When losing money on PPC is a good strategy

by Tim Hill (aka Doodled)

September 1st 2013
Many lose money constantly on PPC but find they still need it for a profitable bottom line.
Many lose money constantly on PPC but find they still need it for a profitable bottom line.

From time to time I find myself saying to a client “spend less on my SEO services and more on Pay Per Click. My fees to manage your PPC are less and it will improve your SEO”.

That's a bit of a strange one for many to get their heads around but I'll be laying out how it works in this post.

First, it is true to say if there is one extra easy way to burn money on the internet it has to be starting your own Pay Per Click (PPC) campaign, particularly Google Adwords. Want to lighten your wallet by $300 today, not a problem, PPC can do that for you.

The web is brimming with people ready to tell you stories about how much they have lost and advise against the evil pay for a click or impression services – be it Google Adwords or any other. But who is actually at fault?

What I'll show you is :

  • when it's OK to lose money.
  • how to spot if you are investing cash or burning it.
  • what actions to take so your PPC Campaigns start making a profit.

I won't be talking about the wording of your ads or their geographical targeting, etc. If you are not familiar with these concepts then do a little background reading first on how to test keywords you target, advertisement effectiveness, etc. as errors in the set up can cost you dearly.

A good start (and I am of course biased to say this) is my book Making the Most of Google Adwords available as Kindle on Amazon and pdf here: http://howtoseo.link2light.com/making-the-most-of-google-adwords.php

PPC isn't just Google Adwords

One of the first mistakes many webmasters make is in not understanding where to start with PPC. And by “where” I mean which service. Yes, there is Google Adwords which displays your advertisements beside organic search results and on websites that have Google Adsense.

But that is less than half the story. Ecommerce sites should be considering Google Shopping, the ebay ecommerce network, Amazon (product listings or product ads), ebay itself and so on.

Those with content need to think about services such as Outbrain where articles are advertised on other content websites (such as those offering news, etc.).

When I talk about PPC keep all these alternatives in mind because the analysis I'm going to discuss is valid in testing the effectiveness of any channel you do choose.

Investing in your PPC

Right, first off it's worth mentioning that many PPC campaigns loose money at the start and many can loose money all the time while still actually making the website owner a profit.

The graph below is a graphical description of an example website that starts off with a loss making PPC campaign, continues to have a loss making campaign but actually starts turning a profit because:

  • the early clients/visitors from the PPC Campaign become repeat customers/visitors.
  • those who come via PPC refer the site/product/service to greater and greater numbers of other users.
  • your rankings in the organic search rise gaining you more traffic and customers from SEO.
How a loss making PPC Campaign generates a profit

Note: you can make a graph like this for your own site using data from Google Analytics if you have set up your goals or eCommerce settings correctly.

This graph is a familiar story for many websites. Starting at point zero there is little or no income from current visitors. The webmaster starts a PPC campaign but it costs more than the profit it generates.

And that is where most webmasters bail out. Understandably really.

But the goal of PPC should not always be seen in the short term – “I spent $10 today but made a profit of $4 so PPC does not work”. Some of those customers who found your website via the campaign will become repeat customers or will refer others to you.

Their actions when visiting your website will have sent clear messages to Google about where you should rank organically helping your SEO and therefore your natural rankings.

Remember, in the graph above, the PPC campaign always looses money, but the effect of the PPC campaign means the website as a whole generates a profit.

Learning from Supermarkets

When it comes to making a PPC campaign work my advice if two steps:

  • get your website in order first.
  • start your PPC second and monitor it carefully.

Supermarkets are experts on this concept in the off line world. They advertise on TV, radio and bill boards to get you in through the door. Once they have then they do everything they can to try and turn you into a repeat customer – someone who will come without needing to be persuaded and therefore at a cost of zero.

They'll be lassoing customers with loyalty cards, advertising next week's promotion, running competitions (often in order to collect email addresses) and so on.

In other words they got their shop in order before they started advertising making sure all the “trappings” to maximise sales and get the customer through the checkout were there while at the same time finding ways to connect with the client and bring them back again at the minimum cost.

Some will become repeat customers and a select few will also recommend the supermarket - “Where did you buy that?” - “Oh I got it at X” or “Where do you shop?” - “At X, it's brilliant”.

When does this type of marketing work?

Well it would be easy to say it works well with only consumables, the customer buys, uses and comes back for more. Your PPC campaign builds this loyal pool of buyers up and up.

But it can work equally well with a static product such as a book or online service. In this case the art is going to be in making some of your PPC visitors are so impressed they refer others to you. So that, for example, for every one customer from PPC, they recommend your site/product/service to 20 of which two also become customers.

What happens if it doesn't work?

What happens if your website has a progress graph more like this:

How a loss making PPC Campaign generates a profit

It seems to work a bit and then flattens out. Or even worse, you don't seem to be building up any regular or referral clientèle worth talking about and your organic rankings are unchanged.

Well the issue probably isn't your PPC Campaign itself – you need to have a good hard look at why your customers aren't coming back or why the aren't referring you. Do they back out of the site fast (that's your bounce rate)? Which pages lose the most number of visitors? Do visitors get as far as putting things in the cart if you are an ecommerce store? and so on.

All this data is freely available from Google Analytics so take the time to study it. Look for patterns that give you holes you can plug. Are people leaving because there is no clear “call to action” or because they don't have confidence in your payment system or because your site design is off putting and confusing?

Building up your client income

If you sell a consumable item and your clients aren't coming back the first step is to identify why not. It could simply be that they don't remember you? Regular newsletters can help so long as you persuade a fair number of customers to sign up when they purchase.

Simple concepts such as sending the customer a request to provide a review of your product/service/website 2-4 weeks after their purchase or visit helps remind them about you and reinforce your brand name in their memory for the next time.

Review requests can also provide clues as to why some customers might not be coming back although it can take time as, generally speaking, you will get 3 reviews per 100 requests and you'll need more than 50 reviews to make any sensible analysis of the data and draw conclusions.

What do we mean by referrals?

We are all referring people to things every day on the web.

For both consumable and non-consumable items making it easy for visitors to 'share' your content (Facebook/Twitter/etc.) is making it easy for them to refer.

Useful tools are great in persuading the visitor to bookmark your site or tell others about it. As it happens back in the 1990s one real estate agent I knew had a mortgage calculator on their site which was a rarity at the time. I bookmarked the website for that reason alone although within 12 months I ended up buying a property through them.

The mortgage tool kept me coming back over and over again despite their very low stock levels – a reason for which I would have avoided the site (and the business) in other circumstances.

In forums people discuss and refer every day of the week. Your product(s), service(s) or content need to be top notch. If they are others will do the selling for you.

All these referrals (and remember we haven't talked about offline referrals in the real world) are actually links. In other words your ultimate aim is to get your visitors to do your link building for you.

The SEO and PPC connection

As I've just mentioned positive user reactions means users create links to your website in a variety of ways which is all positive for your SEO.

The last part in this jigsaw is the effect PPC campaigns can have on your natural rankings, especially if you use PPC to advertise somewhere on the Google network (Adwords, Google Shopping, YouTube, etc).

It's fairly straightforward. If someone searches “keyword X” and then clicks on your advertisement and then acts positively (they bounce less than you competition, stay longer than with your competition, buy more often than when they visit your competition, etc.) then your organic rankings for “keyword X” are going to rise.

In Summary

PPC can bring the visitors in but campaigns don't always make a profit in their own right. Some campaigns lose money day in day out. Persuading visitors to come back or refer is the second step and that is much more about marketing and web design.

So run your PPC Campaign over an appropriate time scale (usually 8 weeks or so) without loosing your nerve, analyse the outcome and then edit or add to your PPC Campaigns as appropriate.