A Simple Guide to Pay Per Click (PPC) Advertising

A Simple Guide to Pay Per Click (PPC) Advertising (Part 2)

  • Posted by changerz
  • On March 27, 2015
  • Broadplace,

Part 1 of PPC Guide
Part 3 of PPC Guide
Welcome back to the second part of our guide to pay per click! We will be talking more in-depth about account structure, goals, key performance indicators and how the pay per click auction works.

Account Structure

AdWords Account Structure
Account: Your account is at the top of the structure where everything else is housed. Within this section of the structure is your contact information and your billing (how you will pay as well as your invoices.)
Campaigns: Campaigns can be apportioned in several ways, depending on the website, performance, and structure. Enclosed within each campaign is a defined daily budget, the choice of network that your ads will run in (will explain in the next post), how you chose to target your audience, as well as scheduling the time of day and days of the week you want the ads in this campaign to run.
Adgroups: The adgroups become more specific and are used to differentiate the ads that are shown to make sure they are as relevant to the keyword that triggered them as possible. Agroups will contain the keywords and their bids, ads that you want to show, and landing pages.

Pay Per Click Goals

The first step to starting your account should not be anything technical. The one thing that will drive all your pay per click based decisions should be what you want to achieve with it.
Although many business goals can be achieved through PPC, it boils down to these two most common ones:

  1. Increase sales
  2. Branding

Although these are not exclusive within themselves, we should decide which goals are our priorities so that we can create our campaigns with them in mind.
1. Increase Sales
For SMEs this is by far the most common one. Many businesses will aim to increase sales by generating leads (calls, online enquiries, etc.) or online sales (if you are an e-commerce).
2. Branding
Branding can mean trying to keep top of mind when people do searches for products that you provide, or to assist all your other marketing outlets in creating your company’s personality. Learn how to use PPC to brand here

Key Performance Indicators

How do we measure how well we’re doing in pay per click? Key performance indicators!
Key Performance Metrics
Clicks: This is the measure of how many times people have actually clicked on your ad and been led to your website. The importance is that it lets you know how many people have gone through paid ads to your site, and since it is pay per click model, you only get charged when people click.
Impressions: How many times your ad has been shown on the search page or display networks. This is important to know because you will be able to see if you are showing up at the frequency and keyword triggers that you want.
Click through rate (CTR): The percentage people that see your ad and click (clicks divided by impressions). As a KPI the click through rate is crucial because it will let you see the effectiveness of your ads and to gauge whether you are targeting the right audiences. For example, if a plumber in the UK was showing up in the US, his click through rate would likely be low. Similarly, a poorly written ad would result in a lower CTR than a well written ad.
Average cost per click (Average CPC): Due to the pay per click structure being an auction, each click is likely to cost a different amount even if you have previously set a maximum cost you are willing to pay. The average CPC will give you insight into the allocation of your budget within campaigns/adgroups.
Cost: Very simply, it’s the cost that has been accrued by the advertisement within the selected time range.
Average Position: The average position will show you which position on the search engine result page (SERP) your ads are showing up on. In general the top three positions will have ads on the top of the SERP and the others will be on the right side.
Conversions: This is essentially the goal that you wish to achieve with PPC, it is an action on the site that you want visitors to do. For example a form fill or a sale could be counted as a conversion, but it could also be a call, or downloading of a white sheet. This is probably the most important KPI when it comes to managing a PPC account because it will allow you to determine the success of your PPC campaign.
Cost/conversion: The cost divided by the number of conversions is a good indicator to how well the account is running and how it will align with your overall goals to increase sales. If you are at a loss (average order value is lower than the cost per conversion) it means that you need to improve the performance of the account. While in most cases people will remember to work towards increasing conversions, it is just as important to try to widen the gap between your cost/conversion and your average order value to improve your profit margin.
Conversion rate: The rate at which clicks become conversions, it would be naive to assume that every click is going to become a conversion, so the conversion rate is a good indicator as to how well your website converts after the visitor has been brought to the site through PPC. It is calculated by dividing conversions by clicks.

Auction Time Bidding

AdWords AuctionAs you should know from reading part 1 of this guide (you did read it, right?) pay per click works in an auction format. In general, when we think of auctions, the factor that defines who “wins” is usually money. However, if it were that simple, it would be incredibly difficult for any SMEs to compete with the large companies.
Google has devised a way to make sure that everyone can stay competitive while Google also shows the most relevant ads. Therefore money isn’t the only factor that determines whether or not you show up on the SERP and the position in which you show up.
Born out of this was the Ad Rank, it takes several factors into consideration when determining if they should show the ad, and it is now a large part of the auction.
The Ad Rank is the quality factor to the ads and is built of four core pillars:
Expected CTR: The expected CTR is based on historical performance and is becomes an indicator to whether or not people will click into your ads, it is assumed that if nobody clicks on your ads, it is either done poorly or irrelevant to the keyword that it is showing for.
Landing page experience: the quality of the content on the page as well as the relevance between the ad and the landing page are taken into account.
Ad relevance: Ad relevance compares the keyword to the message in your ad, the more compatible your ads and the keyword that triggers the ad, the better your score for ad relevance will be.
Impact of Ad formats (extensions): Lastly, this is the expected impact of the extensions and additional improvements that have been made on the ads. For example, the use of sitelinks.
(it’s obvious which one looks better)
Pay Per Click Ad Comparison (pretty obvious which one looks better right?)
So with all this in the auction, how are payments made? When it comes to payment of the bids, each ad will only have to pay the minimum need to beat the person below them (only when they’re clicked).
For a really good explanation of how it all works, you can watch Hal Varian, Google’s chief economist explain it here.
Hope you enjoyed the second part of this simple pay per click guide and hope to see you for the third and final part!
Part 1 of PPC Guide
Part 3 of PPC Guide
Written By Jeffrey Chang

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