How much do you spend on PPC advertising?

Starting a business and trying to figure out costs

[quicksilver1024]

I'm starting my own business this coming summer.

I was wondering how much a typical medium-sized company pays for PPC advertising.

[bateman_ap]

I spent over £1m last year, I could have spent £0 if I wanted. The question is a bit vague. Basically my rule of thumb is that if I spend something and make a bit more back I keep on spending and spending and spending!

[King_Fisher]

TOO MUCH!...KF :o)

Really I spent too much on PPC, Should of spent more time on SEO/Keywords.

[ByronM]

PPC is something i do in bursts.. If i have something that others are limited on supply i'll run a PPC campaign and get the word out, otherwise there is no way i can compete with the deep pocket of the others who are long since smart priced at prices i'll never see anyway ;)

[ispy]

Remember, when at the top the whole line below you is clicking on your ad. Envy.

[quicksilver1024]

Great comments, but what I'm more interested in are the numbers :)

I've read somewhere that online advertising falls (on average) between $6,000 - $10,000 a month. I forgot where I saw this figure, but that was always the range I've had in the back of my mind...

[tootalldave]

Yes, it can get as high as $10,000 per month or even higher.
But you have to start out small until you get your conversions high enough to show a net-net profit by tweaking your website and ads.

Also each pay per click will give different results and the good ones like Yahoo and Google have to be watched very closely as they seem to have a policy of letting crap clicks through during certain episodes of their business, such as Yahoo and MSN are talking hot and heavy right now, so Yahoo would be more likely to let plenty of crap traffic trough to show a higher Advertiser Revenue to MSN.

[sem4u]

I know companies that spend £1-3M a year in the UK alone. Most budgets are are a lot less than that though.

[ByronM]

Its nice seeing expenses but the real number you want to see is expenses vs earnings regarding PPC and most people probably wouldn't share there secret to success.

You can spend a LOT more than you can make very easily ;)

[mattb]

We're happy when it's about 8% of the gross sales. Whenever we start a new line of products, we figure we will lose for the first few months while figuring out the best mix of products / price. We've been advertising PPC since the start of Overture and Google Adwords so we have a few years of experience.

[pbradish]

For my main client's Ecommerce site, we spend roughly $1,000 per month on Google Adwords - and $250 per month on Yahoo. We also purchase PPC ads on MSN, but those searches are pretty minimal at this point.

For ecommerce, PPC is definately worth the investment. We've been able to produce an excellent ROI - the best of any/all advertising that we do.

[Hortyman]

Hell, with google alone I spend close to 2mil on one of my sites and 1 mil on another one. But I have worked for sites that that spend as low $2000 per month and still turned a profit. It is all relative to what their competition and how large they are....

[quicksilver1024]

Hmm...there's so many different kinds of ranges for online advertising!

I was just hoping for an average amount and run with it... :(

[klauskl]

in the campaign that i manage we spend 13k monthly

[ByronM]

Hmm...there's so many different kinds of ranges for online advertising!

I was just hoping for an average amount and run with it... :(

Thats the worst way to try and figure out your own budget though ;)

Why not start with something simple.

* Gather your core products
* Create campaigns for these
* Track the conversion Rates
* Find your "profitibility" mark
* expand it to more products
* Trend it out another month or 2

Then apply what you have learned in your test cases to your entire catalog and you will have an idea of your spend vs income and how you have to maintain your marketing to fit that moving forward knowing that nothing will be static but you will have an idea of where you stand.

sorry for the runon haha

Basically figure your expenses, figure your profit margin, figure out your CPC vs EPC and see if its profitable to market that particular item.

[p5gal5]

Rather than have a ballpark figure (dollar-wise), you might want to set a goal (percentage-wise) from what you estimate about your average transactions, conversions, etc., to ensure maximum profitability. If the site is new, PPC might comprise 80% of the traffic - if it is established, it might only be 5%.

Personally, my goal is for the PPC cost per acquisition to be ~1/4 of the overall average transaction (eg, if site's average transaction is $100, I try to pay $25 per conversion on PPC). This has turned out to be very lucrative with our margins. I've found that bidding towards the top (at least in our niche), but not at the very top, works the best for PPC ROI. I hate for my clicks to be "collateral damage" when the customer is gathering information; I prefer to let the top bidders absorb those costs (unless it's a very non-competitive term).

Now that the sites are well-established, I aim for PPC to be ~10% of my gross, but I usually end up hitting 5 or 6%.

[ildarius]

I think what most of the people are trying to say is the following...

Scenario:
Out of 100 Clicks (a.k.a visitors) you get 150$ in sales, which means that your EPC (earnings per click) is 1.5$ (EPC=Sales/Clicks)

So far so good?

If you spend 1.4$ per customer (click) and your EPC is 1.5$ then congratulations, because now you can spend as much as you can beg, borrow or steal because you're making more then you're spending!
:))

[ByronM]

I think what most of the people are trying to say is the following...

Scenario:
Out of 100 Clicks (a.k.a visitors) you get 150$ in sales, which means that your EPC (earnings per click) is 1.5$ (EPC=Sales/Clicks)

So far so good?

If you spend 1.4$ per customer (click) and your EPC is 1.5$ then congratulations, because now you can spend as much as you can beg, borrow or steal because you're making more then you're spending!
:))

Forgive me if i'm wrong, shouldn't EPC for merchants be based upon profit/Clicks? Sales/clicks would put you out of business at those numbers (spend $140 to sell a $150 item unless you have a 94% margin)

So for a merchant it would be something more basic such as

sales * margin / 100 = EPC and as long as that is greater than your CPC you will have positive growth.

For example:

1500 in sales at 5% margin = 75.00 profit / 100 - .75 EPC so if you spend 74 cents CPC you will have at least a positive growth (albeit a dangerous growth if PPC if a large margin of your profits because your expenses of managing the program are probably more expensive than your margin of EPC vs CPC)

I use goals in google analytics to calculate the profit from each sale and then compare that to the cpc/ctr/epc to generate that profit (and hopefully its positive)

[edited by: ByronM at 3:05 pm (utc) on April 10, 2008]

[p5gal5]

I think what most of the people are trying to say is the following...

<snip>

If you spend 1.4$ per customer (click) and your EPC is 1.5$ then congratulations, because now you can spend as much as you can beg, borrow or steal because you're making more then you're spending!

Unless the site is extremely high-volume with insane margins, for this scenario to be true, you would need to:
1. Be arbitrage
and/or
2. Not take time/efforts into account.

[rocknbil]

I guess we'll weigh in.

Wife started business on $800 and $1000 in credit cards. Click and mortar, has physical store.

We tested the waters at $5 per day, then increased the spending. Last year, we ran almost the entire year on $500/month.

When the slump hit in December, we just shut it off.

I was really surprised, we only lost about 20% of sales, or so it seemed, and it was only temporary. We are currently using no PPC at all and are doing almost as well as we did last year this time.

Keep in mind this is a single proprietor retail business in a fairly small niche . . . but the way I see it, we're no worse off and $500 per month ahead.

[ildarius]

I was really surprised, we only lost about 20% of sales, or so it seemed, and it was only temporary. We are currently using no PPC at all and are doing almost as well as we did last year this time.

Where do you get the traffic from? (if you don't mind me asking)

Forgive me if i'm wrong, shouldn't EPC for merchants be based upon profit/Clicks? Sales/clicks would put you out of business at those numbers (spend $140 to sell a $150 item unless you have a 94% margin)

You're absolutely right, pardon my over simplification

[rocknbil]

Where do you get the traffic from? (if you don't mind me asking)

Almost all organic SERPS, we have very few incoming links. Averaging 25K uniques per month (I know I know, chump change! :-) )

[particleman]

To the original poster, I don't think you'll get a concrete number from anyone you can just plug in to your situation and go. How much you can spend, should spent, or need to spend will vary wildly depending on what type of business or keywords you use.

I have seen very successful campaigns run on only a few dollars a day. That particular site was very specialized, even if they had budgeted $100/day there just wasn't the clicks available to spend it.

That isn't the normal situation (similar to others), start small, and work your way up. PPC is instant gratification (for most sites), you will know very shortly if it will be effective or not. I have seen campaigns flat out not work, it is often very clear. Of course, search around on landing pages and that sort of thing so you aren't wasting your money. Lastly, TRACKING, track where users are arriving to your site from and track CONVERSIONS, so you can make sure your campaign is working. Google conversion tracking works well, but not perfect, I use custom written tracking in our sites to be more accurate.

[quicksilver1024]

Yes - I understand now, but as a person just coming into the light of online advertising I want to first get a sense of how much people around me are spending.

I know this is not an effective way to actually decide my budget for advertising, but by no means am I actually doing this.

I asked the question mostly out of curiosity and I thank you all for responding back.

Thanks!