This Stub is related to my previous Stub PPC Conversion Tracking for Affiiliates.
You said, that you already do PPC Advertisement via Yahoo Search Marketing (Overture) so you know the basics how that works. I do not need into too much details about that. You basically write up little Text Ads to be shown on Websites or Search Engine Result Pages (SERPs).
You specify the Keywords or Phrases for which you would like your Ad to be displayed. Lets says you sell "Widgets" and wrote a little Ad that is addressing people that are looking for Widgets to buy. Keywords or Phrases like: widgets,blue widgets, green widgets, quality widgets, buy widgets etc. would probably be appropriate keywords which are very likely being used by people on the Search Engines if they are searching for widgets.
Since only a certain number of Ads can be displayed on a relevant Page and probably more companies like to have their Ad to be displayed than "slots" are available, the search engine must make a decision which Ads it shows and at which position or slot and which Ad it does not show. One (the only one with Overture) criteria is to have the Advertisers bid money they are willing to pay per click from a user for position X on the Page. Lets use my example.
You might have to pay $1.00 to have your Ad shown at the Top Position for Keyword "widgets", $0.50 for the top spot for "blue widgets" (because not as many advertisers bid on "blue widgets" as on "widgets"), $0.35 for "green widgets", $0.10 for "quality widgets" and $0.75 for "buy widgets".
As you can see in this example, there is a big difference in the cost to get a visitor to your offer, depending on the keyword you are bidding on. It cost $100 to get 100 visitors that clicked on you Ad displayed for "widgets" and only $10 for 100 visitors for "quality widgets".
Lets keep it simple and assume that you bid on all the keywords and got 100 clicks each in a specific time frame.
100 clicks for widgets = $100
100 clicks for blue widgets = $50
100 clicks for green widgets = $35
100 clicks for quality widgets = $10
100 clicks for buy widgets = $75
Total cost for all 500 clicks (visitors): $270
11 or 2.2% of those customers bought your products which has a $100 profit margin without marketing expenses, = $1,100 from those 500 clicks or 11 customers.
$1,100 - $270 for the Advertising = $830 net profit. Not bad. That's great actually, because you have over 300& ROI (Return on Investment)
if only 2 of the 500 visitors would have bought something, you would have ended up with a $70 loss on the sales. Not good.
This is were we are without detailed conversion tracking. We know our Ads. We know how much we pay per Keyword, also how much visitors we get from it and at the very end how much we generated in profit or loss. What we don't know without the proposed tracking is the break down of what Ad (if you have more than one Ad with different wording) and what Keyword resulted into a sale.
Lets assume that conversion tracking in place and go back to my example where 11 of the 500 visitors were converted to buying customers = sales.
100 clicks for widgets = 1 sale
100 clicks for blue widgets = 5 sales
100 clicks for green widgets = 0 sales
100 clicks for quality widgets = 3 sales
100 clicks for buy widgets = 2 sales
Now it looks very different, doesn't it?
None of the visitors that clicked on your Ad for "green widgets" bought anything for whatever reasons like your selection of green widgets is very limited, but you have tons of different blue widgets. Bidding on "green widgets" does not make sense at all. You might get a sale for every 500 or 1000 or more visitors, but its not worth it. Its obviously targeted to the wrong people so drop it.
"widgets" cost you $100 to make $100 = $0 profit. Does it make sense to keep bidding $1 for the top spot? Not really. reduce the bid maybe and see what happens (traffic and conversion) is one option. Dropping it another.Lets drop it. "blue widgets" and "quality widgets" are doing great. "buy widgets" could do better so lets try a different Ad with better wording better targeting "buy widgets". Lets assume we did a good job and 100 visitors from the new Ad result into 3 sales.
Our Tweaked Campaign looks like this now.
Keyword Cost for 100 clicks Number of Sales
blue widgets $50 5
quality widgets $10 3
Keyword Cost for 100 clicks Number of Sales
buy widgets $75 3
Total Cost for 300 click $135. 11 or 3.6% of those customers bought your product = $1,100 gross profit.
$1,100 - $135 = $965 net profit.
Wow.... $135 more profit and a much higher ROI because you spent less money on Advertising but at the same time converted the lesser traffic much better.
This example was very simplified, but gives you the general Idea.
You want to expand your Advertising of course and get more traffic, but you want traffic that you can convert well and does not cost you too much.
You can not make this an efficient process if you are doing it by more or less guessing, what we do at the moment.
We have several Ads and a lot of Keywords and Phrases with different cost and several other factors like where and when which can be adjusted and effect results. We can't determine very well which of the several million combinations of things work better or worse or not at all.
I can change one thing only and have to wait several weeks or a whole month to see how the overall result changes to single out a single thing. We end up doing some very rough changes only as a result of it Exploring and Experimenting is more like a trip in the unknown that can be very costly.
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