- Target more than 10% of site traffic for PPC.
- Track results and continuously improve.
- Set a pay per click ROI target that includes both ad costs and labor.
A site’s pay per click budget should be the second most important marketing priority after search engine optimization in part because it is the second biggest opportunity to gain audience.
Search engine traffic usually is and should be the largest source of audience for a site. It makes perfect sense to spend the largest amount of marketing time on search engine optimization to make sure those numbers are strong and keep growing.
Many sites don’t spend any money on pay per click marketing. They miss an opportunity to gain additional audience from niches that SEO doesn’t deliver. Others spend too much on their PPC budget.
What is the right amount?
Setting an Audience Goal
One survey claimed that sites using pay per click generate about 30 percent of total traffic from that tactic. But in reality it depends on the site and the opportunities.
The dangers of PPC marketing include:
- Spending too much or too little money on it;
- Dedicating too much or too little time on it;
- Failing to use A/B testing and other means of improving results.
One reason why some sites dismiss pay per click is the fear that they can’t afford to spend the money. But if they spend extra time on search engine optimization instead, they still are facing a cost — the value of their time.
That’s why PPC marketing can make a contribution to site audience growth. It may cost hard dollars to manage, but it produces more results in less time.
The audience goal (or goals) vary depending on the site’s business model. They include:
- Increasing advertising revenue;
- Generating transaction revenue;
- Acquiring subscribers;
- Producing leads, i.e., Realtors.
4 Steps for Creating a Pay Per Click Budget
The riskiest way to get started is by creating a large budget and jumping feet first into unknown territory. The odds of failure are high.
The wise approach involves starting with one or more small test campaigns. They provide insights on which keywords generate the best response for the least amount of money. Then grow the spending amount as results improve.
So follow a few simple steps in establishing a PPC budget and making it worth the time and cost.
- Start with a goal of producing at least 10 percent of site traffic from PPC.
- Identify keywords with the most opportunity.
- Determine an average cost per click.
- Multiply the audience goal by the average CPC to arrive at the budget.
Using the above steps, let’s say a site has 20,000 visits a month and wants an additional 10 percent or 2,000 visits from PPC.
The average cost per click for the targeted keywords is 25 cents. Multiply 2,000 visits by 25 cents to set a budget of $500.
Once the budget is established and the campaign rolled out, it becomes critical to track results and continuously improve the performance.
The early part of the campaign may end up with an average cost per click above 25 cents. In fact, that’s highly probable until the search engine providers do their part in optimizing the campaign.
In addition, the cost per click usually declines as the campaigner optimizes the program to create the most efficient use of the inventory.
Search engines don’t like campaigns that chew up a large amount of inventory for few if any clicks. They get paid for the clicks and not the impressions. So they usually provide a lower cost per click for efficient campaigns and a higher CPC for inefficient ones.
Return on Investment
The return on investment must of course exceed the cost of the campaign. Those costs include the advertising budget, the labor involved and other related expenses.
One advantage of starting with a target of growing audience by 10 percent is that it limits the risk of poor returns due to a poor implementation of the campaign.
As the campaign rolls on and performance improves, the campaign manager can begin to increase the PPC budget until the total audience from paid marketing reaches the optimal level.
A variation on ROI is Return on Advertising Spend or ROAS. The ROAS number is simply the gross revenue generated by the campaign divided by the amount of money spent on advetising.
Surveys by The Nielsen Company indicate that the ROAS for online advertising is 218 percent or $118 dollars return on every $100 spent.