We all witnessed the arrogant dot-com stupidity from 1998-2000. Banner ads went from being the hottest new idea to being almost completely ineffective, and waste of money. (They did work well for awhile. As a matter of fact my friend Ken McCarthy, who did the world’s first Internet Marketing seminar with Marc Andreeson, founder of Netscape, was at the meeting where the banner ad was invented.) Everyone thought that banner ads would fund everything in the world, but they’ve performed very poorly. The direct marketers figured this out a lot quicker than everyone else, by the way.
Well first let’s talk about what DIDN’T work. What didn’t work was when you go to Yahoo and AT&T has a banner ad about long distance that you don’t click on, and AT&T pays something to Yahoo every time it’s seen. What didn’t work was the fact that they were showing you a banner ad about phone service even though you were looking for stuff on the Rolling Stones. If you’re searching for “Rolling Stones” then what are you likely to buy? Phone service? Of course not. But you might buy CD’s or T-shirts or concert tickets.
Now IF you can buy advertising that’s entirely based on people searching for very, very specific things, then you ONLY have to pay for eyeballs that you care about. And… if you only pay when they click through (pay per click, not pay per impression) then you’re ONLY talking to people who are likely to care and you are ONLY paying if they do care. There’s really never been an advertising medium in history that was targeted that way, until now. There never was a way to ONLY advertise to people who are looking for your exact kind of thing.
Pay Per Click Means that people who type in a very specific phrase or word on a search engine see your ad… and you only pay when they click through to your website. If you sell “Orange Ethernet Cables” then you can create an ad that ONLY appears when those three words – or even that exact phrase – is typed in at a search engine. How much do you pay? It’s based on what other advertisers are bidding for those words.
So let’s stick with the “Orange Ethernet Cable” example.
I’m going to use Overture (www.overture.com) who is the #1 pay per click vendor – they sell their listings to most of the other search engines, including Yahoo and MSN. The #2 vendor is Google, whose listings are sold to AOL and Earthlink as well. On Overture right now, “Ethernet” is selling for $0.39 per click. “Ethernet Cable” is selling for $0.25 per click. “Cable” (one word) is selling for $0.79 per click. “Orange Cable” and “Orange Ethernet Cable” have NO other advertisers who are bidding, so you can buy the top position for just pennies.
Ultimately what determines the price is how much a visitor to a website is worth. Getting a visitor does not mean the same thing as making a sale. So if it takes 100 visitors to make one sale, you must factor that in. That means that the guy who’s able to afford the most advertising is going to be the guy whose website converts traffic to paying customers. You can’t buy advertising sensibly if you have no measurements or at least educated guesses as to what a customer is worth.
And pay per click will increasingly be a tough proposition if your website is not designed to ask people to take definite action – whether it’s giving you an order, calling you on the phone, sending you an email or filling out a form to take the next step.
