PPC (pay-per-click) campaigns use advertising networks to direct paid traffic towards websites to make ad conversions. The objective is for the commissions paid out on conversions to be higher than the cost of traffic.
How it works
Traffic is obtained through services such as Adwords, MSN Adcenter, or Yahoo Search, and is bought on a per-click basis. The cost of traffic is based on bidding upon keywords, and the popularity of the keyword effects the per-click cost. The two main objectives to PPC campaigns is to keep the cost of traffic as low as possible and to rise the conversion rate once the traffic lands upon the website you are promoting. Profit is obtained by generating commissions that are higher than the cost of traffic. There are three major variables to consider:
- Cost of traffic
- Conversion rate of traffic
- Commission generation on offer
The ability to find cheap, targeted traffic is critical to running a successful campaign. There are many different methodologies to finding cheap traffic, which can widely vary across niches. There is often a strong emphasis on finding long-tail keywords, and then developing campaigns with hundreds or thousands of keywords to drive volume. Due to increasing competition, it can be extremely difficult to find keywords at profitable levels. As a result, creativity and testing are very important when setting up campaigns.
The conversion rate is another critical factor to running a profitable campaign. This can be influenced by a number of factors; landing pages, traffic source, how targeted traffic is, and the effort required to complete the offer you are promoting. There are a number of different theories on utilizing landing pages, and testing is essential to finding effective layouts that make conversions. The quality and targeting of traffic can greatly influence conversion rates. The key is to find traffic in the “buying mode” of a particular niche. The effort required for conversion relates to what it takes to make a conversion. This can range from a simple email submission to spending money to purchase a product. The complexity of the transaction is influence the conversion rate.
The commission rate paid by a successful conversion will also dictate the price point for traffic. These rates vary greatly by offers and advertising networks. Typically offers are found through CPA networks, although alternative offers can be found in other avenues. Offers for email submissions payout $1.50-$4.00, while purchase offers can be as high as $60 per conversion.
- Time: The time commitment associated with PPC campaigns is moderate. There is a lot of initial testing that must be done to find successful campaigns. However once the testing is done, daily maintenance is minimal.
- Capital: The capital requirements are high. During the testing phase, money will be lost on unsuccessful campaigns. Once a converting campaign is found, an increasing about of capital needs to be devoted to it to drive volume.
- Scaling: PPC campaigns can be scaled. Daily maintenance of existing campaigns is minimal, so one person can effectively manage an ever increasing amount of campaigns.
- Outsourcing: This process cannot be outsourced. It is too difficult to explain the process and the financial impact of unsuccessful campaigns is too severe if ran incorrectly.
- ROI: Successful campaigns should generate between 200-1600%.
Based upon the high ROI potential and that it can be scaled, PPC campaigns will be incorporated as a secondary revenue stream into the business plan. As they cannot be outsourced and there is a high need for capital, they will be utilized later in the plan, after I have transitioned into working for the company full-time.