What is Pay Per Click Marketing?
Pay Per Click advertising originally was created as a way to generate additional revenues for the search engines. This income was in addition to the banner advertisements sold to major corporate clients. The first company to successfully create a program which is similar to the PPC engines that we use today was Overture.com They contracted with various search engines to create an online auction style bidding system where anyone can bid to receive placement on the results pages created by the search engines when user searches on a particular term.
With the initial success of Overture, Google created their own program called Google Adwords, which was an adaptation of the Overture Program, but with an improved business model. Over time, the success of PPC became so successful, that the traditional business model of paid advertising on the internet was changed forever.
Today, any person can advertise on the internet at little or no cost. In regard to the real estate business, this has allowed independent agents to compete successfully with the corporate real estate companies like Coldwell Banker, Remax and Century 21.
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How Does It Work?
As I mentioned, the basic foundation of Pay Per Click is based on the auction style based bidding system. Anybody who bids the most money at any given time can be shown as the first result provided on the Search Results Pages provided by the search engines.
What makes this system work is that, you as the advertiser only pay the search engines if a user clicks on your advertisement, which then directs them to your page. If they don’t, you don’t pay. In industry terms, this means that you don’t pay for the “impressions” received, but only for the “clicks” received on your advertisement.
For the search engines, that means that every search performed on their search engine is a revenue opportunity and an advertising opportunity.
For the real estate industry this creates hundreds of thousands of opportunities to generate business via the search engines. Also since residential real estate is a local business, REALTORS® have the opportunity to focus their pay per click marketing campaign and compete successfully with bigger companies.
Who Offers Pay Per Click
Pay Per Click advertising is offered by almost every search engine. For the small to medium sized business however, The only 3 search engines a company should use are Google, MSN and Yahoo. These 3 search engines provide over 90% of all searches done in the US on the internet on a daily basis. There are hundreds of other search engines providing the other 10% of the search results but the time it takes to implement these programs is not worth the return on investment. This will change over time as it becomes too expensive to bid on the top search engines, but as of today, Any one serious about generating business via the internet can afford to advertise on the top 3 search engines.
If you are just starting out, I always recommend that you start by opening a Yahoo PPC account because it is easy to implement, manage and understand.
Second tier search engines as I mentioned above also provide PPC programs but usually on a fixed cost per click basis so that all advertisers regardless of how much they can spend or are willing to spend are on the same level. If you are spending over $10,000 per month on your PPC campaign, it then makes sense to ad these second tier PPC campaigns into your overall marketing mix.
What are the various PPC Strategies?
When considering a PPC strategy, it is important that you consider your strategy in conjunction with all your online marketing activities.
For example, if you are also involved in an ongoing SEO campaign, you balance your costs budgeted for Pay Per Click with your budget for SEO. In the beginning, you should allocate 75% on PPC marketing and 25% on SEO marketing. Then over a period of the next 12-18 months, you should see your overall budget decrease while generating the same amount of business and the allocation of the over all budget should become 50% for PPC and 50% to SEO.
Some clients have seen that after the 12-18 months, they no longer need to use a PPC marketing campaign because of the success of their SEO campaign; however we always recommend utilizing both forms of marketing because you never want to be 100% dependant on one form of advertising. There are additional one time online marketing expenses you should consider when creating a PPC strategy, but these tend to be one time annual charges which may or may not be necessary on a year in year out basis.
How to implement a PPC program:
In implementing a PPC campaign, you need to decide on the following:
- On which terms are you going to bid? To accomplish this, create an excel spreadsheet.
- In the first column, list all the geographic areas where you do business. For example, San Diego, La Jolla, Coronado, etc.
- In the second column, list any adjectives consumers may potentially use in a search. For example, New, Luxury, Waterfront, etc.
- In the third column, list all the industry key words. For example, real estate, homes, property, etc.
- Once you have completed your list, you can cross reference these terms to come up with your list. This can easily be hundreds to thousands of terms depending on the size of your potential market.
- You must next create an ad to use. To decide this, first look at the ads that are currently being displayed on some of the search terms you will be bidding on. You will see that large companies tend to use their name which may make a consumer click on their link. As a small business owner however, you do not have this luxury, therefore you need to offer the user a compelling reason to click on your ad. This can be created by either offering the user a tool to help their process i.e.: to search homes available for sale in their market or to differentiate yourself by personalizing the ad. i.e.: REALTOR® name is the top selling REALTOR in the given market.
- Lastly, you must decide how much you can afford to bid on a per click basis to generate leads or contacts.
- A good yard stick here is to look at it on a per transaction basis. For example, if you generate an average of $3,000 per transaction after your agent and company splits, then you can afford to pay $.30 per click. This is derived using direct marketing response rates of ½% to 1% of people who click on your ad. Say in a given month, 2000 people visit your website and all came from PPC advertising. For those 2000 unique visitors, you should expect 20 leads which is 1% of 2000 and one transaction which is a 5% closing ratio.
- Over time these numbers will improve and as a result you will be able to bid more per term, but initially, these ratios are a good starting point for a new PPC advertiser.
Once you have these above decisions made, it is then very easy to set up and manage a PPC campaign.
What Pitfalls to Avoid in Launching a PPC Campaign:
When launching your first PPC campaign, make sure to avoid the following:
- Don’t let the search engines set-up your campaign for you. They will put you in terms which offer the most traffic. This is not effective because you end up paying more per click and unless you have a budget established, you can easily spend thousands of dollars in a few short days or weeks.
- Make sure to turn off the broad match settings on your account. You only want your terms to be displayed for the terms on which you are bidding. For example, if a broad match term is Bugle California Ranch Real Estate for Sale, your ad might be displayed for the term “Bugle For Sale” which has nothing to do with real estate.
- Remember that if have a monthly budget is on, which we always recommend, then make sure your average cost per click is at least 50% of your daily bid. For example, if you are budgeting $1.00 per day, then your average cost per click should not be above $.50. The reason for this is that once you reach your daily budget from clicks, your ads are removed till the following day.
- Don’t start by bidding to be number #1 for every term. Initially only bid the maximum you decided in the second step. They review your campaign each week, revising bids till they meet your desired average CPC (cost per click) over time.
Good Luck with your PPC campaign. If you have any questions in regard to the above information please feel free to get advice in our free real estate forum or contact us today.
