Today I’ve decided to make a commitment of learning Pay-per-click (PPC) for as long as it takes to start making decent money. I’ve got a few ideas I want to try out, including ads for my own plugins as well as promoting other WordPress products that I’m an affiliate for.
Disclaimer: I’m primarily writing for myself so I might skip a few important things just because I was already aware of them before I started this process. Also, I’ll be focusing mainly on Google AdWords and Facebook as my channels, as those are the ones most relevant to my business.
First Things First
Let’s start with the very basics. Why use PPC? The main advantage of PPC is that it gives you instant traffic and allows you to test new business models in real time. Of course, free organic traffic is great and something that we should always strive for, however many times we can’t afford to wait until that organic traffic starts trickling in.
Pay-per-click allows you to be listed at the very top of the search engine results pages (SERPs) very quickly, and this gives you the opportunity to:
- Evaluate the state of a market and its readiness/openness for your product
- Split test your landing pages and gather fast results
- Prototype a new product/service before you invest big money in fully developing it.
- Determine which terms work best and start targeting them via SEO
The ability to test ideas is one of the most compelling uses for PPC in my opinion. For example, if I want to create a new WordPress plugin I can create a landing page for it and add a subscription box for those who want to get notified when the product is released. Based on how many people sign up I can have an indication of the real interest there is for the product, and I’m already building a list of people that have the high potential to be my first customers if I decided to go ahead with the project.
If there is little enthusiasm for my offer, on the other hand, it might be that the market does not need yet another plugin with this feature set, or maybe I am marketing it to the wrong people or from a wrong angle. Essentially, it allows me to fine tune a product’s target audience even before I create the product itself.
Typical Conversion Rates
PPC is a highly trackable marketing medium, which is great as it gives you an easy way to calculate your Return On Investment (ROI). So when starting out we need some kind of yardstick to measure our success by.
Most PPC campaigns are either doing lead generation or direct selling.
For lead generation the typical conversion rate is between 10% and 12%. For direct selling it depends on whether you are selling high ticket items (lower conversion rate) or cheaper items (higher conversion rate). It can be anywhere between .3% and 5%. It’s probably a good idea to try and get some insight into the conversion rates of your particular industry when measuring your results. In my case, I could ask other people selling WordPress products what their conversion rates are.
All this means that we need a means to calculate our ROI; enter the PPC ROI Calculator from Fuel Interactive.
Below you can see a quick calculation I’ve done. I’ve calculated my average sale (total earnings/total sales) to be $82. I also decided that as a start I’m going to spend $500 per month on AdWords. Since I’m just starting out I don’t have much data relating to conversion rates or cost per click, so I entered a conservative conversion rate of 1% and a cost per click of $3, based on the cost of each click in a recent test campaign I did. The results weren’t pretty.
So I would be spending $500 and only earning $82, which means that I’m throwing $418 down the drain; not good. Sure, it’s common knowledge that when starting out you will lose money, that’s part of the learning process until you fine tune things. However I at least want to have some goals to aim for.
So I changed the conversion rate (I would have to improve my landing pages for that to happen, but that’s part of the game) and also reduced the cost per click, which can also be done once my ads start converting well. Here are the new results.
With these small but significant changes I now have a return on investment of 14% and a profit of $74, which is a huge difference compared to the previous results. Once I’m getting a positive ROI I can then scale things up, spending say $2000 a month instead of $500, which would net me a profit of $460.
It’s also keeping in mind that sometimes it can be more worthwhile to improve your site’s SEO rather than spend money on PPC. This is especially true when the cost-per-click is high, say $5. If you spend $1,000 on an SEO campaign (which tends to be much longer lasting) it will pay for itself very quickly after only a few hundred targeted visitors.
Keeping Tabs on the Competition
One of the best ways of learning what works without spending a dollar is to survey what your competitors are doing. If ads from your competition are ranking around the same ad position over the course of a few weeks to a month, they are probably generating profits that allow them to keep advertising. It’s worth doing this exercise before jumping in with your own ads. I’m not sure if there is some tool that helps in doing this kind of monitoring, but I’ll probably stumble across it sooner or later and will post a link.
And that’s all for today. It’s fun learning PPC and I’m looking forward to get into action with some of my own campaigns and see what kind of results I can get.