How Pay Per Click Is Different From Traditional Media Spending

By Brian Carter on March 7, 2008 7:06 PM | | Comments (0) | TrackBacks (0)
 
Warning: long, complicated post... but highly valuable to an audience that likely will be confused and bored by it.

I came at this from the PPC side. Having done AdWords and Yahoo PPC freelance before joining up with an interactive agency, I didn't deal much with clients used to traditional ad spends.  But clients with larger budgets seem more likely to have this orientation.  It was a shocker and an adjustment.  But it's better than clients with no budgets!

Here's the traditional assumption: we define exactly how much to spend each month for the next year, and we cannot change those amounts during the course of the year.

I understand businesses have budgets and planning ahead is essential.  But the problem is you can miss opportunities you discover along the way.
Suppose in your PPC efforts you discover you can make $5 for every $1 you spend- maybe you only expected to make $3 for each $1.  But you're getting $2 extra in profit- and if you could reinvest that $2 in PPC, you can make it $10.  Feed the success to make more profit. 

Strike while the iron's hot.  In PPC you can't assume the same ROAS will be there next year.  Things change quickly.  The more you spend, the more you learn, the quicker you become efficient and dominate the competition, and the more profit you can make.  And if not you, then your competitor, and their rigorous ad testing while getting volume clicks increases their CTR and quality score and distances them from you, perhaps prohibitively.

Back to traditional vs. PPC spends:

Rigid, highly segmented, calendar-based budgets can make your PPC specialist lose their hair.  Why?  Because no one can predict how much can be spent in any one segment of a campaign, and optimizations can change maximum spends.

In the traditional ad buy, you could buy a billboard for a week of exposure- the cost is fixed, the number of views is unknown.  In PPC, the cost of your billboard (text ad) is determined by the number of cars that drive by it.

That's not a perfect analogy though. It's more like this:

For a "billboard" (text ad) in the PPC world, the amount you can spend depends on:
  • the location of the billboard (niche/demographic/competition),
  • how stimulating the ad is (CTR),
  • whether the ad is relevant to the demographic that drives by it (quality score), and
  • whether the store advertised delivers a good experience (landing page/quality score).

Segmented budget complications: When you segment a campaign- say you want some geotargeting aimed at Canadians, and another campaign that's U.S.-focused, and another campaign that places ads on specific Google content sites... if you tell your PPC specialist you want a different budget for each, here's the can of worms you're opening:

- What if one campaign can't spend the amount you wanted?  Do you want them to increase bids in that campaign until it spends enough?  What if that eats away at your margins?
- What if one of your campaigns has a much better ROAS than the others- won't you want to put more money into it to increase your conversions and profits?
- What if a campaign spends the amount you want, but when you optimize it to a lower cost per click, it underspends?  Which is more important?

Budget assignment can evolve as you learn what each campaign can do.  But the more budgets you have in place, the more time a PPC specialist spends trying to meet those budget requirements.

There are multiple PPC management strategies, and they can be mutually exclusive.  Some strategies include:

1. Spend a specific budget while trying to reduce CPC.
2. Optimize ROAS- if a keyword costs a lot per click, it's ok if the conversion rate and revenue are high enough to give you a good ROAS.
3. Maximize number of leads- you want good visibility, reach, CTR, and conversion rates (CR) for your lead submission form.
4. Improve lead quality- you have to focus on keyword relevance and CTR as well as CR, possibly while tracking leads all the way through the sales cycle.

Every client is in a different spot and has different goals. Some don't have the technical ducks in a row to measure conversions.  Some only understand budget and CPC and have never heard of conversion rate.  It's a process, so we educate our clients about better tracking, better KPI's, and help them get the technology in place to optimize PPC for the business results that mean success for them.

And ultimately, PPC should be about getting more, better, and more affordable business results.

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