Keyword bidding is one of the most important aspects of pay per click advertising. Bid too low and your ad will appear so far down in the SERPs that your CTR will be too low to judge your ad’s effectiveness. Bid too high and you won’t sell enough product units to make your advertising profitable. Therefore, you must learn to optimize your bidding practices. That requires some level of skill and new advertisers should just plan to take a loss until they figure it out. How much of a loss depends on your own learning curve, but here are some suggestions to help you on your way:

• Set a daily and monthly budget - Since you are planning to take a loss early on, minimize your risk by establishing a budget as you learn.
• Be sure to bid on the right keywords - Bidding correctly is as much about targeting the right keywords as it is bidding the right amount. You can’t bid optimally on the wrong keyword so make sure you do the proper keyword research to find the keywords that most appeal to your audience.
• Find out what the top bidder for your keyword is paying - This is a simple one day test. Bid $10 and after your first click through put your campaign on pause. You won’t pay the full $10 unless the highest bidder for a keyword has overbid that amount. You will only pay 1 cent more than the highest bidder. But performing this test will allow you to see what your upper limit is. After you know that you can adjust your keyword bids to target where you want your ad to place.
• Ensure that you have tight ad groups - Putting a keyword into the wrong ad group can cost you in more ways than one. Do some experimenting and find out which keywords operate best together.
• Determine your break even point - How many units must you sell to break even on your keyword bids? If your unit price is $1 and you bid 5 cents per keyword, how many units do you need to sell to break even? How high should your CTR be to sell that many units? This is done through testing and experimenting. It might take some time to arrive at your answers but play with your keyword bids until you figure it out. Use it as a measure for all future advertising.

The most important thing for all pay per click advertisers is to set a budget. You don’t want to lose your shirt before you realize the effectiveness of your pay per click advertising. Take it slow and do a lot of testing. Measure everything.

When a searcher types in a search query and the search engine results page comes up, what will they see? You hope they see your organic listing and at least one paid listing on the page. I say at least one paid listing because you can actually have more than one ad on the same search results page. Many pay per click advertisers don’t know that. It is assumed that because Google has said that you can only rank once on the first page for the same search term for any one domain then it must also be true for paid advertising. It isn’t.

You can do this in one of two ways: Target the same landing page in all of your paid ads or use different landing pages. Both work. If you do the latter, however, you have to make sure that each landing page is optimized for the key phrase that you are targeting and that both will achieve high quality scores. Different landing pages will yield two ads different quality scores if they target the same keyword.

Make sure both ads use your keyword effectively. Put it in your title and at least once in your description. Even if you use the same display URL and the same destination URL in your ads, you can rank both ads on the first page of results for any search query - if you are willing to pay the bid price on keywords. This could actually be very effective and you can use the top ad to drive more clicks to an ad in position 2 or 3. Clever, no?

In pay per click circles there is a lot of talk about click through rates, cost per clicks, quality scores, and a host of other criteria that are nice to measure, but in reality the only real metric that matters is conversion data. Specifically, you want to know your total conversions and your conversion rate. These are the metrics that will make you your money and determine your ROI.

It’s OK to have a low CTR. It’s OK to have a high average CPC. What really matters is how many conversions you get and whether that is making you money. But even if you are converting large numbers of your traffic, you could be losing money on your pay per click campaign. That’s because you’ve likely bid your keywords too high.

If you bid too high on your keywords then it doesn’t matter how many conversions you have. You will lose money. Even if all the other metrics meet your satisfaction. Lower those keyword bids and see what happens to conversions. Sometimes they go up, sometimes they go down. But what you really want to see is a return on your investment - a measurement between how much you are spending on your pay per click campaign and how much it is earning you in return. That last part of the equation is wholly dependent on conversions. And that’s why it is the only real metric that matters.

If you run several ads at once then you need to watch your CTR closely. CTR is a good measure of performance for your ad campaigns because one low CTR can drag your overall pay per click advertising effectiveness down. But before you go willy nilly and start tossing your ads, you should define what a low CTR is. It can vary from campaign to campaign and from advertiser to advertiser.

CTR stands for click through rate. In general, you want your CTR to at least be 2%. That means 2% of the people who see your ad click through to your landing page. So for every 100 people who see the ad you want a CTR of at least 2%, preferably higher. 3-5% is even better.

What affects CTR? A number of things can affect your ad’s CTR. Among them include:

• Call to action
• Keyword bids
• Ad description
• Keyword selection
• Ad title optimization
• Match type choices

You should conduct proper tests on each of the above elements to see what affects and improves your CTR. After running the proper tests on your ads and determining which elements are most effective, you can then decide whether a particular ad meets your minimum CTR. By defining a minimum CTR for each ad campaign, you have a measure to decide whether a particular ad is performing as it should.

If you are a small business owner of something like a hobby shop or crafts store and you have a very small budget, don’t think that you are left out in the cold where online advertising is concerned. The great thing about pay per click advertising is it doesn’t discriminate against budgets. You can start with as little as ten dollars per month.

If you are new to web advertising and not sure how to go about it, you can advertise without risk. Just set your pay per click settings to budget your daily and monthly ad spend. Start with $10 for a monthly budget and 50 cents or $1 for a daily budget. This allows you to test the PPC landscape to see if it will work for you.

Also, bid small for your keywords - like 5 to 10 cents per keyword. You may not appear on the page 1 of the SERPs, but you’ll still be there. Contrary to popular opinion, some people still do drill down the lower pages of the SERPs. OK, not many, but some still do. What you are trying to do is to reach those people who are in your target audience. If someone isn’t in your target audience then they won’t click your ad. That’s saving you advertising money.

Bid it right and you can make $10 go a long way. If you make any money at all on your advertising you’ll still be ahead of the game. And by testing the waters first, you can gain a better understanding of how to use online advertising without losing a lot of money.

There are two ways to increase ROI. You can cut expenses or you can earn more profit. Ideally, you’ll do both, but what if you can only do one or the other? Most of us would focus on cutting expenses. But that may not always be the best way. If you can earn more income and spend the same amount of money, wouldn’t you rather do that?

That’s what the latest blog post at Efficient Frontier is about. I agree, it isn’t obvious, but this is what we’ve been saying at Pay Per Click Journal for over a year now.

While EF puts it in different terms than what we’re used to communicating, they’re essentially saying the same thing as “increase your ROI.” By bidding on your keywords in such a way that you focus on the CTR and expected conversions versus how much you are actually spending, you can control your earnings. You know how much each unit you sell costs and you know your profit margin on each unit sold. If you know that each position of your ad placement in the SERPs leads to a certain number of conversions then you can calculate expected ROI.

Let’s use an example: You sell widgets for $20 each. You know that at position 1 for your best keyword you will pay $1 per click and make a sale for every 15 clicks. Your expected ROI is $5. But if it costs you 75 cents per click at position 2 and you make a sale every 10 clicks then your expected ROI is $12.50. These figures show that you are better off at position 2 than at position 1.

It takes constant tweaking and experimenting to figure out which position is your optimal position, but when you find it then you will maximize your earnings over time. That’s how you stay profitable with pay per click advertising.

I’ve never really heard a sound argument for letting affiliates bid against your brand within pay per click advertising. Even in a closed, carefully selected way. Whether you let one affiliate do it or 100, you are cutting off your own foot.

Think of it this way: You let Affiliate A bid against your brand. No. 1, by doing so you are adding competition to the one area you have an edge - brand recognition. If you’re used to paying low on click through you will now likely have to pay more for each click because your affiliates will now be competing against you for the same keywords.

Aside from the increased cost in clicks, you’ll also be paying out more in commissions when your affiliates start closing more sales from those ads. Just because you are making more sales than you did last week, or last month, doesn’t justify your decision. What matters is that you likely would have closed those sales yourself based on two facts and one assumption:

• FACT: You were sole bidder for your brand
• FACT: The searcher queried and would have seen your PPC ad all alone in the SERP
• ASSUMPTION: Your ad and landing page were equal in quality and closing technique as your affiliate

Note that my argument is contingent on you being as good at sales as your affiliate. If that’s not true and you know it’s not true then you might let your affiliate bid against your brand. But for that to be the case you should be confident that you are losing sales yourself by advertising. Nevertheless, you could do just as well by testing new pay per click ads and landing pages and increasing your conversions. Your affiliates have other means of reaching their audiences.

How well do you know your niche? To be a successful pay per click advertiser you need to know a little more about your niche than just the popular keywords. But you should stay on top of those keywords because the popular keywords for any niche will fluctuate from month to month. Are you taking advantage of those?

There are a few ways you can stay on top of the popular keywords for your niche. One way is to consult Technorati. If your niche is politics, entertainment, real estate, or another popular category like that then it will be easy to see the latest information on what people are searching for on Technorati. But it also helps to be able to know the latest popular keywords for your niche if your niche is not so popular.

You may not necessarily bid on the most popular keywords. Everyone else is doing that. But you should know what they are so that you can leverage them. Search for less popular but related keywords and bid on those instead. The traffic may not be as high, but the competition you will face as an advertiser will be lower. It will be easier to break in the door. All it takes is knowing a little bit about the playing field within your niche.

Pay per click advertising is a very powerful mode of online marketing. There are several reasons why companies rely on pay per click to achieve their monetization goals. One of those is the branding effect. But is branding better than generic keyword usage in pay per click campaigns?

“Better” is a variable word. How you manage your advertising campaigns depends a lot on your goals and the purpose of the advertising. Are you trying to achieve brand dominance? Then you definitely must use your brand as an advertising tool, but you also have to bid high on your keywords. However, I would not bid on branding terms exclusively. You want to bid high on all of your keywords, generic keywords included.

If you are not going for the branding effect then your branded keywords are not as important. But should you bid on them anyway? It depends.

Is your brand well known? Would people search for your brand online? How many people would search for your brand versus the generic term? If there are a lot of searchers looking for your brand specifically then I’d say bid on the branding terms. If not then stick to the generic keywords.

Pay per click advertising is keyword-based advertising. Your ad content is based on a carefully selected campaign made up of the best keywords for your business. Do those keywords entail your competitors’ brand names?

This has become a controversial practice in pay per click advertising. Your competition has worked hard to build a brand (as you have). Then along comes someone who outbids them on their brand name as keyword and threatens to take their business away. How would you feel? That’s likely how your competitor feels too.

Is it right? Well, there are currently no laws that say you can’t bid on brand names as keywords (at least in the U.S.). That doesn’t mean you should do it. Of course, it doesn’t mean you shouldn’t, either. But many companies are now trying to protect their copyrights and trademarks by pursuing the search engines and advertisers whenever their brand names are used for advertising. If you compete with a huge company with deep pockets then you could lose. That’s a risk that you’ll have to take (if you want to).

In TV advertising, you can’t use a competitors’ brand name. In pay per click advertising, you can (with a few limitations). But it is risky and you should weigh the risks carefully before you do it.

If you sell a product that appeals to a specific demographic then you can target that demographic in your pay per click campaigns. Each of the search engines have the ability to target your ads towards a specific demographic. Google calls it demographic targeting. AdCenter calls it incremental bidding. What you do is simply tailor your keywords bids toward the defined demographic that you are targeting. It works.

Let’s say that you sell feminine fashions targeted toward women ages 18-25. You can tailor your bidding for the important fashion-related keywords that you are targeting so that you bid on the demographic that is important to you. For instance, let’s say you sell a line of mini-skirt. You can bid .50 on “mini-skirt” and up your bid for that keyword to $1.00 for the 18-25 age range. If women ages 18-25 are more valuable to your business than women in the 30-40 age range then it makes sense. You can still attract the older women through your keyword bidding, but by using a higher bid for the younger target you are establishing that demographic as more valuable and the search engines will place your targeted ads appropriately.

If you are new to pay per click advertising you may be struggling with deciding the size of your budget. Even experienced advertisers sometimes struggle with these issues so there is no shame. To be sure, you should limit your budget just so you don’t exceed your ability to pay the expense.

The reason you want to limit your PPC budget is because sometimes an ad will fail to get the type of result you’d expect it to get. When that happens you are simply losing money. You want to cap how much money you have the ability to lose so that you don’t end up casting a line into the water only to have the fish snag the bait and rip the pole out of your hands.

So much budget is too much?

Well, I’ve always believed you should start small. For most campaigns, $5 a day is adequate until you can get a handle on just how much you’ll pay for your advertising. You can always, of course, increase your budget as you need to, but one rule of thumb is to take a percentage of your overall advertising budget and devote that to your PPC budget.

You’ll hear marketers often talk about long tail keywords. Many of them will recommend that you focus your PPC campaigns on the long tail keywords simply because they are less competitive. But should you follow this advice?

Think about this. A long tail keyword may be less competitive, but the reason it is less competitive is because fewer people are searching for it. It will also be less expensive to bid on. There are several things to consider before you decide to bid on those long tail keywords:

• Budget - How large or small is your budget? If you have a small advertising budget then the long tail keywords might be more affordable for you. They could be a good place to start. But if you have a larger budget then you might consider bidding on the general keywords to tap into their popularity.
• Importance - Importance of keywords to your niche is a very important consideration. If a long tail keyword doesn’t match your business model then it doesn’t matter how competitive or inexpensive it is. It makes no sense to target the wrong keyword. On the other hand, if a long tail keyword is the perfect keyword for your business where the generic keyword might be too broad then it really doesn’t matter whether you spend 10 cents per bid or $1 per bid, the right keyword is the right keyword.
• Business goals - What are you trying to accomplish with your PPC campaign? Are you looking for conversions or opt ins? What are you selling or promoting? Does it appeal to an audience that is more likely to search for the long tail keyword or the general keyword?
• Targeted repelling - It is just important to repel the wrong people as it is to attract the right ones. Does the long tail keyword do an effective job of convincing the wrong market not to click on your ad? If not then it may be the wrong keyword. If so, on the other hand, then it may be the right keyword to target provided that other factors are considered.

These are by no means the only considerations you should have, but these are important to consider when determining whether the long tail keywords hold value for you. It may be that you want to target some long tail keywords and the general keywords that are more expensive to bid on. Take a look at all the angles and make a decision based on what is important for your business.

You may have heard of demographic bidding, but what is it? In a word, demographic bidding allows you to specify a particular age group or gender for your ads. If you sell feminine products, for instance, you don’t want to market them toward men so why not use demographic bidding to narrow the audience to which you target your ads? You can take advantage of demographic bidding in two ways, through keyword-targeted and through placement-targeted campaigns.

Keyword-targeted ads will appear on content network websites based on the keywords that you choose. For example, you might choose “feminine hygiene” as your keyword phrase. Your ad shouldn’t appear on content network sites that are targeted toward a male audience.

Placement-targeted allows you to select specific sites that you want to see your ads appear on. For instance, if you want your ad to appear on a specific website geared toward women and you know that website allows ads from the content network then you can tell Google AdWords to show your ads on that website. This allows you to tap into the target market that you know exists on that niche website.

To take advantage of demographic bidding you simply add a % of your bid for a particular demographic group that you want to bid on. So if you want to target your ad toward the 50+ age group then you’d enter your bid (let’s say, $1.50) for your keyword then add a percentage (let’s say 100%) that you are willing to pay extra in order to capture that target market. Whenever your ads appear for that target market then you’ll pay up to $3 per click instead of $1.50 for the non-targeted keyword clicks.

Keep in mind that these ads will only be shown on sites where demographic information is tracked. If a website doesn’t have stats on their users then it won’t apply. But many websites do track demographic information so this could help you.

You may notice from time to time that your minimum bids move. If you’ve had a PPC campaign that all of a sudden stopped because your ads no longer met the minimum bid for the approval process then you’ve likely been frustrated by that. Yahoo! Search Marketing has a solution for you that will help you keep an eye on that minimum bid.

When you log into your account you should see a notification that lets you know your ads no longer meet the minimum bid. Let’s say you bid 10 cents for your keyword and the minimum bid is 13 cents. On your user interface within the advertising management system, you’ll see your actual bid and a red note one field to its left telling you that your bid is too low. Right below the red type you’ll the the actual minimum bid necessary to keep your ad active for that keyword.

What you do is log into your account and click on the Keywords tab. If you haven’t seen that before, it’s because that’s a new tab. But it lets you see all the keywords for your PPC ads no matter which campaign they are associated with. That’s a cool tool. Now you can see the minimum bid information described in the last paragraph. You can either raise your bid or let your ads pause for awhile. An easy way to manage all of your keywords at a glance.

Another cool feature of this new tab and new reporting tool is that your ads do not automatically go inactive right away like they do with Google AdWords. Instead, you have a grace period during which if you raise your bid to the minimum then your ads will never pause. You won’t lose a beat. If you do not raise your minimum bid, of course, then your ads will pause, but you at least have the grace period.

While your ads are pending inactive, you can raise the bids for your keywords to the minimum necessary to keep them active, but the minimums are just that. They are not minimum bids for competitive purposes, only minimum bids to keep the ads active. So be sure to remember that.