$10 Per Click – Do They Know Something We Don’t?

The text you’ve provided offers a detailed explanation of pay-per-click (PPC) advertising, focusing on the dynamics of cost-per-click (CPC), its potential for success, and how businesses can make it work for them. Here’s a breakdown of the main points:

 

  1. PPC Advertising: PPC works by charging advertisers when someone clicks on their ad. The amount paid per click is the cost-per-click (CPC). The rise of CPCs, especially for highly competitive keywords like “debt consolidation,” is a key focus of the discussion.
  2. Justifying High CPCs: The writer notes the high costs of certain keywords (e.g., over $10 per click for competitive phrases like “debt consolidation”). Despite the cost, many companies pay these amounts because PPC works effectively. Advertisers need to calculate how much it costs to acquire a customer (Cost Per Acquisition or CPA) through PPC, not just the CPC.
  3. Why Some Companies Succeed: Successful companies in PPC advertising are the ones that master the intricacies of keyword selection, bid management, daily analysis, and continual optimization. It’s not just about paying for clicks but making sure each click leads to a profitable acquisition.
  4. Acquisition Cost Calculation: The author emphasizes that knowing your cost per acquisition (CPA) is vital. For example, if you pay $0.40 per click but need 200 clicks to acquire a customer, your CPA is $80. If you pay $5 per click but only need 10 clicks to get a customer, your CPA is $50. Companies need to determine if their CPA is worth the return from a new customer.
  5. Finding Gaps in the Market: The writer also points out that the PPC market is still in its early stages, and there are gaps in the keyword bidding market that businesses can exploit. These gaps allow advertisers to pay lower CPCs for competitive keywords, especially when they target phrases with moderate competition.
  6. Value of a New Customer: Understanding the lifetime value of a customer is critical to justify the costs associated with PPC advertising. For instance, a new customer might be worth $1,000 in some industries and only $10 in others. Businesses need to match their bidding strategy to the potential value of their customers to remain profitable.