Recipe: Pay-per-Click Advertising

Online pay-per-click ads allow you to focus the reach of your advertising and pay only for the response you get. With these text or graphic ads, you pay a fee every time someone clicks on the ad to visit your website. Sometimes these ads appear in a fixed location, such as the top of a designated page on a website. Other pay-per-click ads are context-sensitive (e.g., Google AdWords). This means they are displayed on search engine pages and a wide variety of websites where keywords related to your service are in use.

For example, a security management consulting firm could purchase a pay-per-click ad for the keyword phrase “security consultant” and agree to pay a maximum of $1.50 every time a visitor clicked through to visit the firm’s site. When someone searched for “security consultant” using the search engine from whom the firm purchased the ad, the firm’s ad would appear on the results page as a sponsored listing. The firm could also opt to have its ad appear on advertising-enabled websites with related content. These could include blogs about security management, security management resource sites, and more.

The key to determining whether pay-per-click advertising is a good choice for you is to know the true value of each click. For example, if 1,000 people currently visit the firm’s site each month, this typically results in one new client monthly, and the average profit the firm earns from each new client is $15,000, then the value to the firm of each click is $15. So paying $1.50 per click to get more traffic would be likely worth their while.

But for a business with the same number of current site visitors and monthly new clients which has an average profit from each new client of only $1,000, the value of each click is only $1.00. In this case, paying $1.50 per click for more traffic would make no sense.

Many pay-per-click advertising vendors offer a user guide to help you decide how much you can realistically afford to pay. Be sure to weigh all the factors carefully before agreeing to a contract.