With the holiday season just around the corner and small businesses looking for a way to boost their sales, talk often turns to pay-per-click campaigns. Everyone from the small mom and pop shop to giant corporations like Microsoft and Wal-mart make use of paid search advertising to help boost traffic and sales around the holidays. That said, so many advertisers are still living with the false idea that they simply have to bid their site to the number one listing.

An article in USA Today over the weekend talked about the rising cost of pay-per-click ads and the frustration of some business owners about what they "must" spend to maintain their ranking.

In response to the rising ad rates, Jane Moritz recently decided to suspend paid advertising for her small business and work on making her site more Google friendly. "I was paying $1.50 a click, and then it went to $4," says Moritz, who runs a baked-goods site, Challahconnection.com. "Not every click turns into a sale. You're lucky if you get 30%."

Moritz has begun advertising again, but fears that competitors with deeper pockets will bid up prices during the holidays. "I can't afford to pay $6 a click every time someone looks at my site," she says.

This is the type of talk that you read and here quite often when it comes to small businesses and pay per click advertising. When it comes to running short term pay per click campaigns, this problem tends to get even more exacerbated. Many want to be able to run advertising campaigns, but feel that they can't justify the cost because their conversion rates don't result in a profit.

There are several problems with this line of thinking.

1.) You don't have to be number one. - This is probably the hardest thing for most search engine advertisers to understand. The idea of owning that number one spot for their choice keyword has been so beaten into their brains, that many site owners are willing to spend themselves into the red just to stay ahead of their competitors. All the while, savvy competitors are likely sitting quite happily in spots #3, #4 or even #7 turning a nice profit and planning their next vacation. Pay per click advertising isn't all about holding on to the number one spot. It's about matching your bid and position to your conversion rates and your site and finding the happy medium that keeps you in the black. Remember, the number one rule of pay per click is that it is not about buying clicks. It's about buying customers.

2.) They don't have to run ads everywhere. - Many web site owners think that if they are going to run pay per click advertising, they need to run it with every major search engine. Many small business owners are not content to start off with a campaign on Google AdWords or Yahoo! Search Marketing. They also want to run a campaign on Ask Jeeves, Miva, Enhance and a half a dozen other networks. This usually happens because they've found some free coupons to use at each engine. The problem with this is that an inexperienced advertiser can quickly find themselves in trouble trying to manage half a dozen (or even a handful) campaigns. I wrote about this issue just a few weeks back in my article: Starting Small with Pay-Per-Click will Pay Off.

3.) Most small business do not know what they can afford to bid. - The majority of small businesses that decide to run pay per click campaigns for the holidays have no idea how to setup their initial bid rate. They don't know how to calculate conversion rates or determine what they can actually afford. Instead, they set their bid higher than their competitors and hope for the best. Until companies take the time to learn how to set a pay per click budget, they're going to have a hard time turning a profit.

4.) They don't understand that it's the site and not the ad that causes a conversion. - Buying traffic with a pay per click campaign is not difficult. You simply need to find the right word and spend the right amount of money. Buying customers with a pay per click campaign is an entirely different story. Most advertisers still don't understand that what they present to a customer after they click on a link is actually more important than the ad text or keyword that they used to get there. Understanding pay per click landing pages is one of the essentials to being able to turn a profit in a competitive paid search market.

I don't want to make pay per click advertising out to be overly simple. It isn't. It takes time and skill to master the art of fine tuning a paid search advertising campaign so that it turns a nice profit. At the same time, it's also not as scary and difficult as the press, and some advertisers like to make it out to be. Ultimately, site owners need to treat pay per click like they do any other form of advertising. They need to consider the cost, consider the potential reward, and make their decision accordingly.

Discuss this article in the Small Business Ideas forum.
October 31, 2005

Jennifer Laycock is the Editor of Search Engine Guide, the Social Media Faculty Chair for MarketMotive and offers small business social media strategy & consulting. Jennifer enjoys the challenge of finding unique and creative ways to connect with consumers without spending a fortune in marketing dollars. Though she now prefers to work with small businesses, Jennifer’s clients have included companies like Verizon, American Greetings and Highlights for Children.

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