Pay Per Click (PPC) Advertising — The Risks & Rewards

Looking to increase the number of visitors to your website? You might consider using Pay Per Click (PPC) advertising — also known as Cost Per Click (CPC).

Pay Per Click is vastly different to SEO, as you pay to acquire traffic — as opposed to encouraging search engines to organically show your site for free.

In this post I explore the pros and cons of PPC advertising, describe what i’ve learned by using it myself, and help you to assess whether it can benefit your business or cause. 

 

So What Exactly Is Pay Per Click Advertising?

Here’s the definition:


Pay Per Click: an internet advertising model used to direct traffic to websites. An advertiser (i.e. someone wanting to promote their product), pays a publisher – typically a website owner or a network of websites – whenever their ad is clicked by a visitor.  


You provide the details — the text, images, slogans — for an advert, and the ‘publisher’ displays it in front of potential customers.


Pay Per Click (PPC) Advertising -- The Risks & Rewards (Pros and Cons of PPC advertising)
To launch my Goalkeeping glove brand, I used Facebook ads to target those interested in football.

The publisher comes in many forms, such as:

  • Search Engines (Google AdWords is very popular. Your ads display above or below organic search traffic).
  • PPC Companies (Outbrain, for example. They’ll usually use associated websites to display your adverts to visitors).
  • Amazon (Designed for sellers to promote their products. They display your items to potential buyers — both on and off the Amazon platform).
  • Social Media (Facebook, Instagram and Twitter, for example. Your adverts are shown on social newsfeeds).

 

The Two PPC Advertising Models


1. Flat-Rate Model

The advertiser and publisher agree a fixed amount to be paid for each click made to your specified URL (e.g. a product page on your site). In many cases the publisher lists the Pey Per Click (PPC) pricing for different locations on their site.

Ads are placed in what’s commonly referred to as “paid advertising space”. The most expensive, “prime real estate” would usually be located on the most popular, prestigious pages of the site.


Once you own a popular website you’ll be contacted, very frequently, by advertisers (or digital marketing agencies) seeking space to place product links and banners. By taking them up on such an offer, you become the ‘publisher’.


2. Bid-Based PPC

The advertiser (i.e you) agrees to compete against other advertisers in a private auction hosted by a publisher or advertising network. Each advertiser must state their maximum bid per click (e.g. £0.10).

Bidding might sound complex, but the process is very simple and completely automated. You only need to upload your advert, set the price you’re willing to pay, specify the target audience (using keywords and location, for example), and the rest is over to the publisher.

Provided your bid isn’t too low (where you’re outbid by those with a higher budget), you’ll receive visitors to your site. The volume of visits depends on several factors — such as the popularity of your products, and attractiveness of your advert.


Cost Per Impression — a variation on Pay Per Click

You might also come across Cost Per Impression (CPI) advertising. It’s much like PPC, except advertisers pay each time an ad is displayed, as opposed to clicked. Many people prefer PPC to CPI because you only pay when a click is successful – no click, no fee.

 

The Legitimacy Of PPC Advertising

Understandably you might have some reservations about the legitimacy of PPC advertising.


How Will I See My Adverts? How Do I Know They’re Running?

The scepticism with PPC often comes in that the advertiser does not always know precisely where their adverts will (or have been) shown.

This very same predicament occurs in some offline advertising methods, too. Handing out flyers, for example. Could you pinpoint exactly when and where your flyers were handed out?

Indeed there’s an element of trust in employing others to do your advertising. The same goes for PPC.

Some methods of PPC are more transparent and verifiable than others, though. For example, in the case of Google AdWords you can select an option to show your ads in their “Display Network”. This isn’t for showing your ads on search pages, where you can easily verify your ad is showing from a quick “Google”. So precisely where will your adverts show if you use that setting?

Well, I must admit I’ve selected the “Display Network” setting before not fully understood it’s purpose. A nice video always helps, though.



It’s not so complex after all. In fact, this is the format a lot of advertisers use — showing your ads across relevant, associated sites.

Granted, you may still have difficulty verifying exactly where your ads were shown. But the clicks can be monitored in Google analytics. The referral URL is a good indication. In that respect, PPC does have some form of an audit trail.


How Will I Know If the Clicks from PPC Are From Real People?

This has got to be the biggest problem with PPC.

You can’t really be sure that you’re paying for legitimate clicks from interested customers. Suppose the PPC company paid for people to click your links, to make it appear like they are sending you traffic. Or if a competitor drained your advertising budget by continuously clicking your adverts with no intention of ever buying from you.

These are genuine problems. It’s known as click fraud:


Click Fraud: the practice of repeatedly clicking on an advertisement hosted on a website with the intention of generating revenue for the host website or draining revenue from the advertiser.  


It happens, unfortunately. But funnily enough the ‘Display Network’ approach that I spoke of in the previous section, means it’s a lot tougher for individuals to locate your adverts and attempt to drain your budget.

So if you’re concerned about the transparency of PPC advertising, the best you can do is use a reputable advertising platform under a name that you trust. I’ll get onto this later in the post.

 

The Benefits Of Pay Per Click Advertising

Not everyone believes in the rewards of Pay Per Click adverting. But PPC simply wouldn’t exist if it didn’t offer any benefits to at least some advertisers.

Here’s what PPC brings to the table…


1. It Helps to Achieve Goals

PPC advertising can be effective — depending on your expectations. What are you looking to achieve from PPC? What do you deem to be a successful PPC advertising campaign?

Here’s some of the goals Pay Per Click advertising helps companies achieve:

  • Upfront sales: Revenue earned directly from traffic referred through PPC. Therefore you expect that sales will increase in line with your PPC spend. This is the ideal scenario.
  • Repeat sales: Future revenue from the traffic referred by PPC. You earned little or nothing from upfront sales — but retaining customers on repeat purchases puts you in the green. With this approach you’d want to consider: how many customers typically buy a repeat item? What products can we upsell? (that’s for you to assess).
  • Brand recognition: PPC helps spread the word about your company and products. It hasn’t converted into many sales, but you’re content with the new leads you’ve generated. Such as page likes, followers, blog readers, email newsletter signups, or page bookmakers. Social media advertising (e.g. Facebook Ads) is great for this.

If you maintain realistic goals, then PPC might offer something valuable to your business.

I’ve written a post on the impact of traffic on profit. This will help you to understand the potential in PPC campaigns.


2. The Results are Measurable

One of the major benefits of PPC advertising is that it’s easy to track high-level performance details including impressions, clicks, and spend. There’s no mystery to your PPC performance.

Conversion tracking can also be set up in Google Adwords, which helps you to see which areas of your PPC campaigns are working most effectively, and those which aren’t. You can learn more on this here.

But even if you don’t use Adwords, Google Analytics reveals the performance of any PPC referred traffic. You can use the stats to learn more about your advertising effectiveness, and the ‘user journey’ — such as what pages they viewed the most, and how long they’re spending on the website. Important insights.


3. It Provides Quick Entry Into the Market

Setting up a PPC campaign is quick and easy.

It takes a mater of minutes and you’re up and running with the same kind of positioning that could take months — even years — of SEO efforts. Plus unlike SEO, PPC is almost guaranteed to bring you traffic (provided your criteria isn’t too narrow).

Furthermore, when compared to channels like email and social media, which largely go out out to your existing followers, PPC has a much longer reach. It gives you the ability to easily seek out those further afield, who’ve never came across your site/product before.

Aside from sales, I find PPC helps to establish a greater audience through recurring readership and social media follows. This in itself has value.


4. You Remain Control

You maintain control over a wide range of options for how you reach potential customers. This often starts with the keywords or categories, and how restrictive you want to be.

At any stage you’re able to refine the presentation of your ads in order to improve effectiveness.

If you see positive results, you can scale up immediately. If you want to take a break, you can pause or stop your campaigns right away. The choice is yours.


5. It’s Targeted to the Appropriate Audience

Targeting is one of the most important considerations for advertising — both online and offline.

Whether you’re making a billboard, a TV commercial, radio advert, or online advert, the principle is the same: you need to hit on the right audience. That’s precisely why spam (junk) mail has to be sent to a huge numbers of recipients to hit on a punter.


Pay Per Click (PPC) Advertising -- The Risks & Rewards (Pros and Cons of PPC advertising)
Advertising to people who aren’t interested in what you have to offer reduces your “hit rate”. You want to target those who have a proven interest in what you sell. PPC offers this.

In most cases the advertiser (you) are able to decide what audience your Pay per Click ads are shown to. This is absolutely vital, because advertising isn’t about flashing your product before as many people as you can. It’s too expensive! Rather it’s about showing it to those with a high probability of being interested in it.

PPC ranges from targeting keywords through text ads, to focusing on specific audience demographics on the display network, to re-targeting based on browsing history. There’s plenty of techniques.

 

The Drawbacks of PPC Advertising

You could easily decide that PPC isn’t suitable for your business. Here’s some of the main drawbacks.


1. Costs Can Quickly Escalate

Here’s the rub — PPC can be pretty expensive. With fast advertising comes fast expense!

The first time I ever used Google Adwords I had very little idea of what was going on. I used the automated bidding feature, set up some relevant keywords, and off I went. I received visitors very quickly.

But the market value of my keywords was extremely high. Essentially people were willing to pay a lot per click. I couldn’t afford to compete with that myself; it wasn’t profitable.


Pay Per Click (PPC) Advertising -- The Risks & Rewards (Pros and Cons of PPC advertising)
The products I sold couldn’t warrant £1.50 per click. I had to change my approach. Luckily this occurred when I was using “free advertising money” sign-up a promotion on Adwords.

You need to carefully work out your margins in order calculate how much you can afford to spend on PPC. If, for example, you spend £0.10 per click, and expect that 1/100 of those visitors buy a product, then you will spend £0.1 x 100 = £10.00 to make just one sale. Only you can assess whether that’s profitable for your business.


It’s worth noting that breaking-even on your advertising, or even making a loss, might be worthwhile if it builds leads which convert into sales later on.


2. You Won’t Immediately Know Your Conversion Rates

To ensure that your PPC costs are viable and don’t spiral out of control, you need to gauge your sales conversion rates.

But without knowing how many PPC visitors buy from your site, you can’t work out how much you can afford to pay per each click. And you also can’t treat PPC traffic like any other traffic — because it comes from a totally different source.

This creates a dilemma where you must invest in Pay Per Click, in order to see the results. This could mean losing money just for the opportunity to make money.


Pay Per Click (PPC) Advertising -- The Risks & Rewards (Pros and Cons of PPC advertising)
You can only learn more about the impact and effectiveness of Pay Per Click advertising once you have invested in using it. Are you prepared to take the risk?

This problem is made even more complex in that not all visitors will buy your product right away. A visitor might follow you on social media, sign up to your newsletter, bookmark a page from your site — then buy at a later date. With so much delay, how can you attribute that sale to PPC?

Well, it’s pretty difficult and it requires a lot of investigative work. With enough data (and a substantial investment into PPC) you can begin to spot trends.


Yet another dilemma: measuring the effectiveness of PPC on a website selling many different products. You advertise one product, and visitors buy another!


3. Some PPC Companies Are Rogue

Not every PPC company is legitimate. I’ve experienced this first hand — with 92% bounce rates and very little interaction on the website. Either my site, or the PPC company was doing something terribly wrong. I concluded it was the latter, and switched to a more reputable service, with better results.

Was the 92% bounce rate traffic legitimate? Or was it just poorly targeted? I’ll never know.

There’s no full-proof method for avoiding a dodgy PPC company. But I have a few words of advice:

  1. If it’s too good to be true, it probably is. Avoid companies offering extremely cheap click rates. In my experience, they perform badly.
  2. Judge the book by its cover. Assess the PPC company’s website and brand. If it ‘feels’ unprofessional, has incorrect spellings, poor stock photos, or offers services for explicit content, then avoid it.
  3. Look for positive third party reviews. Only sign up to somewhere with a good reputation.

I’ve never found a diamond if the rough. My results from Google Adwords and Outbrain were far superior.


4. Market Saturation

One of the problems with PPC is that certain markets are saturated. If a well-established brand sells a product that’s just like yours then you’re going to have to fork out just to compete on the PPC bid. Are your pockets deep enough?

You’ll discover that PPC markets are proportional to the value of products you sell. For example, a high ticket item will have a higher PPC price than a low ticket item — because people are willing to pay more for advertising when the potential returns are greater.

Competition. That’s the way of the world. 

If you’re struggling to compete on PPC, then you might instead divert your attention to improving your PPC campaigns. Failure at that leaves you with SEO or other advertising channels, of course.

 

Is PPC Worth It? Do The Pros Outweigh The Cons?

Provided you use a reputable service, successful PPC advertising depends on your business and its objectives.

Know what you want from PPC at the outset. Evaluate how much you need to spend to achieve your goals. Start slowly. Monitor your results, learn from them, and look to improve your performance over time.

Remember that competition and market saturation can render any advertising extremely difficult to profit from. Therefore you have to optimise your approach to PPC to stand the best chance of success.

Learn more on maximising the performance of your advertising campaigns from the following posts: