute
maximum bid per click. There are only three ways to increase the bid
above $0.345 while maintaining the integrity of the campaign:

- raise the product price above $69
- increase the CSR above 1%
- accept a lower profit margin per sale

5. - Failure to Track Results and Manage the Campaign

Once the advertising campaign is set in motion, results should be
tracked and analyzed on a daily basis. Many pay-per-click search
engines now provide in-depth analysis and reporting tools that
greatly simplify this process. In addition, specialized pay-per-click
tracking software is widely available, and in the absence of a
workable alternative, will prove to be a wise investment.

However, no two selling days are alike, even on the Internet. We
suggest that no fundamental changes be made to the campaign until
a few hundred click-throughs have been gathered, or until the
campaign has been live for several days.

Those suggestions are, of course, only rules of thumb. Any
campaign found to be creating a cash hemorrhage should be
discontinued immediately and thoroughly reevaluated.

6. - Failure to Capture the Visitor's Email Address

A majority of prospects will not buy on their first visit, and may not
return to buy later unless prompted to do so. In fact, the entire
campaign may register a net loss on the initial run. Even so, with
effective email follow-up, initial red ink can be washed away and a
substantial profit realized within just a few days.

Pay-per-click advertising has only recently come into its maturity as a
workable marketing venue. But it still holds the qualities of the
proverbial double-edged sword. Fortunes can be made or lost,
depending on how the resource is used. Those who take the time for
prior study will find themselves in the better position.


About the Author

Dan B. Cauthron offers No-Nonsense Information and Resources for
Serious Internet Marketers - http://DanBCauthron.com