Conversion Rates and Click-Through Rates of PPC Advertising

Studies repeatedly show that those adverts nearer the top of the page (so the best ranked) attract the highest CTRs. They get the most clicks. And, the clicks cost the advertisers more.

Looking at the heat map, you can see that getting in the blue box on Google will most likely generate even more clicks on an advert. You might think, the more clicks the better, but is this necessarily the case? Being in the top position means you will pay more per click. Many clicks at a higher price may use up your budget quickly. Also, many people click on the top advert believing it to be the top organic search result – often without reading the advert text.

Advertisers need to consider what a user does after clicking through to the advertiser’s web site from the search engine. When planning a PPC campaign, it is therefore crucial to set up the goals of the campaign, and make sure that these are being met. You can use your analytics package to set these up. With a goal set up, the advertiser can track how many of the users that click through to the web site follow through to that goal.This is called a conversion.

Goals can be:

• Buying a product
  
• filling in a form
  
• Downloading a whitepaper
  
• Sending an enquiry
  
• Booking a flight
  

We know that the CTR of an advert is clicks / impressions %

The conversion rate of an advert is conversions / clicks %

As the advertiser, you also need to know the value of each conversion. You need to know this so that you don’t pay too much for your clicks, and so that you bid to have the best CTR for maximum ROI.

The above table shows how you might adjust bidding strategies based on business principles.

• Example A: bid on a keyword with phrase match.
• Example B: bid on the same keyword with phrase match, but bid for a higher position. The conversion rate of the web site remains the same, but because of the higher CPC, the CPA increases, although there are more conversions.
  
• Example C: bid on the same keyword, but with broad match this time. Because the traffic is less targeted, the conversion rate on the web site is lower. This means that the CPA increases again.

The campaign needs to be run according to business rules. A PPC campaign can aim for maximum conversions, but this is usually at a higher CPA.

Budgets
As well as deciding on your CPC bids for your keywords, you are able to determine the budgets for your campaign. You can set daily budgets, monthly budgets or no budget. Once your budget is reached, your adverts are paused, so you can be sure that you never overspend. If you are concerned about overspending, you can set a daily budget.
However, this can mean that your adverts do not run as often as you would wish them to.

The different advertising platforms offer advanced bidding options, all aimed at helping you to run your advertising campaign better. You can bid for placement on the SERP, or you can bid based on how much you are willing to pay for click. You are able to bid for adverts during certain times of the day only, called scheduling.

Which platform should I choose?
There is some theory that different platforms are better for different industries, for example, that Yahoo! fares better than Google on travel advertising. However, this is subjective, and most large advertisers will run PPC campaigns on a number of platforms. As with most things in Digital Marketing, it is all about testing.

There are some small differences with each platform in terms of editorial policy, and each system has a different user interface. Google AdWords is perhaps the most well known, allows users to transact in the currency of their choice, and also offers training programmes and certifications.

Google AdWords also currently has the best geo-targeting worldwide, although geotargeting is offered by both MSN’s adCenter and Yahoo! Search Marketing.

The long tail
Google has estimated that 50% of searches are unique. This means that the sum of searches which are unique is about the same as the sum of non-unique searches. Looking a little more closely at search terms will show a small number of high volume searches, and then a large number of lower volume searches stretching out to those unique searches.

This is sometimes referred to as the long tail of search. Figuring out that low volume, niche search terms can do wonders for a PPC campaign. Generally there is not much competition for those search terms, and the search term it is much targeted.