A Comparison of Paid Search Advertising Models

by Bill Platt

Published on this site: May 4th, 2006 - See more articles from this month

As webmasters, we are all chasing customers. We are looking for human visitors to come to our websites and to buy what we are selling.

To serve our needs for targeted traffic - potential customers - the search companies have begun to offer us a share of their significant traffic through many paid advertising methods.

The most common advertising offer at the search engines is the PPC (Pay-Per-Click) advertising model. There are also other search advertising models such as CPM (Cost Per Thousand Impressions) and Featured Listings.

In this article, we will look at the advantages and disadvantages of each advertising method.

PPC (Pay-Per-Click) Advertising Model

By far, PPC is currently the most popular advertising model. From the buyer's perspective, it is usually the most expensive type of advertising and the one that generates the most fear of fraud. In fact, many experts suggest that click-fraud might be as high as 20 to 25% of all click-traffic.

Pay-Per-Click is exactly what it sounds like. The advertiser bids on keywords and tells the advertising company that they will pay X number of cents or dollars for every click that they receive to their website through the PPC-provider's website.

Advertisers compete for position within the search results with the highest bidder getting the best advertising spot at the top of the results. The second highest bidder gets the #2 spot, etc.

Generally, Pay-Per-Click providers serve three listings on the first page of search results. Only when there is strong competition for a particular keyword term and a number of advertisers vying for placement, will the PPC-provider show results with more than three advertisers.

If you bid the minimum five cents per click (the standard for most PPC systems), then it is possible that you might not see your listing on page one or page two of the search results. Let's face it; PPC providers are interested in making the most money they can from the traffic they send to people. So, if one advertiser is paying a dollar per click and you are only bidding five cents a click, who do you think will receive the best placement? Yep, the one-dollar per click advertiser will get the most attention and the best placement, even if it requires pushing your placement back to page three of the search results.

The top two PPC-providers are:

http://adwords.google.com/

http://www.content.overture.com/d/ - Now owned by Yahoo!

Other not-so-well-known providers of PPC traffic, inalphabetical order, include:

http://www.411web.com/

http://www.7search.com/

http://www.abcsearch.com/

http://www.adbrite.com/

http://www.ask.com/

http://www.brainfox.com/

http://www.enhance.com/

http://www.kanoodle.com/

http://search.looksmart.com/

http://www.lycos.com/

http://www.miva.com/ - Formerly FindWhat.com

http://www.search123.com/

http://www.searchfeed.com/

http://turbo10.com/

The biggest advantage to these systems is that they serve large pools of consumers online, and they let you target specific search keywords.

The disadvantages are numerous. Those most often cited include: the high cost of bids for certain keywords, poor conversion rates on purchased clicks, and click fraud (generally regarded as people clicking your link just so they can get paid for it).

Personally, I have paid as high as a dollar per-click for a service that sells for $35, and $20 in volume. I have spoken to others who operate for-profit websites and have paid as much as $2.50 per click on an average keyword. In some really competitive markets, people pay as much as $30 per click.

If you use the Web-Professor bid tool to check keywords at Overture
( http://web-professor.net/tools/bidstats/ ) and you type in the keyword "mesothelioma", you'll find 30 bidders vying for that term and a maximum bid of $29.88 per click! If the maximum bidder converts traffic to sales at the national average of 3%, then he or she is paying an average of $900 to get one client! Insane, but true.

CPM (Cost Per Thousand Impressions) Advertising Model

CPM advertising is most often associated with banner advertising, but can now be purchased for text ads as well.

This type of advertising is available from many sources, including:

http://adwords.google.com/

http://www.realtechnetwork.com/

http://www.joetec.net/

CPM advertising can be cheaper than PPC, but it fails to address the effectiveness of your advertising copy. Before undertaking a large CPM campaign, you need to be confident your advertising copy will deliver results.

As with any other type of advertising, you need to track click-through and conversion rates to determine the advertising copy that is most effective for your business.

You also need to have a solid understanding of how many impressions it will take to generate a visitor, and how many visitors you will need to generate one sale. And, on the backside, you will need to know what the average earnings from your sales will be. With these stats in hand, you'll know how much you can afford to pay for CPM advertising or any other type of advertising.

Using Google Adwords, you can buy CPM advertising for as little as $2 per thousand impressions. The one time I went that route, thinking my advertising might be cheaper, I ended up dropping $180 in three days with only one sale to show for my investment - utilizing the exact same ad that generated a 4% click-through rate (CTR) in Google's PPC advertising system.

The major appeal of CPM advertising is its perceived low-cost, with rates ranging between $2 - $3 per thousand impressions.

The major disadvantage to this type of advertising is that you need a good handle on how well your advertising is performing. Your advertising copy can make or break you. Additionally, you need to keep an eye on your advertising budget. From first hand experience, I can tell you that although CPM advertising can
appear inexpensive, it can in short order surpass the costs of PPC advertising.

Featured Listing Advertising Model

Featured listings differ from the other two advertising models in that you do not pay for "ad clicks" or "ad impressions". With featured listings, your advertisement appears in the purchased location for 30 days, 90 days, or one year.

Featured listings can be bought on individual websites and even on networks of websites.

Below are a few examples of advertising networks that offer featured listings:

1. Geek Files ( http://www.geekfiles.com/advertising/ )
   
   Geek Files offers various Featured Listing placement options with ad rates ranging from $19 to $179 per month. You get two months free if you buy advertising for a full year.
   
   
2. Aardvark Travel ( http://www.aardvarktravel.net/featured/ )
   
   Aardvark Travel is a travel search engine. Featured listings appear in a colored box between the top five listings and the bottom five listings in the travel-related search results. There is a $50 setup fee for each Featured Listing and a $10 per month recurring charge for as long as you keep your listing active. Aardvark claims featured listings generate 40 times more clicks than any other listings on their pages.
   
   
3. The Independent Search Engine & Directory Network
   ( http://www.isedn.org/ )
   
   The ISEDN offers a program that allows you to purchase Top Ten exposure for your website(s) across their network of 200 plus member websites.
   
   The network is comprised of specialized search engines, search directories, and article directories. Featured Listing placements for specific keywords are displayed across the entire ISEDN system.
   
   The cost of a keyword term (the word or phrase associated with the listing) is $12 for three months or $36 for 12 months. The price drops for each additional 5 listings you purchase. If you are buying in volume, discounts can be significant. For example, the cost for 16 to 100 listings is $6 per listing for 3 months and $18 per listing for 12 months.
   
   The main drawback to the ISEDN program is that the network, although large, does not yet have the traffic volume of the major engines.
   
   The major benefit, of course, is that you can buy a lot more bang for your advertising dollars. Additionally, you can see your ads appearing on pages in a position that will attract more attention and click-through traffic to your website.
   

Which Advertising Model is Right for You?

It really depends on your business model. More so, it depends on your absolute click-through averages and your website conversion rates.

Your advertising needs to cost you no more than what it earns for you. Ideally, your advertising will cost less than it earns for you.

Some businesses trade on the lifetime value of customers and are willing to pay more to get customers than what they earn on their first sale, but not all of us can afford to build a customer base in the same way that Amazon built theirs.

If your advertising budget is small, your goal should be to make every advertising dollar count. Grow your business to the point where you might be able to afford some of the more expensive advertising solutions. But then, if the lower-cost solutions generate sales for you, why would you want to pay more?

Bill Platt is the owner of http://thePhantomWriters.com. Article Ghost Writing and Reprint Article Distribution Services. Bill has been providing his services to online merchants since 2001. If you would like to talk to Bill personally about his services, you can reach him from 9:30am to 6pm CST at: (405) 780-7327. Article Tip: The About the Author information that follows an article is your chance to provide a strong call-to-action to get your readers to your website. Keep it short. Let your website do the selling, and let your website close the sale.