Paid Search Advertising (PPC) FAQs

1. What is paid search advertising?
2. What is Pay Per Click advertising?
3. Isn't paid search expensive?
4. How is Paid Search different from Natural or Organic Search?
5. Should I start with paid search or natural search?
6. Should I manage paid search internally or outsource it?
7. How long does it take to launch paid search campaigns?
8. How long will it take to start seeing results?
9. How many keywords can I bid on?
10. What about click fraud?
11. How do you track the results?
12. What is a bid limit?
13. How do you calculate bid limits?
14. Should I use broad match or narrow match?
15. What is click fraud and how concerned should we be about it?

Paid Search, often known as Pay Per Click (PPC), is a form of advertising offered by the various Internet search engines. Advertisements are attached to particular keywords (or key phrases), and shown only when someone searches on that keyword. Advertisers bid on these keywords, with the advertisers bidding the highest typically appearing on the first page search results.

These ads are called "sponsored links" or "sponsored ads" and appear next to and/or above the natural or organic results on the search results page. The major paid search providers are Google Adwords, Yahoo Search Marketing, and MSN AdCenter.

Pay Per Click is an advertising model used on websites, advertising networks, and search engines where advertisers only pay when a user actually clicks on an ad. Minimum prices per click vary depending on the search engine / network but typically start at US$0.10. Most Paid Search Advertising today is built on a Pay Per Click (PPC) model.

With click fraud on the rise, a mismanaged paid search campaign can drain an organization’s resources. But properly managed, a paid search campaign becomes one of the most cost effective ways of advertising today. Furthermore paid search yields a goldmine of data that can be used to optimize your other advertising strategies.

From an advertising perspective, one of the greatest advantages that paid search has over natural search is that it is highly measurable. Data provided through advanced web analytics allows marketers and advertisers to track and optimize ROI. Tracking ROI with natural search is much more difficult, though not impossible.

Also improvements in Paid Search ranking can be achieved by merely pumping more money into the campaign. Natural Search rankings, however, cannot be bought and improving website rankings for select keywords is achieved through the tedious process of Search Engine Optimization (SEO).

Finally, Paid Search can be used to target hundreds or thousands of keywords while Natural SEO must take a much more focused approach with just 15-20 high value keywords being targeted. Data from a Paid Search campaign is usually a good way to determine those 15-20 keywords to target with Natural SEO.

Because natural search is limited in the number of keywords that can be effectively targeted, it is recommended that you begin with Paid Search. This allows you to test a large number of keywords, and to measure the results on a keyword by keyword basis. Focusing your natural search efforts on only the top 15-20 paid search keywords will provide for a better ROI than plunging into natural search blind.

The only legitimate reason a business should focus on Natural Search before proving out keywords on Paid Search is that the company is in an industry niche that is not hypercompetitive and has fairly obvious primary keywords with significant search volume.

In many cases, managing paid search internally is the best way to go. You should consider outsourcing the management of paid search when one or more of the following are true:

• You expect the monthly media/advertising spend to be thousands of dollars or higher.
• You have hundreds or thousands of potential keywords that need to be managed.
• You have tried paid search in the past and couldn't make it profitable.

A paid search advertising campaign can usually be launched within three weeks with the majority of that time spent developing keywords and adcopy. If keyword and adcopy is already available, then the campaign can be launched in as quickly as a few days.

Once the campaigns are created and activated, traffic will begin flowing to the website within hours, if not minutes. Generally, traffic will ramp up over the first few days of the campaign.

There is no limit to the number of keywords that you can bid on. However, you will only want to bid on keywords that are relevant to your business. As a rule of thumb it is usually preferable to have too many keywords, rather than too few.

Click fraud is a legitimate problem with paid search advertising. The major paid search engines have technologies in place to prevent click fraud, but they do not always work. We closely monitor our paid search accounts for suspicious behaviour, reporting same when we detect it. This often results in a credit being made to the account by the search engine.

The first step is to determine what is being measured on the site. In most cases, a site is either attempting to sell directly, or to generate leads for an offline sales team to work. We refer to these actions as online "transactions."

Once the transactions have been defined, there are a number of technologies that allow one to connect such transactions with their original source. Although Google and Yahoo offer web tracking (aka web analytics) technologies, the data provided is limited but adequate for simple campaigns. For larger more intricate campaigns there are a number of third party programs available, such as Hitslink, which provide significantly more information.

A bid limit is the maximum you should spend per click for a particular keyword. While receiving clicks for less than the bid limit increases profitability and is very much welcome, it is extremely important to have an upper boundary.

The formula for calculating bid limits is as follows:

Transaction Value x Conversion Rate x Advertising %

Transaction Value represents the value of the online transaction. For instance, if you are selling widgets for $100, and your cost of goods is $60, the value of a transaction is $40. If the site is collecting leads, you need to determine what a lead is worth.

Conversion Rate is the percentage of website visitors that submit a transaction. If 200 people come in on a particular keyword, and ten of them submit lead forms, the conversion rate is 5%.

Advertising Percentage (%) is a strategic decision as to how much of the value generated by a transaction should be allocated towards discretionary advertising spend.

As an example, let's say you have a transaction that you determine to be worth $100. For a particular keyword, the conversion rate is 4%. You're looking to grow as quickly as possible, so you set the advertising percentage as 50%.

The formula would be:

$100 x 4% x 50%

For a bid limit of $2.00 per click.

Bid limits should be calculated by keyword or keyword category because the conversion rate can vary greatly from keyword to keyword.

We recommend that you use narrow match combined with a large selection of keywords. Many people recommend broad match as it results in few keywords to manage, but we feel this results in large amounts of untargeted traffic which is detrimental to your ROI.

Click fraud is the act of sending fraudulent clicks to PPC advertisers. The clicks can either be generated by automated technology or via actual manual clicking on advertisements. The goal is either to generate revenue for affiliates or to increase the costs of a competitor.

Click fraud is a legitimate problem with paid search advertising, but the degree of problem is difficult to determine. The major paid search engines have technologies in place to limit click fraud, but they can be circumvented. Third party fraud detection tools can also help.

At LCG we closely monitor our paid search campaigns for suspicious behavior, alerting you to it as well as reporting it to thesearch engine when we detect it. This often results in a credit being made to the account by the search engine.

It is important to realize, however, that this is an inherent risk associated with paid search and that it can never be totally eliminated, only limited.

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