One thing you need to know about pay-per-click ads

Tue 8 May 2012 08:00, Tamara Yadvichuk

One thing you need to know about pay-per-click ads

Last week Mashable published an article with an alarming topic which reads Why pay-per-click ads are wasting your money. Wait a minute: do they really waste money? In 2011, the total amount of money spent in online advertising reached $80 billion, of which almost half went to search marketing. Does it mean that the world has just wasted $40 billion?

Let’s get things clear first. Pay-per-click ads we’re talking about here are ads provided by services such as Google AdWords. If you go to Google and search for a somewhat popular product (like digital camera), you will see your usual search results on the left, and AdWords ads on the right. Pay-per-click simply means that if you click on one of them and go to the advertiser’s website, it will cost them a certain amount.

The next question that comes naturally is how effective those ads are. The thing is that it’s impossible to name any valid average metric for all the pay-per-click ads ever displayed. The numbers which could give an idea about their effectiveness, such as the ad’s price, how many people saw it, clicked on it, and, eventually bought the advertised product, are very different for each specific industry, product and target audience. Besides that, the price of the ad greatly depends on its position in the paid search results: the first few which receive the majority of the clicks are the most expensive.

According to Google itself, if your AdWords ad has a click-through rate of more than 1%, you are doing very well. This means that of every 100 people who saw the ad, one clicked on it and was brought to your website, where he/she could:

a) buy products, subscribe to newsletters, and do lots of other things;
b) look through a couple of pages and leave;
c) do nothing and leave immediately. 

The above mentioned article said that according to research, 55% of new visitors who arrived at the website via an ad choose the third option, meaning that half of the website’s advertising money is wasted. So why does this happen?   

A common mistake with pay-per-click ads is to try to reach everyone. Google, for example, claims that it can reach 4 out of 5 internet users in the world (around 1,8 billion people), which makes it sound like ‘if you advertise with us, all those users can see your ads’. The thing is that you don’t want to advertise to everyone, it’s way too expensive, and that’s where a lot of money is wasted – you want to reach the person who wants to buy what you are selling. And when that person arrives at your website, you need to make sure that they find what they came for: the discounted product, free subscription, etc.

So, whether your ads will bring you the desired profit depends on how well you target them, and how good is the landing page they lead to.

And of course, Google makes lots of money on all of this. In 2011, the search giant made almost $38 billion, 96% of which came from advertising. 


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