PPC and PPA Advertising

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Are you wasting your money?
After two years of grad school and an MBA in Marketing I can share one truism of advertising. This is the fact that 50% of your advertising budget is wasted! The problem is that you just don’t know which 50%. Every business understands that in order to attract more customers that you need to advertise. Every business that has ever advertised knows that it can be a lot of money with very little return.

View, rinse, repeat
We have all done the traditional Yellow Pages Ads, small newspaper or trade publication advertising and perhaps you have even advertised on the radio or TV? The average prospects needs to hear a message seven or more times before they trust the brand and are willing to try the service. This means that you could be spending all your money without actually increasing bottom line. Businesses don’t maintain their advertising over the long haul if there is a disconnect between money spent and results.

Click Fraud is as high at 30%
This is where the traditional Pay-Per-Click services like Google AdWords or Yahoo Text Ads gained popularity, this way you bid an amount and you only get charged when someone actually clicks your link. Most advertisers believe that “the prospect has shown some interest, so I am willing to pay for them to see my product.” Advertisers like this because they only pay when a potential customer is in their hands, the trouble is that prospects or competitors are clicking and driving up your costs and you have a terrible conversion ratio. This is known as Click Fraud and it is a bigger problem than Google and Yahoo are letting on. It makes them money and costs you the advertiser money, this type of fox in the chicken coop system has been the subject of debate over the past few years.

Pay to Play
The newest form of Google adverting is Pay Per Action (PPA) this is meant to mitigate the risks of click fraud and allow advertisers to only pay when a customer completes an action. An action can be filling out a form, or typically completing the purchase of an item from a shopping cart. My belief is that this won’t affect big advertisers because they are already tracking the return on investment on their PPC campaigns. For smaller advertisers the ability to filter out click fraud will help them track results more closely than before and perhaps spend more in advertising that generates results.

Google PPA Adwords
I don’t expect the google PPA model to be the holy grail of online advertising, one reason is because the service is currently in Beta and is not available to everyone who wants it and two because the market will evolve and pricing for advertising will adjust in response to the new action oriented model. Will he who pays the most for a conversion be the most active site or how will you feel with Google in your wallet during each sale that you make?

Find our why conversion ratios are more important than visitor numbers
Next week – Keeping track of your web visitors and tracking CONVERSIONS. Learn why conversion ratios are more important that Page Rank or number of page views.