Two Pay-Per-Click (PPC) Strategies for Overture.com

Wouldn't it be nice to get an interested prospect looking at one of your products for only 5 cents -- one nickel? Sure! If you have a conversion rate (percentage of purchasers to visitors) of 5%, it would take 20 people to make one sale, and 20 visitors at a nickel apiece would cost you only $1. A conversion rate of 1% would cost you $5 per sale. Cool. But where can you get a targeted visitor for only 5¢? I'll explain, but first I need to tell you how Overture and similar services work.

Bidding for Position on Overture

Overture.com (formerly GoTo.com) is a Pay Per Click (PPC) search engine in which your listing position in the rankings is determined by how much you are willing to pay for each click-through. Marketers bid against each other for the top spots. As I write this, here's the current bid prices of the top spot in the high-ticket life insurance sector.

A 5% conversion rate might be possible, but conversion rates are more likely to be below 2%. To pay these prices, you need a pretty high-ticket item.

Top Three Win the Traffic

Of course, you can pay less than the top price and appear farther down the page. I've graphed the bid price for the top 20 bid positions for the keyphrase "term life."

http://www.wilsonweb.com/wmt7/images/bid_pattern.gif

Notice how the top five positions cluster between bid prices of $3.14 and $3.08. After that the bid price drops precipitously.

Of course, the top positions on any search engine are best. And if you don't get in the top 10 to 20, very few people will find you. But the reason the top spots on Overture are so hotly contested is that the top three spots ("premium listings") for every search term also appear as the top spots on several major search engines and directories, including Yahoo!, Infospace, MSN, AltaVista, and Lycos. That's because Overture has found what most search engines have not found -- a consistent source of revenue that small business people can afford. Yahoo! and the others provide a huge reach in exchange for some of the PPC revenue, Overture makes a lot more money than they would if they were limited to just traffic on their own site, small businesspeople get a large reach for a predictable amount of advertising expenditure, and consumers see the most serious players at the top of the list. Everybody wins.

PPC traffic starts appearing within a week and continues as long as you deposit money with Overture faster than it's used up by click-throughs. And PPC traffic from the top three positions on Overture bring in a large amount of targeted traffic.

If you look again at the graph for the keyphrase "term life" you see that five companies are competing for the top three high-traffic spots, driving the price up. http://www.wilsonweb.com/wmt7/images/bid_pattern.gif Position 6 dropped out of the running when the bidding was at $2.20. If this company's marketer was wise, he'd drop his bid by 60¢ to the level below, but he hasn't checked lately and consequently is paying 60¢ per click more than he needs to.

The minimum bid for any keyword or keyphrase on Overture is 5¢, or one nickel, but for the keyword "term life," a nickel puts you way down in the rankings to #36. You'll see some bids on Overture for 1¢ that were grandfathered in when the minimum price was raised, but you can't get any new 1¢ bids.

Incidentally, Overture's aggressive anti-fraud policy discourages your competitors from killing you with bogus click-through costs by clicking repeatedly on your link.

Now that you understand the basic rules of the game, here are two strategies that you'll want to consider: (1) a prime keyword strategy and (2) a nickel strategy.

Prime Keyword Strategy

The most intuitive -- and most expensive -- strategy is to bid for the keywords that are most important for your product or service. Essentially, you bid the market rate for your keywords and keyphrases. You may not be able to afford the top three positions that get huge amounts of traffic, but perhaps you can afford position #10.

Calculate Your Conversion Rate

But how do you know what you can afford? The only way to determine this is to test carefully in order to determine your cost per sale which is calculated by the formula:

(100 / Conversion rate) times PPC cost = Advertising cost per sale

For a PPC cost of $3.14, with a conversion rate of 1%, the ad cost per sale is $314.

100 / 1.0 * $3.14 = $314

Click-through rates may tell you the popularity of a search term, but they don't tell you the conversion rate, since click-throughs don't correlate directly with sales. Each different keyword or keyphrase is likely to have a different conversion rate -- sometimes a substantially different rate -- even if it directs to the same landing page.

To relate specific ads (or search terms) to resulting sales, you need affiliate management software that uses cookies to track a visitor's clicks-through to your site from a specific keyword or keyphrase. When a purchase is made, the cookie is read and attributes that sale to the particular search term (or ad or affiliate) that was responsible for getting the buyer to your website.

The programs I recommend to small businesses for ad tracking purposes are (along with my affiliate URL, thank you very much):

• Ultimate Affiliate Package, $200 www.groundbreak.com/cgi-bin/affiliate/clickthru.cgi?id=rfw
• Little Salesman Affiliate System, $197. Included in the Complete CGI Toolbox. www.cgitoolbox.com/c.cgi/rfwilson_l
• My Affiliate Program, $795 set-up plus $50/mo for the Pro version, less for others. www.myaffiliateprogram.com/index.asp?3051

For more on selection, see my "Report on Affiliate Management Software," listing 18 different programs with user feedback on most. www.wilsonweb.com/ebooks/affilisoft.htm

To summarize, with a prime keyword strategy you need to calculate the conversion rate (and thus the cost per sale) for each keyword or keyphrase that you use. Once you find that a keyword or keyphrase is cost effective, then bid it up to the point where it'll generate significant traffic -- hopefully into Overture's top three.

Nickel Strategy

Note: Recent changes to Overture's policies make the nickel strategy described below more difficult to implement inexpensively. See the updates.

A completely different strategy submits thousands of keywords and keyphrases at the minimum bid of just 5¢. The combined click-throughs from these thousands of search terms brings you significant traffic at a very low cost -- a nickel a click. Here's how it works.

1. Find thousands of relevant keywords and keyphrases

If you only find a couple dozen keywords and keyphrases, this strategy won't produce much traffic. You need to find thousands. You can do this in two ways:

• Mine your site's logfiles to find all the keywords and phrases that brought people to your site in the past year. (Yahoo! Store's logfiles allow you to find search terms that actually resulted in purchases, which improves your chances.) Offer to pay a webmaster or techie by the hour to do this for you if you don't know how. Essentially, it involves using a logfile analysis program such as WebTrends Log Analyzer (www.webtrends.com) to slice and dice each and every logfile entry that came from search engines, and then makes a list of each separate search term used.
• Use Wordtracker (http://our.affiliatetracking.net/wordtracker/af.cgi?2918) to find thousands of appropriate keywords and keyphrases. If you're going to work a nickel strategy, then Wordtracker is an essential tool. You can purchase a subscription by the day ($6.15), week ($20.51), month ($41.02), quarter ($101.09), or year ($205.11). Try their free demo first to see what Wordtracker will do for you.

Ideally, you'll use both these tools to find the thousands of keywords and keyphrases you need to make this strategy work.

2. Develop a generic Overture.com ad

You're seeking to use these thousands of search terms as bait to identify web surfers who have an interest in your particular product or service. If they're not good prospects, you don't want them to click on your ad and cost you 5¢. This requires you to employ your text to target good prospects and repel bad ones. Before you settle on specific ad copy, test variations of the ad with prime keywords so you can see which ad produces the lowest cost per sale -- not what gets the most click-throughs.

3. Bulk-submit your tested ad with your keywords for a bid of 5¢

Overture allows you to bulk-submit thousands of keywords and phrases at a time. Their human editors go through your search terms to see if they're closely-enough related to your ad copy. This will trim down your list by perhaps 25%. Some of your search terms will have top bids far above the 5¢ minimum bid and very few people will bother to scroll down to #36 to click on your 5¢ ad. Don't worry if your ad doesn't cost you much and doesn't perform well. You'll make it up elsewhere.

Note. Recently Overture made it more difficult to bulk submit, stating: "We will no longer be accepting large spreadsheet submissions from advertisers spending less than $1,000 a month." Bummer! See PPC updates.

4. Reap the nickel traffic from thousands of obscure keywords and phrases

Once your thousands of obscure search terms have been accepted by Overture, you should experience an immediate influx of traffic. The key to this strategy is large numbers of search terms. The more you have, the more low-cost traffic you'll see.

Combining the Nickel Strategy with Other Approaches

The nickel strategy is great. But that doesn't mean you don't need other approaches. A nickel strategy will bring in a considerable amount of traffic, but perhaps not enough to meet your sales goals. You may need to supplement the nickel strategy with a carefully-thought-out prime keyword strategy, as well. Your nickel strategy will lower the average cost per sale over all, while your prime keyword strategy will increase the number of overall sales.

Though some will disagree, I don't see much value in bulk-submitting to Overture's competitors: (www.payperclicksearchengines.com) in hopes of developing an effective penny strategy. Since most of Overture's competitors don't have deals with the major search engines, they're likely to generate a pitiful amount of traffic for the work expended.

Don't discount the value of search engine positioning for the most "expensive" and competitive search terms. If you use WebPosition Gold software (www.webposition.com/d2.pl?r=AQH-55E7) diligently, you can achieve high rankings in the regular search engines. I've done it. But maintaining your position requires careful long-term monitoring. Since effective search engine positioning is so time-intensive, I recommend that businesses -- even small businesses -- outsource this task to firms that specialize in this arcane art and science.

Search engine positioning will bring you lots of traffic, but it may not be too targeted (since you can't control the text of the "ad") and it can take months to build. PPC strategies, on the other hand, can bring lots of traffic almost immediately, and, if you've done your homework, for a reasonable cost per click. Use both approaches.

Once you've done your testing, pay-per-click strategies with Overture allow small businesses to generate a predictable number of sales for a predictable advertising investment. What are you waiting for?

Note: My paid Web Commerce Today subscribers got a real treat in November 2001 when I interviewed Rob Snell who has refined the nickel strategy to an extremely powerful money-maker for himself and his webstore clients. One of my paid subscribers, well-known Internet consultant Mark Welch, wrote me, "I consider this to be one of the most useful articles I've seen this year." http://www.wilsonweb.com/wct5/trotline_marketing.cfm