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  1. #1
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    Question How can the big guys pay so much in PPC?
    Here's what I don't understand. If I get 50 click in PPC and the no one buys, then I lose money - obvious. I'm not paying that much for my clicks or my daily budget, but still not buys. Now, what about the "big boys"? They must spend thousands upon thousands and never get buyers.

    Is it just sheer numbers? I've never taken a marketing / advertising class, but is there some sort of ratio / mathematical model that demonstrates that higher amounts are bound to sooner or later pay off (give the product sells).


    Example, I can advertise new balance shoes for $15 a day, say I get 50 clicks. No sales, lose $15. A merchant can spend $1500, get 5000, and lose a lot, but they will probably sell shoes because they reached more people. So what is that point where one knows they are reaching enough people to actually gain sales? How many must they reach to hit that point?

    Hey, I'd spend $1500 a day if I knew I'd make $3000. Some of it is product knowledge and I'm sure they lose in their advertising experiments also. They really must be good at what they do. I understand how important all of the business components work together. Interesting.

  2. #2
    ABW Ambassador simcat's Avatar
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    The thing is , how do you really know what the 'big guys' are paying per click? They might get a price break.
    Plus, since Google$ recent 'quality score' deal, I think the amount that people are paying for the same spot can vary quite a bit. I notice just for myself, that the costs can change a lot just by moving ad groups around, adding plurals, etc.

  3. #3
    ABW Ambassador netnow22's Avatar
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    Well PPC is trickey, should be able to tell on well your ad is performing by 100-200 unique users. If no one buys, then rewrite your ad!!! Remember when writing ads for PPC sometimes its better to use negative ads, you don't want every brother and sister clicking on your ad.

    For an example if you bid on the keyterm "Shoes"

    A negative ad for this would be:

    Title: Looking for New Balance SHoes? or Buy New Balance SHoes Here
    Description: Save 10% and Get Free Shipping on All New Balance Shoes with coupon code
    URL: Directs them to a Coupon Code landing page


    This way only the people interested in New Balance SHoes will click on your ad

  4. #4
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    First, as noted, you really never know what anyone else is actually paying.

    Second, a likely scenario is that the "big guys" are running an effective ad with a high CTR and an effective landing page that converts well.

    Suppose I am paying 8 cents per click. If I get a CTR of 2.5% then I am giving Google an eCPM of $2 (2.5% x 1,000 adviews = 25 clicks x 8 cents = $2). If you are paying 20 cents per click but only drawing a 0.9% CTR, then your eCPM is $1.80, so my ad will show first.

    If I can persuade just 1% of my clickthroughs to become customers, my cost per customer is $8 (8 cents x 100). If I can persuade 2% to convert, my cost is $4 per customer; if I can persuade 5% to convert, my cost is $1.60 per customer.

    Raise the bid to 20 cents and the cost is $20/$10/$4 per new customer (for 1%/2%/5% conversion).

    Third, quite often the people you are bidding against are not "big guys" or "smart guys" at all. Instead, you may be bidding against a never-ending series of idiots, each experimenting with AdWords and bidding and budgeting the amounts Google recommends. They won't be around in a few weeks, after they run out of money, but there will be more idiots to replace them.

  5. #5
    Affiliate Manager Alan Hamilton's Avatar
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    Hi web, good question. There are a lot of variables to what you ask. I have some observations and I'm sure others will have some too.

    I notice in your question that you use an example of spending $15 to advertise NB shoes for a day and getting 50 clicks without a sale. Another post also mentions 100 - 200 clicks being the yardstick by which an ad is measured for effectiveness. In some cases maybe that would apply. But our experience has shown me otherwise.

    Having advertised online for several years, I have seen conversions on the same ads go from as high as 8% to as low as 1% from one week to another, or one month to another. For instance a domain we promoted on G for four years offering a unique pet related product was getting 500 - 600 clicks per day for weeks at a time, and converting 4 - 5%. Then this same ad dropped to an average of 250 daily clicks, or it would drop to a 2% conversion.

    We could have punted and re-written that ad, but we have seen this happen repeatedly through different times of the year for four years. Invariably, the campaign would get fewer clicks certain times of the year and / or lower conversion rates. Then the very same ad would turn around and jump back up to 500 - 600 clicks and 4, 5, 6% conversion. If we had scrapped that ad because clicks and conversions dropped for a short period, we would never have seen the long term up and down trends.

    I believe in long term stat gathering and a few days is not enough time to gather reliable information by which I am willing to determine that an ad is or is not performing. Sure, it may not perform for a few days, or even a few weeks. Then suddenly it jumps and starts producing good numbers.

    Provided the landing page is effective, if the ad is targeted to reasonably filter window shoppers while providing a respectable click rate, then the rest will take care of itself. The ad itself is no doubt very important, but the landing page and its ability to close sales is imperative. For instance I could have an add that knocks em dead generating clicks. But if the landing page is not an effective selling tool, then it's to no avail.

    Another thing I have noticed in long term campaigns is the delayed or future sales that result from branding and name recognition. For instance, in one to two weeks we will be announcing another affiliate opportunity that is based on a program that we have been developing and promoting in house for over two years. The creatives we used to promote this program at first produced minimal results, but we knew the creatives were good, so we held in there to give it time to work. Then, three months into it, (and several thousand click dollars) we saw the lead output triple and then quadruple as consumers who are looking for this type of service consistently saw our brand in their searches, or visited the site previously. Buyer trust had finally been created. Had we changed the ads after 500 clicks, we would never have seen the eventual growth that has now made the product / service a recognizable name.

    I've said this in several posts on other or similar topics, and heaven knows I've espoused it to hundreds of sales and marketing people over the past 30 years: patience and long term performance is far more reliable (and profitable) than snap decisions. In fact, patience and long term building IS what CREATES eventual daily strong revenue. Time is something we all have, but it's up to each of us to decide how much time we are willing to give to building long term. Though most of my business career was spent in offline marketing (as there was no internet) the same principle applies to online marketing.

    Patience and focus on long term returns versus the day to day return will produce far better results than making wholesale changes every week. f course, this is not to say that you cannot sometimes spot a dead horse the first week or two. It depends on what you are selling. For instance If I was offering an exclusive site selling 3,000 watt Honda generators at a savings of $700 off the brick and mortar price, and my ppc ads did not generate adequate clicks the first week, I would re-look my ad. If the ad was generating adequate clicks, but I was not getting the sales, I would then re-look my sales page because that kind of deal would be hot enough that I should see immediate results. But where you are selling NB shoes and thousands of others are too - time and experimentation takes longer.

    I hope this gives you another perspective on the question to add to your thought process. Quick bucks are nice, we all love them. But real bucks and steady / known performance comes only through time. If you have the funding to keep building, then patience can be a virtue.

    Best of luck to you.
    Last edited by ALH - AmeritrustRx; September 23rd, 2006 at 02:38 AM. Reason: typo
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  6. #6
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    ALH, thank you.

    Let me give an example, I have PPC for Steve Madden shoes. I don't mind telling anyone because everyone else is selling them to. It's no secret. They are one of the highest natural search returns for shoes to.

    My landing page is a simple html page that has my name and to click a shoe below. The shoes themselves, the pictures, are to general landing pages that are categories. One picture (with link) says, Steve Madden Dress Shoes, has a picture of a dress shoe from that manufacturer and goes right to the merchant's page that only had Steve Madden dress shoes. It goes exactly where it says. There is also a link on the landing for casual, men's, on-sale, boots, and sandals. There are six pictures with links in all. That's it. That's the whole page. I did this with the specific intent of getting them off of my site as quickly as I could to the merchant. I do not expect any return visitors.

    My ad was made exact search [steve madden shoes]. The ad was clicked and the landing page ad gets clicks. I actually sold one pair as I tracked it by SID.

    Here is the only difficulty I have with your comments for affiliates. If I had a "real store" like the merchant, I can see the long term effect of advertising. It's like seeing McDonald's commercials. Doesn't everyone already know about them? Of course, the but the constant exposure to advertising does indeed work and this is measured over long term. But in PPC, where the user is directed to a landing page to go to a merchant, immediately to a merchant, then it becomes harder to use some of the traditional information. That is why I posted about the number of clicks to conversions ratio question.

    If I look at shoes.com, zappos.com, shoebuy, 6pm, shoeline, and so on, then I see almost the same thing. Users are clicking their ads. If their ad comes up with the same keywords as mine, and mine is getting clicked, then I know they are getting clicks, especially since they are higher up than me. I will say that in their case, it is about long term advertising. If everytime I type in "shoes" I see shoes.com and zappos.com, then something happens inside of the mind of the shopper, suddenly, shoes become synonymous with those names, same with books and amazon, McDonald's and hamburgers.

    So, since I'm never, or at least not anytime soon, building a long term anything in this genre of affiliate marketing, I'm back to square one. The regular old "finding gems" that have a high conversion rate for the short time. I don't know that that's what I like or what I would call a "business." Perhaps, no I'm sure, they are losing clicks for the long term name recognition. They aren't making any more conversions off of those keywords than I am.

  7. #7
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    Quote Originally Posted by markwelch
    First, as noted, you really never know what anyone else is actually paying.

    Second, a likely scenario is that the "big guys" are running an effective ad with a high CTR and an effective landing page that converts well.

    Suppose I am paying 8 cents per click. If I get a CTR of 2.5% then I am giving Google an eCPM of $2 (2.5% x 1,000 adviews = 25 clicks x 8 cents = $2). If you are paying 20 cents per click but only drawing a 0.9% CTR, then your eCPM is $1.80, so my ad will show first.

    If I can persuade just 1% of my clickthroughs to become customers, my cost per customer is $8 (8 cents x 100). If I can persuade 2% to convert, my cost is $4 per customer; if I can persuade 5% to convert, my cost is $1.60 per customer.

    Raise the bid to 20 cents and the cost is $20/$10/$4 per new customer (for 1%/2%/5% conversion).

    Third, quite often the people you are bidding against are not "big guys" or "smart guys" at all. Instead, you may be bidding against a never-ending series of idiots, each experimenting with AdWords and bidding and budgeting the amounts Google recommends. They won't be around in a few weeks, after they run out of money, but there will be more idiots to replace them.
    I think that makes me one of the idiots. The big guys in the context of my post are the merchants. My CTR for my ads are

    2.41%, 3.7, 5.4, 6.2, 1,5 these fluctuate of course, some get up to 50%. But all of these are on a handful of people, 53 in this case, 2200 - 2300 impressions. I pay pretty good for the clicks, some .20, .35, .65, .72, etc. not cheap. Most of the time Google won't let me bid .02 or the like. The users click the ad, go to the specific landing page, click a specific category, go directly to the merchant. All highly targeted. I suppose in them mind of the consumer they might be saying, well, they just didn't have x product that I'd hoped they'd have. Sometimes, I do have very specific product and even a price in the ad. Click, no sale. That ad and landing page I know is very specific. And when I say click, I mean they register on CJ's page, so it is a click to the merchant, not just my site. They are leaving my site to the merchant. It's almost 1/1 on PPC clicks to what is registered on CJ. So that makes my CTR on CJ way way up there.

    With that few a people it is hard to believe that I would get many sales. I may be simply wrong here, but the ratio question presupposed that exposure to LOTS of people on a product they want would, must yield conversions - all things being equal (is that even possible)? My thoughts were that if I had 53 clicks in a span of four hours, then the merchants who were bidding on who knows how many thousands of brands and keywords, must be spending thousands of dollars a day or week. But, they are more than likely looking long term and the psychology behind it, if ALH (see above) is correct.

    Thanks.

  8. #8
    More Cheesier Than Ever Cheesehead's Avatar
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    For the big guys, a click with no sale is not a complete waste of money. This is name exposure that will eventually pay off. Think of TV ads - not every person watching is going to drop what they are doing and run out to buy the product, yet large amounts of money are still spent on the ads.

    For the affiliate, a click with no sale is usually a waste of money. We promote the merchant's name and then the user returns to the merchant's site in the future. The real trick is to make it NOT a waste of money. If we have a good enough site, they will come back to our site rather than the merchant site.
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  9. #9
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    I think PPC for affiliates may or may not be the way depending upon the goals of the affiliate.

  10. #10
    Affiliate Manager Alan Hamilton's Avatar
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    Welcome Johnny
    The internet is a universe that is wide open to competitors of all shapes and sizes. Some of those competitors are the big guys and some of them are new folks (the little peeps) pursuing a dream or goal.

    Because we live in a free society, we all have the right to use internet technology to our benefit, I admire those who try, whether they succeed or fail. If we fail, we learn from our failures and move ahead. I've fallen off horses many times in my life, but I've become a better rider from the experience of lessons learned.

    In your case, I hear you clearly regarding the challenges that you personally view as your nut to crack. The branding issue is a huge factor behind long term success and growth, and having the staying power to promote the brand is imperative to longevity.

    However, branding is not exclusive to merchants who own stores, factories or distribution centers. There are countless affiliate sites, shopping and advertising sites etc etc that have great brand recognition. They all started somewhere and they all promoted brand through longevity and reinvestment.

    I admire your honest comment that you are looking to build short term profitablity and I am sure that if you do, you will want to parlay (not the pirate term) that success into longer term growth. Keep plugging away, and keep learning JWA!! I wish you the best in your journey.
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  11. #11
    CPA Network Rep JP Sauve's Avatar
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    I've always wondered the same thing. The cost for PPC SS traffic is so expensive for almost any keyword, it's hard to imagine anyone can do it at a profit... but enough people are buying that they MUST be making a return.

    I can only guess they see results in 2 ways...

    1 - TWEAK TWEAK TWEAK to maximize click-to-sale conversions

    2 - The most expensive rankings generated from top results on search engines probably get clicked on by newbies more than experienced surfers. An experienced surfer will shop around, use more specific search terms, click on a few places for more info on a product. I'd expect a newbie has a higher likelyhood of buying from the first page they see. Newbies tend to search with simpler terms, and if they convert better, the expensive clicks might still be bought at a profit.
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  12. #12
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    Quote Originally Posted by JP Sauve
    The cost for PPC SS traffic is so expensive for almost any keyword, it's hard to imagine anyone can do it at a profit... but enough people are buying that they MUST be making a return.
    While this is true for some (perhaps most) keywords at some prices, it is definitely not true for many keywords at high prices. I honestly believe that a huge part of this is a constant stream of new AdWords users who blindly accept Google's recommendations, and another big part are advertisers who don't track ROI in any meaningful way.

  13. #13
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    Most large clients and agencies have complete control of the cart/carts and can set a target ROI or target Profit. They only loose money on "Branding Campaigns" in the short ter.

    mackin@makemetop.co.uk

  14. #14
    Resident Genius and Staunch Capitalist Leader's Avatar
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    Quote Originally Posted by JP Sauve
    I'd expect a newbie has a higher likelyhood of buying from the first page they see.
    Or, they'll just be so wowed by the whole internet experience, that they'll click, click, click on all sorts of stuff just to see what happens!

    I think this is the reason I usually have better results staying OUT of the #1 PPC spot if there's any real competition going on. That #1 spot is a money eater. Even though there are lots of buyers who'll click it, there are also loads of dud clicks from people apparently satisfying mere idle curiosity.

    The first page is a fine place to be, but I usually leave the absolute #1 in PPC to some competitor, and let them eat those curiosity clicks.
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  15. #15
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    Quote Originally Posted by JP Sauve
    I've always wondered the same thing. The cost for PPC SS traffic is so expensive for almost any keyword, it's hard to imagine anyone can do it at a profit... but enough people are buying that they MUST be making a return.

    I can only guess they see results in 2 ways...

    1 - TWEAK TWEAK TWEAK to maximize click-to-sale conversions

    2 - The most expensive rankings generated from top results on search engines probably get clicked on by newbies more than experienced surfers. An experienced surfer will shop around, use more specific search terms, click on a few places for more info on a product. I'd expect a newbie has a higher likelyhood of buying from the first page they see. Newbies tend to search with simpler terms, and if they convert better, the expensive clicks might still be bought at a profit.
    JP, your guesses for ppc affiliates... not bad for someone who's just wondering... your guesses, TWEAK (analyzing & optimizing) and specificity, are the two most important keys.

    For that #2, remember that G and M both now have landing page relevancy built into the bidding and pricing model, so the better you can deliver precisely what is being searched for, the better it gets.

    You're partly right about position, but the story doesn't end with just noobs and the top positions - they are other factors that affect the importance of what position is best. If you have specificity on your side, aim high and don't worry about the aspect you mentioned. Give the peeps exactly what they want and they lose the motivation to continue looking elsewhere.

  16. #16
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    Quote Originally Posted by Leader
    The first page is a fine place to be, but I usually leave the absolute #1 in PPC to some competitor, and let them eat those curiosity clicks.
    This is a valid point that I concur with, but it's ignoring that generally, people are more lazy (or just short on time) than thney are curious.

    If you've got excellent specificity, you cure the curiousity and can come to view the flip side of this same argument... most are too lazy to keep searching for alternatives once they've found one reasonable and acceptable choice.

    Where you have specificity, shoot the lights out. Where you're flirting with "maybe" and hitting the periphery of what is being searched for, avoid the costs of being top dog, cuz you can't afford to be there long if you're watching your p's and q's.

  17. #17
    Affiliate Manager Alan Hamilton's Avatar
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    PPC Curiosity Costs
    I've found that being in the 5 - 8 positions provides a good number of clicks and they seem to be a more "buy motivated" visitor.

    When I first started doing ppc, I bought into Overture's pitch to keep me in the top three. I learned within ten days that all I had done was raise their earnings projections for the next quarter!!

    I also learned NEVER to use the "auto replenish" with Overture (YA - WHO?) as their method of replenishing is a moving target based on your daily average click charges, which they calculate daily and then run the charge out over 3 - 5 days. Before I caught on to what they did and how they do it - I wound up being charged 10 times in ten days, each for 3 - 5 days of the new projected "average daily spend" and I won't mention the amount. (saves self embarrassment). But the bright side is that I learned from doing it.

    Of course - the effectiveness of Y for ppc is also a listing, if not sinking ship. So I don't bother much with Y anymore. Minimal focus just to keep my toe in the water in case it warms up someday when and IF they clean up their content partner alignments.

    G on the other hand has been a great - steady performer and MSN is coming along well too. I find with both that being in the top ten for our identified top sales generating key terms gets good results while keeping costs down - so I avoid the top 1 - 4 positions and thus far it has paid off.
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  18. #18
    Resident Genius and Staunch Capitalist Leader's Avatar
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    Quote Originally Posted by Donuts
    This is a valid point that I concur with, but it's ignoring that generally, people are more lazy (or just short on time) than they are curious.

    If you've got excellent specificity, you cure the curiousity and can come to view the flip side of this same argument... most are too lazy to keep searching for alternatives once they've found one reasonable and acceptable choice.

    Where you have specificity, shoot the lights out. Where you're flirting with "maybe" and hitting the periphery of what is being searched for, avoid the costs of being top dog, cuz you can't afford to be there long if you're watching your p's and q's.
    Generally true. People are incredibly lazy, and that's generally a good thing, marketing-wise.

    There are a few specific searches that bring in oceans of curiosity clicks, though. Especially if it's some item that's offbeat, and therefore causes people to want to see it for the sake of seeing it.

    It's always good to watch ROI on any newly-discovered term that's expected to get a significant amount of clicks.

    Quote Originally Posted by Alan
    also learned NEVER to use the "auto replenish" with Overture (YA - WHO?) as their method of replenishing is a moving target based on your daily average click charges, which they calculate daily and then run the charge out over 3 - 5 days. Before I caught on to what they did and how they do it - I wound up being charged 10 times in ten days, each for 3 - 5 days of the new projected "average daily spend"
    The key is to set a daily budget (not the same thing as the withdrawal-amount setting; there's a seperate thing where you can set how many $$ worth of clicks they can send in a day), so there's a finite max to the "average."

    I use auto-replenish + daily budgeting, and it works very well.
    As for their more iffy traffic sources, I found that if I set the daily budget too high, they will resort to worse and worse traffic sources to try to keep clicks coming in until they hit the limit.

    So, I watched the log files, and checked how much of the daily budget was spent when the crap clicks started coming. Then I set the budget just below that point. So right about when they'd want to fire away with their Dud Click Cannon, *poof* my ads go off.

    Unfortunately, that doesn't take the likes of MySpace out of the picture, but at least they've got a real search feature.
    Last edited by Leader; September 25th, 2006 at 08:49 PM.
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  19. #19
    Affiliate Manager Alan Hamilton's Avatar
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    Quote Originally Posted by Leader
    The key is to set a daily budget (not the same thing as the withdrawal-amount setting; there's a seperate thing where you can set how many $$ worth of clicks they can send in a day), so there's a finite max to the "average."
    I agree that the budget feature can be important. However on G, I have never had a problem setting a high daily budget that subsequently is never used up. Instead it triggers more impressions without overshooting the budget.

    I've tried lower daily budgeting on Y or other less productive SE's many times. They just use up whatever it is as quickly as possible and wait for the next day. I might well be missing something, but from my experience so far, I feel that I have much better control on Y (and other non "G" SE's that tend to be loaded with junk networks) if I manage funding manually.

    Your helpful reply leads me to a question Lead.... How can you reliably identify the "junk" clicks you mention? I can identify peak periods, and with day parsing I have eliminated late night kickers - but how can you actually ID clicks as junk other than this process?
    Last edited by Leader; September 27th, 2006 at 07:27 PM. Reason: Fixed quote tags
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  20. #20
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    A few thoughts on this subject:

    First off, you don't really know what the "big guys" are paying. However, if you've been doing this long enough, you probably have a good idea what some of the top-tier keywords in your space are going for.

    The marketing strategy will probably vary quite a bit for different retailers, but it usually boils down to this: are they playing the PPC game as a branding strategy or as a true Internet marketing strategy with an ROI threshold on their campaigns?

    If it's simply a branding strategy, then they most likey have a budget that's based on a fixed percentage of total company sales. They are happy to throw dollars at high-ticket keywords that may not convert, just to get visitors.

    Otherwise, there's a simple formula based on the net revenue that these sales produce vs. the cost. We have a pretty basic ratio of cost:sales, and if some keywords or programs aren't producing the necessaary ROI, then we stop. It seems simplistic, but should be the same formula you use in your affiliate programs.

    I think the latter example is what most "big guy" retailers go by, but there are probably examples of big brands that also sell direct, and they may ride the fence a bit on branding vs. ROI.

  21. #21
    ABW Ambassador Sheri's Avatar
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    Also remember that the "big guys" have an entire department of people dedicated to nothing but watching their PPC returns. They spend their days tweaking, working, and re-writing ads. Plus, they sit and play cat and mouse with everyone else bidding just enough to get ranked where they want to be, but not overspend.

    It's a science.

    Sheri

  22. #22
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    I'm banking on exactly that, me against employees... bahahahaa!

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  23. #23
    Resident Genius and Staunch Capitalist Leader's Avatar
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    Your helpful reply leads me to a question Lead.... How can you reliably identify the "junk" clicks you mention? I can identify peak periods, and with day parsing I have eliminated late night kickers - but how can you actually ID clicks as junk other than this process?
    I recognize some of the referrers as known losers due to their reputations here on ABW. Other times I notice that traffic from some sources will always leave so fast that I wonder if it was really human-generated clicks at all. Since I notice that these clicks don't usually come if I set my budget right, that's how I handled it.

    Usually I read my raw logs for this kind of thing--the raw logs will show the actual referring site, rather than just "Yahoo/Overture," for paid traffic (works the same way for AdWords: If it comes from a "content partner" it'll show their URL rather than G as the referrer).

    Aggregated logs and log readers are okay for a lot of things and can help for trend-spotting, but for really knowing when certain clicks come in and from where--and whether a particular visitor stayed or left immediately--raw logs are the best I've found.
    There is no knowledge that is not power. ~Hemingway

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