Pay Per Click Financials

How Can Some Sites Afford What They Pay?

[nerolabs]

I sell widgets. I sell a lot of them. I'm usually ranked in the top 10 for a lot of key niche categories (I usually can't do too well in the top keywords in my industry, but I settle with the top on niche keywords).

I'd like to broaden my traffic, and I'm looking at doing a better job with my PPC strategy.

However, everytime I go to Overture, Findwhat, Sprinks, etc, I get very depressed at what some people are paying for clicks.

I have a highly optimized business. We make around $0.35 profit per click that comes to our site. Spending 10 or 15 cents is not a big worry for us.

However, there are sites that are pathetically bad compared to ours spending 50, 60, 90 cents on top keywords, and I can't tell how the heck they are getting ROI on these clicks! They must be draining their entire pocket book on these advertisements, and not know it!

What is an honest merchant like we are supposed to do when flaming!@#!@# idiots are inflating Overture (etc) with outrageously high bids?

Andrew

[Shak]

Welcome to Webmasterworld [webmasterworld.com]

This has been the case for quite some time.

a few things which I have noticed though:

Competition may be converting way better than you are.

They could be avoiding sales tax etc etc.

and a million other things, be glad that they are not shrewd enough to know what to do.

There are always going to be idiots, and the PPC arena is NO different.

Good luck.

Shak

[Staffa]

What is an honest merchant like we are supposed to do

Hang in there until the others go belly up ;o)

[mack]

I think a lot of businesses are prepared to cut their profits in order to make sure they get the business and not their competetor. If a company is willing to bid high they will rank higher. They get the sale but make a bit less because of the click cost. But profit isn't all it's about when competition is involved. from that sale they made something, their competition made nothing.

Mack.

[nerolabs]

Shak,

I run an affiliate program like some of my other competetion does. Take it from my affiliates, we convert nearly three times better than they do, and our average ticket price is 40% higher. We are a very competetive site, as far as our "financial take" goes.

Staffa,

I would assume this is the case. I watch these listings, and I see some people are spending thousands of dollars a month, and even with our numbers, they are losing up to $3,000 to $4,000 a month on this traffic. Month after month after month.

There has to be something I'm missing about this. Even when I compete head on at their prices and track traffic on just those inflated prices, we end up losing $15 to $20 per lead instead of making $20 - $25 per lead.

Is there anybody that actually approaches these other *insane* sites to "collaborate" on bringing the price down?

[chiyo]

diversified companies can afford to lose money on every sale while they build an area, funding it from more mature parts of the company that are making large margins. In time, if their new product gets good market share, they can reduce ad expenditure, and eventally it will make a profit.

[nerolabs]

Another question on this topic..

Google Adwords have rates 27-35 cents (top rank) for these keywords... Overture has 80-90 cents (top rank) for the same keywords. Why the huge difference?

[MHes]

Two thoughts:

1) Massive exposure with top bids does not mean you will automatically get clicked. There is a point when you're hits go down because you have already been visited by many searchers, so the top position starts to become a branding exercise, costing you less than other forms of advertising.

We run several ppc directories in niche areas, so this is where this observation is coming from. Several well known sites effectively spam our directory. We have around 60,000 visitors per day, and only 5% click their link, although they appear top on nearly every page of our site.

2) Repeat sales. Make a loss on the first sale through ppc, but the customer may come directly back to you in the future. I read that this is a major tactic in the office equipment sector..... as long as they don't come back via the ppc ad!

[andrewg]

The first thing you need to do is to stop worrying about what your competitors are doing.

Hyper-competitive bidding is endemic to Overture, unfortunately.

[nerolabs]

Well, I guess that is my question. Why does Overture seem to have that hyper-competetive bidding where google adwords does not?

Andrew

[sammyp]

Actually I find Google even higher than Overture, which is why I have now dropped them. As someone else said, profit is not always the competitors only consideration and these considerations must vary depending on what your field is. One of the advantages of PPC is that if youre a relatively small player in your field you can still compete head to head. However, if the competitor knows your small and knows his pockets are deeper, then they will often sacrifice profit to get you out of the market. Add in click fraud and its a real headache. I tend to jump in and out, not just when it gets too pricey, but daily anyway in the hope that everyone else will follow me down. It doesnt always work, but works enough for it to be worthwhile.

[martinibuster]

Why does Overture seem to have that hyper-competetive bidding

Overture's distribution partners only show the top 2,3, and sometimes 4 listings. Especially for Yahoo, the top listings are highly coveted.

Google slaps a handful of ads down the side of the page. Their partner AskJeeves displays them all as the first part of their results.

Thus, Google is less competitive because the real estate isn't as much of an issue. This works out well because Google can algo the relevance better.

[Jungle_Jim]

"However, there are sites that are pathetically bad compared to ours spending 50, 60, 90 cents on top keywords, and I can't tell how the heck they are getting ROI on these clicks! They must be draining their entire pocket book on these advertisements, and not know it!"

Your competitors may not be spending what the bid amount shows. For instance, say the number three bid for a keyword is $0.12 and the number two bid is $0.14 and the number one bid is $0.50. If you click on the number one bid that company will only be charged $0.16 -- $0.01 more than the listing below them. Many PPC search engines only charge one cent higher than the next listed bid. Companies do this to ensure the number one listing without having to monitor their listings every day.

[hannamyluv]

Google also activly kicks out any ad that doesn't perform, no matter what they are willing to pay. I think this is why they tend (not always) to cost less.

On another note, I freely admit that I put higher than nessecery bids on many of my keywords but not higher than I can afford. I do this to deter the comp. If a phrase only costs .30 for for the top spot, but by my calculations I can pay .50, I'll bid .50. That way, my comp. knows how high they have to go. And you can't be lazy doing this either. I have to pay attention to make sure that no one is burning my bids. But I am not going to waste my time in a petty bid war where me and my comp outbid each other by .01 every hour. Either they can outbid me, or they can't and I'd prefer to be up front about it rather than waste my time.