This series of articles covers some common issues that occur with PPC (pay per click) search engine advertising campaigns. In it we’ll discuss how to identify a particular problem, what the effect is, and what to do about it. The success of a PPC campaign is typically measured in terms of the cost per action. This equals how each sale or sales lead costs in terms of PPC spending. Another important measurement is revenue generated. We’ll discuss each PPC issue in terms of its effect on either the cost per action or revenue.

First, a PPC primer: PPC advertising is the method by which a company shows up in the “sponsored links” or “sponsored results” section of the search engine results when conducting a keyword search. It is also known as paid placement because, with PPC, the advertiser can pay the search engine to be placed in the top spot. Advertisers bid competitively based on who is willing to pay the most each time someone clicks their search engine advertisement. So, if three companies all want to show up for the keyword “used cars,” the company that is willing to pay the most per click usually shows up in first position, and only pays when a searcher actually clicks the ad and visits the website.

First Issue: Low Conversion Rate

The problems covered in this series go in order of importance, i.e. starting with the worst problems to have, ending with the problems that have less negative impact. Based on this, the first problem we’ll discuss is a low conversion rate. The conversion rate equals the percentage of visitors that perform a desired action, typically a shopping cart sale, or generate a sales lead via an online email form, such as a contact us or request information/quote/consultation. The formula for conversion rate is “# of actions / # of clicks.” So, if you had 1000 clicks to the site, and this traffic resulted in 10 sales, this equals a 1% conversion rate. Every conceivable action on a web site has a conversion rate, e.g. how many people visit your homepage and signup for a newsletter, how many people purchase a product from your shopping cart, etc.

The effect of a low conversion rate is a high cost per action. There is an inversely proportional relationship between the two. All other factors being equal, the lower the conversion rate the higher the cost per action. The lower the conversion rate, the more clicks it takes before a successful action on the site, and therefore more money must be spent on clicks. The effect of a high cost per action is less profit or even no profit, so this issue can have a rapid and dramatic impact to the bottom line.

What to Do About It

The first thing to do, before you can even improve your conversion rate, is to actually measure it. Both Google Adwords and Yahoo Search Marketing (formerly Overture) offer free conversion tracking. There are also commercial conversion tracking software programs out there, which we’ve covered in an article on web site conversion tracking. In order to measure the profitability of only your PPC efforts, the free offerings mentioned above are sufficient.

Once you’ve purchased enough clicks to determine your real conversion rate, which is from 100 to 1000 clicks, you may find that your rate is too low for desired profitability. Good conversion rates vary dramatically by industry, product, service, etc. The more specialized your product, service or industry niche, the higher the expected conversion rate, and vice versa. The general range of “good” conversion rates is from 3% to 15%. If your conversion rate is much lower than this, and your cost per action is too high, then your conversion rate is too low, keeping in mind that there may be other issues affecting your cost per action as well.

Once you determine that your conversion rate is too low, there are a few potentially quick fixes to the problem:

Send PPC visitors to the best page for that particular keyword. If you have an ecommerce site, and are bidding on an actual product or brand name, send the visitors to the actual product page vs. the homepage. If you are targeting a unique market segment with a particular keyword, create a page that specifically addresses the problems and needs of that market.

Make sure that there are clear “call to actions” on the “landing” page that your visitors see first when they click on your ad. This might include your company contact information or a lead generation form that is “above the fold,” meaning that you don’t have to scroll down on the page to see it.