Advertising on the Internet has grown in importance for small and large businesses, so much so that Google recently overtook ITV1 in advertising revenues, earning more than £100 million per month from the UK alone. However, whether you're entering the world of Internet advertising for the first time, or already have some limited experience, it pays to know about the different kinds of Internet advertising and what they can do for you. In this feature, we explain about the two different sorts of adverts on the Internet, and look in detail at what the most popular kind, called pay-per-click, can do to help your business.
Pay-per-click and cost per thousand impressions
If you've browsed around the web, you'll have seen adverts, usually in the form of banners or boxes placed around the edges of the page (and sometimes, right in the centre where you'll never avoid them). These banners can be graphical or just made up of text links, and typically use one of two different kinds of business model; cost per thousand impressions (CPM), or pay-per-click (PPC).
With CPM measurement, the advertiser pays on the basis of the number of people who view the advert. This makes it similar in some ways to traditional television adverts, where programmes with larger audience figures attract better rates.
However, the drawback with CPM is that you've no idea about how interested people are in your advert, and there's no effective tracking of the response rates to it. As such, most adverts are now served on a pay-per-click basis. In this case, the advertiser only pays when someone clicks on the advert to go through to their website, allowing them to both generate traffic and hopefully sales, and directly measure response.
How to use PPC
Pay-per-click adverts are often sold by search engine companies on a contextual basis. This means your adverts will only appear against either search results or on websites where the content matches keywords that you've specified. They can also be sold on a targeted basis, where you select the sites you want to appear on, but this is usually more expensive and may not be the best option.
Essentially, PPC works by letting you go to an advertising company's site (such as www.google.com/adwords), create an account and bid on the keywords you're interested in. Then, if you're one of the high bidders, when someone uses those keywords to search, or creates some content matching them on a site that carries adverts, yours will be displayed and you'll hopefully get some clickthroughs to your site.
The advertising company's site will allow you to track page impressions, so you will know roughly how many people have seen the advert and clickthrough rates, so you can see how effective it is. You can set a budget for your campaign, letting you limit the amount of money you spend on it on a daily or monthly basis.
How much should you bid for keywords? The answer will vary according to the kind of product or service that you're selling. Obviously, you shouldn't set your bid as higher than the profit margin on your product, and remember that not every clickthrough will result in a sale. The best method of working it out is to experiment with a few small campaigns and work out what your conversion rate – the number of clickthroughs it takes to make one sale – actually is.
Is PPC a good option?
For most businesses, PPC is a simple and cost-effective way of advertising. It allows you to set a small initial budget for a campaign and see how effective it is. You can experiment with different keywords and see how they change the clickthrough and conversion rates.
As you're dealing directly with the company placing the adverts, you're not paying expensive advertising agency fees, which obviously means that you can get more adverts for the same budget. However, if you're conducting a large-scale campaign it's worth talking to a specialist online advertising agency, as they have a great deal of experience in understanding what keywords are the most effective for different kinds of business. This can help you avoid wasting money on ineffective keywords.
In summary
PPC is one of the most effective ways of advertising on the Internet. Not only does it allow you to keep complete control of your budget, and even do campaigns on less money than has ever previously been possible, but it allows you to accurately measure the effectiveness of your advertising. You can see exactly what results it is delivering to your business. For small and medium-sized businesses in particular, it's an excellent method of getting more traffic to your site, and, if done well, more sales.