The Average Cost of PPC Advertising

Prospective pay per click (PPC) advertisers often ask, "How much does PPC cost?" I usually explain that PPC costs whatever you want it to cost. Each advertiser can set a monthly budget, and a maximum cost per click by keyword. We've seen budgets ranging from $50 per month to $50,000 per month and even more. Beware, "It costs whatever you want" is a nice way of saying "PPC will eat your entire budget, if you lack discipline."

To provide useful guidance, we've created a Benchmark Index that shows average results for a group of advertisers on Google AdWords, the leading PPC ad network. AdWords text and image ads are displayed along side and above the main Google search results, and also on Google's content network sites, including AOL, Lycos, and The New York Times. Our advertisers include companies in a variety of industries with a mix of local, national and international campaigns.

Within the group, each advertiser may have a different definition of what constitutes a conversion. For some, the conversion action could be a sales transaction, a sales lead, a sign up, or a visitor who navigates to a key page on the site.

The decrease in click through rate (CTR) from 2005 to 2006 is attributable to the growth of Google's content network. Content network sites usually have lower CTR's and low cost per click. In our experience, the content network produces acceptable results if the advertiser avoids over-bidding.

Inexperienced advertisers typically focus on ad position. The search engines seem to encourage ranking obsession, probably because that drives the most advertising income. Unfortunately higher positioning often results in poor ROI for the client. A serious buyer will usually read several ads, and then choose the one they like the most. We encourage advertisers to bid modestly at first. As long as the ad appears on the first page of results, it will draw significant traffic. Advertisers should only raise bids once they know what sort of return on investment to expect.

About the Author

After graduating from Yale with two degrees in Computer Science, Jonathan Hochman set up his own consulting company in 1990. He has been an Internet marketer since 1994. To send feedback, please visit http://www.hochmanconsultants.com/.

For additional information, please contact Hochman Consultants.

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