A couple of years ago I posted the following message and received no replies. So I'll try again:
1. ppc prices are set by what people are willing to pay; and
2. there is an endless stream of overly optimistic starter uppers willing to outbid competition to gain traffic;
then are the ppc facilitators simply churning through the overly optimistic as they, one after another, burn through their advertising budgets and leave the market - only to be replaced by the next overly optimistic buyer?
If so, would the market of soon to go broke ppc advertisers be the most lucrative one for ppc facilitators?
If so, would the ppc facilitators have little financial interest in serving advertisers willing to pay less where less is a cost per click on which the advertiser can profit and stay in business.
Is this what is happening?
Are any of you who sell products or services able to purchase ppc advertising at a price that allows profit from the traffic? Or are you finding that you are always being outbid by an endless stream of advertisers who advertise for awhile, possibly until they run out of money, then close their doors? "
By the question I meant direct profit from a click to a sale rather than indirect profit such as taking a loss on the first sale but reaching profit via subsequent sales to the same original buyer or accepting the loss from the initial click throughs simply to build a population of participants in a community.
I guess another way would be simply to ask whether anyone is actually profiting via immediate sales to people clicking through the ppc ads.
If not, then I guess the real game is losing money on the click throughs in the short term in the hope of profiting later via customer retention etc.
There are a few issues that drive up PPC costs beyond what seems profitable. Some companies value a new client based on the life cycle of the customer IE: how many purchases will the customer make over the lifetime of the relationship? While others only consider the immediate transaction.
Also, in some web driven business niches, aggregators can afford to bid much higher than individual companies because they are selling the information to more than one company (think mortgage leads).
There is also a heavy dose of the overly optimistic as well (especially in emerging markets). If the advertisers are changing on a daily basis...there may be a lot of companies just using the spray and pray method.