Ask the Experts: Will my AdWords Campaign be Profitable?
Q: I just began reading your book SEO: An Hour a Day and am very pleased with the advice found in it. Thank you. My main concern lies with PPC (AdWords), as I’m just starting out my campaign and currently have very little budget. I’m concerned that not every click on my ad will be a sale and, thus, cause me to lose money rather than make a profit. Is there another method I could perhaps attempt before diving right into PPC from the get-go, maybe a “Pay per Sale” option? Or is there another form of PPC I could try that may not put such a strain on my wallet, so to speak?
A: You’re right to assume that not every click will translate into a sale for your paid search campaign. Typical conversion rates (the percent of clicks that “convert” into sales) vary widely from industry to industry, but it would be reasonable to expect a conversion rate for a brand new campaign to be under 5%. (Brad Geddes suggests that 3% is Google’s stated benchmark)
Instead of relying on every click to convert for you, you need to identify a cost per conversion that you can live with, and set your bids accordingly. For example, perhaps you sell hat boxes at $15 apiece, and you are willing to spend $5 on advertising for each sale you get. That translates to much less than $5 per click, because you know that only a fraction of your clicks will convert to a sale. Perhaps $.25 per click would be a reasonable starting point.
I would suggest trying Google’s Conversion Optimizer, which will allow you to set a target cost per acquisition (CPA). But before you can enable Conversion Optimizer, your campaign will need to have conversion tracking in place, and the campaign will need to have at least 15 conversions in the last 30 days. Here’s information about Conversion Optimizer: http://support.google.com/adwords/bin/answer.py?hl=en&answer=2471188
When you are starting out with a new paid search campaign, you should expect that there will be a learning curve, which means that your advertising dollars may be less efficient than you’d like them to be, at first. You’ll want to take time to manage your campaign regularly, monitoring bids, tweaking your ad text, your keyword list, and possibly your landing page, until you have reached an acceptable conversion cost.
When you’re getting started, there are no guarantees that you’ll make a profit, so determine what exploratory budget you’re willing to spend, and choose your campaign levels accordingly. Or, in other words, only gamble what you’re willing to lose.