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August 7, 2008

The Pay Per Click Numbers No One Will Tell You

I often see questions in discussion groups and blogs that ask about basic numbers one can expect from pay per click ads. Unfortunately, there is often no reply to these questions or the reply is too general to interpret.

This article will attempt to satisfy the thirst for this information and explain the numbers you should be monitoring and what you can expect from your pay per click and sponsored ads.

Impression To Click Ratio

After many campaigns on line, I believe the ratio the search engines like is 1% or greater. That is at least one click per 100 impressions. I have noticed that in any ads where my Impression To Click Ratio is less than 1%, Google begins to move my ads down the page and I have to bid more to stay on the first page of results. I have also noticed that when my Impressions Per Click are greater than 1%, my ads seem to rise in the rankings and I can even cut my bids and still stay in good positions. My clients and I shoot for a minimum of 1% Impression To Click Ratio and some ads reach as high as 10%. We suggest you shoot for that range. If you can’t hit that range, you will need to try different keywords and ad variations.

Click To Purchase Ratio

The number of visitors who purchase from you will depend on your price, your offer and many factors. However, as a rough rule of thumb, we suggest 3% is an average Click To Purchase Ratio. It can be much higher or much lower but that gives you a rough average to shoot for. If you are not hitting this number, it try experimenting with the price, the offer, the landing page and the key words.

Click To Freeby Ratio If your landing page gives away a free white paper, e-book or other freeby, we find that a rough average is 3% to 10% of the visitors will request the free information. The biggest obstacle to giving away free items is asking for too much information from the visitor. The less you ask for, the more likely you are to get a request. We suggest you only ask for first name and e-mail address if that is all you need. Asking for age, address, cell number and other extras greatly reduces the requests you will receive.

If you are falling below these numbers, it is often a trust issue. Maybe your site is perceived as untrustworthy or perhaps the links do not work. Experiment and try different things until you hit and exceed these ratios.

Maximum Profitable Bid Calculation

Like all auctions, pay per click sites have a tendency to get us to pay more than we should for clicks. Many of us bid with our emotions. Just ten cents more and we are sure we will get the traffic and sales we need. Before you bid, you should always have an idea of how much you can afford to pay and still make a profit.

To estimate the amount you should be bidding, start by calculating your gross profit per sale. To calculate this number, take your selling price, less the cost of shipping and handling, less the cost of buying or creating the product and all packaging. This calculation gives you your gross profit per sale.

As an example, if you sell a product for $49.95 plus $10.00 shipping, you sell for a total of $59.95. If that product costs $20.00 plus $4.00 shipping plus $10.00 in shipping and packaging, your cost is $34.00. That means your gross profit is $25.95 ($59.95 – $34.00) per sale.

If you sell to 3% of the visitors who click their way to your site and you bid $1.00 per click, you will pay $100.00 for 100 clicks. Of those clicks, if three will buy, your gross profit on your $100.00 investment in advertising will be $77.85 (3 times $25.95). It won’t take long to go broke if you advertising costs are more than your gross profit.

You need to decide how much you advertising should be as a percentage of gross profit and bid accordingly.

Getting More Clicks For Less Money

To lower your bid costs, stay away from the common or general key words and look for “niche” key words. These are more specific keywords. For example, if you sell digital cameras, the key word “digital camera” may be too expensive for you to bid on. However, if you bid on the keyword for your specific model or brand, such as “Canon Digital Camera” or “Cannon S362″ you usually can bid far less per click. These niche words have fewer clicks but if you bid on a lot of them, your total impressions and clicks will be as highor higher than the general key words and your profit will be much higher.


Carl Davidson is President of Web-Star Marketing, a company that assists its clients in on line marketing. He is the author of hundreds of articles and DVDs. For more information, visit: http://www.web-star.biz

2 Responses to “The Pay Per Click Numbers No One Will Tell You

    avatar Thalia Sahlie says:

    I found this article very informative. We have quite a few keywords in three different ads on two different PPC providers. We just recently lowered our bids because the cost is higher than what we make. We have been wondering if we made the right decision….Well, I don’t think it has changed our sales at all. They have actually increased because we added a data Feed with Google Base.
    Thanks for the good advice.

    Great article.

    Thanks for sharing.

    Specially for people who want learn more and more about PPC.

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