It’s controversial and some people don’t like it, but one effective way to gain a foothold in pay per click advertising - especially if you’re just starting out - is to bid on your competitions’ key words, even their trademarked brand names.

Like I said, it’s controversial and some people don’t like it. But it works.

That’s why Google is changing its policy in the UK and Ireland. Well, it may not be exactly why, but if you read between the lines, what Google is saying is that they are interested in doing what is right for their search users. In other words, if it’s good for searchers then it’s good for all of us.

How can this be good for searchers? Because it helps them find what they are looking for.

Suppose you are a new start up manufacturer of laundry detergent. If a user types in Clorox then they will get a bunch of search results for the laundry detergent manufacturer. Some will be the Clorox web site itself and others will be third parties talking about Clorox. Those will be in the organic search results. But what about the ads on the side and top of the page? Those will consist of businesses that have bid on the word “Clorox” as a keyword, and anyone can bid on any keyword.

So how you can benefit?

You can benefit by bidding on “Clorox” as a keyword then write an ad that says something like:

No, we’re not Clorox
Our detergent is better

Cheesy and sleazy? Maybe, but it does work. Trust me. It works.

Conversation Marketing had an interesting blog post on bidding on your own brand name. But I’m not sure why you’d slip from organic rankings for your own name:

1. It’s cheap. Pay Per Click engines’ quality scoring algorithms mean you’re likely to get the best deal on your own company and product names. That translates to lower bids.
2. It’s insurance. If you slip from the organic rankings for a day or two, your paid ranking will maintain your presence.
3. Chances are, someone else has your name, too. You’re probably not the only ‘Acme Co.’ on earth.
4. If you don’t bid, competitors will. In the United States it’s perfectly legal to bid on competitor product and company names. It happens all the time. You can easily outbid them, though, thanks quality scoring (see #1)
5. Did I mention it’s cheap?

Nevertheless, these are good points. By bidding on your own brand name, you should be able to get top quality advertising for lower cost. You’ll certainly get lower bid prices than your competition, who are likely bidding on your brand as well. This is a legitimate competitive strategy and it happens in Pay Per Click all the time.

Google’s quality score is based largely on your optimization efforts. Since your website is optimized for your brand name (or it should be), you are likely to have a higher quality score than your competition for that phrase and therefore a lower bid price. Plus, if you’ve done a good job of branding then that Pay Per Click ad should pay off as people search for your brand online. This is especially true if you have a website address that is not an exact match for your brand name. For instance, if BrickMarketing.com had already been taken and I had to choose another domain name - let’s say, brickmarkco.com - then there is nothing intuitive about people typing that URL into their browser to find the company. That is just one more reason to bid on your brand name.

I like this quote from the PPC Blog:

Budget caps are there to prevent you from overspending as a safety precaution and are not a primary method that should be used to control spend.

There is an important distinction between using budget caps to keep from overspending and to use them to control advertising spend. I agree with the pay per click Blog when he says that anyone who is not a beginning pay per click advertising should not control ad spend with budget caps. That’s what your CPC is for.

You must decide whether it’s more important to you to get your ad in front of more searchers or to see it higher in the ad positioning on the SERPs. To rise higher in position you’ll have to raise your bid, but if you have a budget cap then your ads will stop running sooner during the day and your ad will be seen by fewer searchers. On the other hand, if you lower your bid you will see your ad appear lower in the ad positions but more often. The result will be more eyes on your ads.

Simply put, if your campaigns are hitting there budgets daily you are not getting the most out of your paid search campaign.

Max your daily budget too soon and you could be shooting yourself in the advertising foot. You might get a better ROI by lowering your CPC and showing your ads to more people. Not only will you be in front of more eyes, but you’ll also be paying less for targeted clicks and getting more return on each sale you make as you increase your chances of getting more sales. The bottom line is, advertising is about ROI and nothing else.

Do you know the optimal bid for your keywords and their associated landing pages? Is there an “optimal bid?”

One way you can determine the best bid for your keywords is to take your monthly budget and divide it by 30 (I always assume a 30-day month since that is the average). So if your monthly budget is $300 then your daily budget is $10. Start off with a 100 click per day assumption. It may be more or it may be less, but if you’ve never advertised by pay per click before then you don’t know. 100 clicks per day is a good benchmark but the number of clicks depends on certain factors beyond your control. Your bid prices will be tweaked any way based on actual performance.

$10.00 divided by 100 clicks would be a .10 bid. That’s fairly low for most keywords at Google, but it may be high for other search engines. Nevertheless, you are starting at this point as an “entry” bid. It will change based on actual performance.

Go ahead and bid .10 on all of your keywords for your new campaign. Let the campaign run for one week unimpeded. The most you will pay on any given day is $10, your maximum budget. That’s if you max your 100 clicks for the day. Once you hit the maximum you’ll be cut off automatically and your ad won’t show any more.

After one week, take a look at your stats. The stats you are most interested in on this day of testing are:

• CTR (Click Through Rate)
• CPC (Cost Per Click)
• Daily Budget
• Average Position

Your Average Pay Per Click Position
If your ads are showing up in the No.1 position at .10 per bid then you’ll likely have to lower your bid. You will probably get fewer clicks at No. 1 than you will at No. 2 or 3. Lower your bid by a couple of pennies to see where you fall and let your ads run again. Depending on how many keywords you have in your campaign, your ads will be at different levels. You could appear at No. 1 for one keyword and No. 5 for another. If necessary, change your bids for each keyword separately. You are aiming for No. 2 or No. 3 in positioning.

If you notice that certain keywords are not getting any CTR during that first week, look to see how many impressions those keywords are getting. Run the ads again at your new bid (a couple of cents lower than your initial bid). If those keywords still don’t get any clicks on the second week then pause them for week 3.

How close are you to your budget? Are you maxing out your budget every day? If so then you should definitely drop your lowest performing keywords. You don’t want to kill your budget on 25 keywords that are getting one click each. Put your money into your best performing keywords. If you are nowhere near your budget then up your bids significantly on keywords that are getting a lot of click-throughs but are low in position.

Your average position is very important. You may be an average of 4. That means you are appearing at No. 1, 2, or 3 for some queries. But you are also appearing below No. 4 for a significant number of queries. Optimally, you’ll be at No. 2 or No. 3 average. Try to bid for each keyword so that you achieve that average position.

After your first set of tweaks, run your campaign again for another week. After week 3, check your results again and make similar tweaks. Remember, the goal is to shoot for an average position of 2 or 3 for each keyword. Whenever a keyword hits that average position for 2 weeks in a row, stop tweaking its bid. Keep it set. Some weeks it may fall and some weeks it may rise because this position is always relative to what your competition is up to. But you want it to be around 2 or 3 on average.

When you are setting up and managing your pay per click advertising, do you evaluate your competition? Do you see what they are bidding for your keywords? Do you take a look at their landing pages? You should.

Evaluating your pay per click competitors is a little different than SEO competition evaluations, though not much. You are looking at some of the same criteria. You do care what your competitors are paying for your keywords. Are they outbidding you beyond your budget means? That’s good to know. But you also want to see where they fall in organic search listings. Do you top competitors pay a lot of pay per click traffic and rank low for organic searches? Maybe you can beat them organically and bid just enough to ensure that your pay per click ads run alongside your organic listings. If so, that will give you a huge competitive advantage.

Other things to look at when evaluating your pay per click competition include:

• Landing Page Optimization
• Website Infrastructure
• Link Popularity
• Internal Link Structure
• How Many PPC Companies Are They Using?
• Ad Results

Some of this information may be difficult to uncover. For instance, how many PPC companies a certain competitor is using. But if you can find it out then you can see how big a budget they have. You can also watch their ads over time to see how effective they are. If a competitor tries a certain pay per click company and kills their advertising after 4 or 5 weeks, that’s nice to know. Maybe you can save yourself from using that company based on your competition’s results. Or maybe their ad wasn’t written effectively and you can write a better ad for that pay per click company.

When it comes to evaluating your competition, you need to evaluate your pay per click competition as much as anything else.

One of the biggest struggles for new pay-per-click advertisers is budgeting for the long term. Too many advertisers think they have to outbid every competitor and take the top place in rank. But that may not be the best plan.

Studies show that second, third, or fourth is actually the best rank for many keywords. The highest bidder may have a recognized brand or a big pocketbook, but your goal as advertiser is to calculate your ROI and increase that to its maximum. That may mean lowering your advertising budget.

Scenario: If you pay $1.00 per click and receive 200 clicks in one month then you’ll spend $200 in advertising. If you can expect eight sales from that at $20 per sale then your income is a mere $160, a losing proposition. But let’s say you drop your bid by 25 cents. You now pay .75 per click and drop from the top position to the third PPC position. If your click throughs drop to 110 and you make 6 sales then your ROI from that ad is $37.50. That’s not a great ROI, but it is better than losing $40 per month.

Don’t think you have to be the top ad with every SERP. You may actually do better in the long run by bidding lower and decreasing your total budget, thereby increasing your ROI.

In a section of a blog post about BusinessWeek columnist Gene Marks’ absurd assertions that small businesses don’t need Internet marketing, Caroline Melberg had this to say:

I’m not an expert on AdWords, but I do know people who have used Google AdWords and other pay per click models to turn a profit. You don’t need thousands of dollars. You can make money on a $200 per month budget. Many have. You just have to learn how it’s done. You didn’t know how to run a business either until you tried. Right, Gene?

She’s right. Gene Marks is wrong:

John’s a pretty smart guy. He runs a company that sells specialty pet foods. He manages his own investments. He keeps an eye on his taxes. But I’ve found a way to turn John into a blithering idiot. I’ve asked him to figure out how to use Google’s (GOOG) AdSense profitably.

It’s really not hard. You don’t have to be a genius to figure out any of the pay per click models successfully. And, Gene, it’s Google AdWords, not AdSense. AdWords is the pay per click advertising vehicle for businesses who want to advertise and bid on clicks per keyword. AdSense is for publishers who want to place ads on their website. Two different things.

That aside, just because you don’t understand it doesn’t make you an idiot. Like anything else, you have to take the time to learn it. If you can’t, or don’t want to, there are people who will manage your pay per click campaigns for a modest fee. Believe me, it’s worth it. Thousands of small business owners have managed it successfully.

The key is in ROI. You don’t need a big budget to run a pay per click campaign. You just need to do your research - your keyword research, and don’t bid yourself above your means to pay. You can control your budget. AdWords, and their competition, makes that easy.

Is pay per click advertising for everyone? No. But you don’t have to be intimidated by it if you run a small business. There are ways to make it work for you.

Pay Per Click Journal would like to thank you for your continued readership. We will not be posting tomorrow or on New Year’s Day. But we would like to take a look back over the last three months of our life and highlight some of the more popular blog posts we’ve made since October.

Our first blog post was made on October 13. Since then, we’ve published 76 posts. These are 10 of our favorite:

• Who’s Going To Manage Your Pay Per Click?
• Google AdWords Vs. Microsoft AdCenter
• Microsoft AdCenter Upgrades And New Features
• Keyword Match Types: When Is Narrow Too Narrow?
• Yahoo! Search Marketing Quality Index
• Landing Page Optimization Is Of Supreme Importance
• PPC Bidding: How To Aim For Position No. 3
• Google Analytics Gets An Upgrade
• Landing Page Basics: Is Too Much Enough?
• Microsoft AdCenter Offers Free Pay Per Click Training

We hope you’ll check out these Pay Per Click Journal posts from the past three months. Meanwhile, if you have a favorite post about pay per click advertising, we’d like to know about it.

SiteProNews today has a great article on traditional vs. new marketing methods. I was surprised to see that Google AdWords was on the list of old marketing methods that is no longer effective. That’s Google AdWords specifically, not pay per click advertising.

Then I found this case study on Google AdWords.

Reading such stories could lead one to believe that pay per click advertising is not an effective method of advertising. But that would be the wrong conclusion. There’s every reason to believe that Google AdWords is still effective for some advertisers. But there are things you want to keep in mind:

• Don’t be the highest bidder - Rarely do the highest bidders see the best ROI
• Find the optimal bid price for your conversion rate - Knowing your conversion rate is absolutely essential in the game of pay per click advertising
• Excel at organic search while improving your pay per click campaigns - When searchers see your listing in both the sponsored search results and the organic search results you will see a huge boost to your credibility than if you appeared in one or the other alone
• Be consistent - You’ll never get anywhere if your advertising spend acts like a yo-yo; keep it consistent
• Make sure your landing pages sell - This is the most important part of your pay per click campaign; pages that don’t sell won’t convert and you’ll just be throwing your money away

It’s well known among experienced pay per click advertisers that the No. 1 position is not the most desirable. You’ll get more clicks than you will at No. 2, but your traffic won’t be 100% targeted traffic. There are people who will click on the ad out of curiosity just because it’s No. 1. Then there are people who will click the ad by accident, not knowing it’s an ad. Let’s face it: There are still people online who are new to the Internet and do not have ten years of knowledge to help them navigate the sea of search confusion. That’s why the No. 1 ad position is not necessarily the best.

If you want a bigger ROI on your pay per click advertising then you might shoot for No. 2 or No. 3. That way you get fewer clicks, but the clicks are from people really interested in what you have to offer. But how do you find the No. 2 or No. 3 position?

It’s largely a matter of guessing and second guessing, but you can find the No. 1 position pretty quickly. When you launch you campaign initially, bid enormously high on your keyword. I like to bid $10. Very few advertisers are paying that much for their keywords. If the highest bidder for your keyword is under that amount then you will pay 1 cent higher for the No. 1 position. For example, if the highest bidder for you keyword is paying $1.29 for the No. 1 position and you bid $10 then when someone clicks on your ad you will pay $1.30.

Set your bid for $10 for one day and see how many clicks you get at that price. The next day, you can go in and lower your bid. You know the highest bidder is at $1.29. Lower your bid to $1.28 and you’ll pay 1 cent more than the second highest bidder. If that bidder is paying $1.18 for the keyword then you’ll know that when you fall in at the $1.19 rate. If you want position No. 3 then lower your bid to $1.17. You’ll still just pay 1 cent more than the current No. 3 bidder.

You may think you need a bid management software. Personally, I think conversion tracking is a lot more beneficial.

A lot of things can go wrong with bid management software. The pay per click industry is changing so fast that most bid management software is obsolete by the time you start using it. But if you must use bid management software then at least keep tips for choosing bid management software these 10 things in mind when shopping around. Otherwise, I say do the bidding yourself.

Big management is really all about ROI. You can bid too high and you can bid too low. The optimum bid is the bid that is going to get you the best ROI based on click throughs and conversions. That’s why I say you are better off with a reputable conversion tracking tool. Once you narrow down your average click through rate and your conversion percentage then it’s just a matter of managing and tweaking your ad campaign from month to month.

If you absolutely must have a bid management package then at least get one that also offers reporting and conversion tracking in the same package.

If you’re not sure how much to bid for your keywords in your next pay per click campaign, try the average bid strategy. With the average bid strategy you take the five highest bids at Overture and compute their average. Since Overture is open bidding and you can see the bids of your competitors before you bid yourself, this is easy. Let’s say the top five bids for your keyword are:

.52
.49
.48
.42
.40

The average of these five bids is .462. Rounded down, you would bid 46 cents. That will put you in the fourth ranking position for your keyword. It’s a good place to start.

I wouldn’t use this strategy, however, if you are in a highly competitive industry where the keywords are expensive and you’ve never done PPC before. You could easily lose your shirt. I would use this strategy is you are new to PPC and the competition for your niche is not so fierce. If you are not new to PPC and you are entering a new niche area where you’ve never done PPC before then this strategy can be a good starting point. NOTE: It is a starting point.

You will want to go back and tweak your bids after you’ve had a chance to gauge your initial performance. You are not, by all means, going to keep this bid. You might find some keywords do extremely well in that position. Others may not. You’ll want to raise some bids and lower others. That’s perfectly acceptable. Still, you’ve got to start somewhere and by starting in the middle of the pack you can test how deep the waters are and how fierce your competition is without too much of a commitment.

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One of the first things you need to do when you set up your PPC account is establish a budget. But be careful. It’s easy to make a mistake and lose thousands of dollars because you didn’t budget your campaign right.

If your daily budget is set at $5 then you’ll be paying out $150 each month if you max your daily budget. Set your daily budget at $10 and it doubles. You need to ask yourself what you can afford monthly. If you have a monthly advertising budget of $1,000 and you’ve been given 20% of that for PPC campaigns then you only have $200 to spend each month. Setting a $10 daily budget is going to put you over that so you’ll need to lower your budget accordingly.

Another thing to think about is what you want to spend on your keywords. Look at the popularity of those keywords very closely. If a keyword costs your $10 then that is one expensive keyword. Can you fit it into your budget?

You’ll have to figure out what the first place position costs you on each of your keywords. To do that, bid as high as you can. If you know your keywords are expensive, you can bid $20 and see what you end up paying, but just do this for one day. By the end of the first day you’ll have received at least one click. But you will only pay for that click one cent more than the person who currently holds the top position. If they bid $12.62 then you’ll pay $12.63.

Now that you know where you stand, bid within your budget but bid as high as you can go to maintain a respectable position. If your highest bid, based on your budget, is only $5 per keyword and that gives you an average position of 15 while your daily budget is $5 then you’ll have to decide if that PPC campaign is going to be worth your effort. The most you can afford is one click per day. Is that going to pay your bills?

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One pay per click bidding strategy I like to use is to figure out who the highest bidder is and bid one notch lower than that.

You might ask, “Why would you do that?” The reason I bid for the No. 2 spot is because that’s the spot most people are likely to click on. Most people won’t click the highest ad on the page. They’ll click the second or third, so I bid on those.

So how do you find out what the pay per click bid is? Easy. You set your first bid so high that it is highly unlikely that anyone has bid that high. For instance, you might bid $10 on all your keywords just so you can see what the high bid is for that pay per click keyword. Set your daily budget low - say $10. That way, you max it out on the first click but you still achieve the goal of finding out what the highest bid is. Chances are, it isn’t anywhere near that amount.

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If the highest bid is, say, $4.92 then you will pay no more than $4.93 for that first click. If your daily budget is the same price as your bid then you will max it out after two clicks. The next day you go in and change your bid amount to something lower. If you’ve established your monthly budget then you can figure out how much you can spend per day. Set your bid for all keywords according to that budget. Using this pay per click bidding strategy will improve your results tremendously.