What are the Benefits and Disadvantages of Paid Advertising?

Paid ads build traffic fast and are a great way to test your pages. How can you overcome their inherent shortcomings?

[Need help writing ads? How to write a text ad that works.]

Let's look at the most common paid advertising model, Pay-Per-Click (PPC) ads, such as Google AdWords.

ads

Because PPC ads are deployed almost immediately, they are the fastest way to drive traffic to a new site, and a great way to test how well different headlines and page designs convert visitors into buyers (split testing).

There is no question PPC ads work. They pull in visitors, and should arguably be part of the promotion mix for many online businesses. This is especially true for local businesses who can buy relatively cheap local keywords like "Gettysburg Lasik Surgery" instead of the broad and expensive keyword "Lasik Surgery"

But there are also drawbacks and costs to consider. Here are the key problems and some ways to offset them:

PPC campaigns can a substantial expense to you (and enormously profitable for the major search engine companies). The average cost per click is now over $1.00 and rising. Your first order of business is to figure out how much you can pay per click and still maintain acceptable profit margins. You may find out you can't buy many popular keywords and still keep your margins. Here's how to do the calculation.

You can lower paid advertising overhead by working with lesser-known ad networks like 7Search, Ask, or AdBrite which offer a lower cost-per-click and higher revenue shares than the big players like Google. (AdBrite was voted "Best Advertising Network" by ClickZ.com for 2006.)

[Revenue share is the portion of the ad cost that gets paid to the site owner where the ad is displayed]
Someone has to manage the ad campaign on a continuous basis (weekly if not daily) to determine if individual keywords are truly profitable. Then edit the list, check the results, etc. It's a part-time job. The PPC Stress Study says that time spent on managing pay-per-click campaigns ranges from less than 5 hours per week for 32% of respondents to over 21 hours per week for 33% of respondents. Any serious paid ad campaign represents a significant time commitment—be sure to factor time into your campaign costs.
When you use PPC advertising, you are not building an long-term asset, just a short-term presence. It is more akin to renting an apartment than buying a house. Unless you have another traffic-building strategy, traffic (and sales) will drop dramatically the day you stop paying for those ads. Therefore, you must continue to build your site in other ways regardless of your paid advertising program.
Studies have shown that not only do organic search results pull in 250% as much traffic as PPC links, visitors who find a site by clicking on an organic link are 30% more likely to actually buy. And it has been demonstrated that the higher the education level (and presumably, in income level of the searcher) the more likely they are to choose organic links over PPC links. The return on investment (ROI) is significantly lower with Pay-per-Click methods.
Potential customers are less likely to click an paid link than a normal listing that appears in the main search engine results. Take a look at the eye-tracking study shown below. It is a composite result of how 400 people scanned a typical Google search results page.

Eye Tracking Study showing The Golden Triangle . . .

Google Eye Tracking Study

White (background) areas get little attention. Gray represents areas of somewhat more attention. Orange and especially, red, are areas of high attention. With the exception of the first text ad in the right column, you can see that most of the focus is on the "Golden Triangle" in the upper left hand corner—THAT is where you would like your link to appear.

All the more reason to build pages around the "long-tail" of secondary keywords. Doing so will you give the highest probability of arriving in the Golden Triangle at minimal cost. Of course, you can arrive in the happy Golden Triangle by buying your way into the "sponsored listings" (if any) at the top of the page.

Invest in paid advertising if it can be purchased profitably, or to test the conversion rate of new designs in the short term.

With all paid ads, you must have proper tracking software in place, and just as important, people to monitor the results. As certain keyword / network combinations prove profitable, increase the budget for those keywords accordingly. Drop keywords that don't make the grade.

What are the alternatives to paid ads?

Calculating your Maximum Cost Per Click

Sorry, this section is being updated. Please check back later.