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I have been lurking for a few weeks on this forum, and was impressed by the quality of questions and answers.
I am quite new to SEO, but have been reading a lot about it lately. We are asked to advise some customers about a successful international PPC strategy. Google Adwords and Overture are the first choice, but there may be others.
However, when I checked bid prices on Google Adwords for one of our customers active in the flower industry, I couldn't believe my eyes: 7 to 9 USD for targeted KW or KW phrases, and only position 4-5 average. How on earth can that deliver a positive ROI? Even if there was a 100% conversion rate visitor/buyer, the bid amount is higher than the profit on a flower purchase of 30USD?
Because no company has a 100 conversion rate, that brings me to the question: what is the average conversion rate in the shopping industry? I read that many e-commerce sites loose about 75%-95% of their visitors before one purchases anything?
This would implicate that a rate of 7USD CPC for each visitor would result in a 28 to 140 USD Cost per Purchase? Which company can afford that with an average revenue per sales unit of 30 to 50 USD? May be an life insurance company with a much higher ARPSU, but not a regular shopping e-commerce?
I can't seem to see where I could be wrong. However, I see that a lot of companies make use of Adwords in the flower industry.
What am I missing?
Sorry for the long thread, and thank you for your patience and replies! :-)
When you're getting started with PPC, you'll have to make educated guesses about how well the traffic will convert to sales. In my experience (as an affiliate), a reasonable starting point is to assume that 1% of visitors will actually buy something, and set your bidding limits accordingly. If the site closes more sales than that, higher bids will be cost-effective as long as the terms are well-targeted. I find that the most cost-effective results come from the most specific terms and exact matches. Limiting my bids to exact matches really restricts the clickthroughs, but they're far more likely to be profitable.
I've been experimenting with AdWords by setting up bids on all the terms I want even if the suggested price seems insanely high. I set my own limits according to what I estimate the traffic will be worth, and just leave it at that. My theory is that as other advertisers use up their daily budgets and go in and out of the rotation, my ad will be there ready to pop up between the cracks occasionally even for terms that I couldn't normally afford. I can't tell yet if this actually happens, but there's little risk to trying.
Buckworks has it right. set your own limit based on what is profitable for you, to pay for your traffic.
...Unless of course you have VERY deep pockets, and want to "pull an amazon".... sending over $2 BILLION dollars down the chute before making a dime.
In general, I think there are some industries where these high CPC *might* still be profitable, e.g. if you are offering monthly services or very high priced products. But in many cases, itīs in fact very hard to believe that these high CPCs can be profitable.
Maybe itīs a psychological problem sometimes: "If our competitors can pay US$ 9.50 per click, it HAS to be profitable, hasnīt it? So why shouldnīt we be able to pay just a few cents more?" Sometimes, nobody seems to notice it stopped being profitable at half the CPC.
But hey, itīs just money, isnīt it? ;)
An update:
After watching my AdWords stats for a while, I can report that AdWords does indeed send occasional clickthroughs even if one's bidding limit is much lower than what they suggest. It's just a click here and there, but my stats show a few clickthroughs at 10Ē when the minimum bid was several times that amount.
I note with some chagrin that I mentioned popping up "between the cracks." Popping up *through* the cracks would make more sense! :)
