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It seems that ad click traffic is continuing to grow, but fewer visitors are clicking through to either take some kind of meaningful action or actually transact business. In other words, clicks are increasing, but conversion percentages are declining.
Really? And how does the author know this?
Someone should tell this guy that Content Matching is optional on both Overture and Adwords.
Online campaigns do come in many shapes, and PPC is just one of those. There are some companies that won't gain by PPC (i.e. Coke - why pay per click when they are a branding based company and would do better with banner ads).
There are many companies who could gain with PPC who don't properly take advantage of how the system works - and yet blame the system as being unprofitable instead of understanding how to properly run such a campaign - which in turn creates negative articles about PPC failure when it's their company that failed in the campaign, not vice versa.
Here is an example…
Business plan calls for Widget Company to product cheapest widgets possible. Very little profit margin for each widget. In turn, this opens up world markets to compete in due to currency exchanges and labor costs and sales are based on volume. In the same space and for the same 2 KWs, are Fortune 25 companies, and highly profitable companies selling training to the Fortune 1000. So bids are high. Too high without the widget company rising their prices, thus defeating their business plan. Has nothing to do with managing a campaign.
<edit> typo </edit>
<edit> more typos </edit>
[edited by: jim_w at 8:35 pm (utc) on Jan. 14, 2004]
I'm not necessarily saying the author is wrong (although the "Perfect Storm" analogy is clearly an exaggeration). But the article is what Donald Rumsfeld would call a "thumbsucker".
In that type of business, I'd agree you are correct. On average you need to be able to convert 2% of 0.05$/clicks (might not get a lot in the last position - but you can still be profitable), and have a profit margin of $3/sale, and be able to make enough sales to cover the salary of whoever is managing your campaign and overhead costs, to be able to run a successful PPC campaign.
If a company can't meet that profit/sale - or the minimum sales/month - then you're completely correct that they can't run a successful PPC campaign. If they can meet those criteria, then with effective management of bids and quality ads - they can run a successful campaign.
That was the other thing that happen to us, while we sell one product, with another in development, most clicks were people just looking for information on 'how to' without paying lots-‘o’- dollars to training companies. And we do have about 60 pages of information to teach our potential future customers.
We were serving up Adsense to compensate for these people, but G stoped serving ads to us that made it worth our time to run them. So we have taken off 50% of them and will get the rest off by Monday. We have replaced Adsense with something we can atleast break even with.
I am doing fine on that.
I agree, except for this observation: banner ads were first, and they were seen at the time as a "Great thing" -- all those eyeballsin the early days of ecommerce on the web, looking at your ad, etc, and maybe clicking through. Like having a billboard on the Interstate Highway, advertising your product.
Very different from PPC. But they went bust, around '99, along with many dotcoms counting on them, when consumers grew used to them, and no longer clicked through.
PPC was not even "invented" until around '99 and then in a very small way with the original (what the heck was their name? Direct Hit? which was one of the first to sell cost per click based on a link; and they sold to OV? I think around '99).
But, have to say, PPC has lasted quite some time. Maybe it is coming of age now. PPC grew slowly but it may now be "of age," in Internet terms -- frankly -- a ripe old age. So maybe now it is overused, (or more correctly overabused) and subject to much fraudulent clicking by competitors, or those who "sub-lease" (if that is a good term) from OV and AdWords, FindWhat and etc. and want $ from their affiliate status, so they manufacture clicks on their affiliate sites.
To sum up: I think the author of that article has some legitimate points. But those who are wise enough, and/or fortunate enough to be able to measure ROI will be able to tell us if he has judged correctly and predicted correctly. Unfortunately I cannot, as i cannot measure ROI, but I read all the posts (or most here) that talk about it and report on it. So far PPC still returns ROI --- especially AdWords and OV. The rest (Find What and Ah-Ha, and etc) can be argued about, and are argued here in various posts all the time. But the one common theme seems to be that Google Adwords and OV do return decent ROI.
While there may be no data in his article, I think his point is valid. On the positive side, it does help us Search Engine Marketing consultants who understand that you don't want content matching for many terms.
I'm not sure where you got your history lesson, but DirectHit was not the first PPC engine, nor do I remember them resembling any form of PPC engine.
They were a background system that rated site popularity, feeding off of click through data from portal/search partners such as MSN.
Here's an article written by Brett in '99 about their technology.. www.searchengineworld.com/engine/directhit.htm
And it was AskJeeves that bought DH, not Overture.
Overture is the original, launched in April, 1998 as Goto.com by IdeaLab...
Advertisers could buy banners for specific keywords as early as '99, and that still didn't result in positive ROI for advertisers in the majority of buys. Comparing banners to sponsored text ads, is apples to oranges. If it looks, smells, and tastes like an Advertisement, it can't be anything else. That is why Consumers got turned off by banners, and embraced textual sponsored links (Even if they didn't understand they were advertisements... :)
The article simply lacked any relevant data. There is a reason that GAW and Overture are as popular as they are, they show positive ROI, in many vertical markets. Now, with web analytics advancing to provide ROAS measurement at the keyword level, PPC engines should be even more profitable for advertisers.
Overture is the original, launched in April, 1998 as Goto.com by IdeaLab...
Advertisers could buy banners for specific keywords as early as '99
I know the programmer who wrote the code to do this for Lycos when he worked for them around 95 or early 96 :-)
Back to original show already in progress....
It was widely criticized for bids being invisible to the user, i.e. you could "pay your way to the top." And it fell out of favor in a hurry because of that.
As I recall, what GoTo did differently was make the bids visible (at least on GoTo). This was before GoTo results were served bigtime on other engines, so you really only saw GoTo serps on GoTo (with bids), and thus it was seen as a more open, honest system.
Ironically, OV results served elsewhere, as they are now, is pretty much the same model that this particular PPC was criticized to the point of its death for. Sorry, I cannot think of the name of the SE, but it was a big deal at the time.
Fact. Broadband is gaining in popularity, so more search can be done as a casual thing, no more powering up, logging on etc..
There will come a tipping point where PPC will become just one of the gang with other traditional marketing distribution channels, indeed we always talk to companies about the integration rather than the separation.
It may be that positive ROI erodes over time as awareness of PPC increases, but that's when the skill of marketers in turning lookers into bookers becomes critical.
PPC will always be a much more cost effective route to market, and when local search makes it into mainstream PPC it will open up the high street to companies that would not want to advertise nationally, so avoid PPC.
Content matching is one of those tough calls, if your not getting many clicks but lots of impressions, surely that's cost effective brand awareness? Now that Overture have introduced seperate bidding prices for content match, it's worth a look if nothing else.