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How High You Can Bid on PPC Keywords

     If you want to have a good position on search engines, you need to know many things, such as meta tags, keyword density, link popularity, and so on. The learning curve and time involved to secure and maintain a good position can give you quite a headache. Compared to them, Pay Per Click (PPC) search engine submission is very straightforward. You just outbid others for keywords or phrases.

How High Should I Bid?

     Before bidding on a PPC, you need to know the limits of your bidding budget. You don't want to find out you lost money at the end of the month because you bid too high, do you? Fortunately, you don't have to be a mathematician or a CPA to find out how much you can afford to pay for a visitor. Let's do an example together.

During the month of July, you had 10,238 unique visitors and sold 100 products at $49.95 each.

During the same month, you made

$49.95 each x 100 sales = $4995.00 (gross profit)

Your total expenses for July (hosting fee, cost of the products, banking fees, etc.) is, let's say, $1205.00. You keep

$4995.00 - $1205.00 = $3790.00 (net profit)

For each sale, you keep

$3790.00 / 100 sales = $37.90 (net profit each sale)

Your conversion rate (visitors to sales ratio) is

100 sales / 10238 visitors

= 0.0098 (0.0098 x 100% = 0.98%)

You have actually made

$37.90 net profit for each sale x 0.0098 conversion rate

= $0.37 per visitor to your web site.

This means if you bid 37 cents on a PPC, you break even. You don't pocket even one red penny. You have worked for nothing.


     Here is an important point when you do the math. "Unique visitors" is NOT the same as "hits" or "visits". "Unique visitors" is the number of different people (different IP addresses) who visit your site. "Hits" is the total number of requests to view files on your site. "Visits" is the total amount of incoming traffic. For example, if I visited your site at 10, 1, and 5 o'clock on the same day and viewed 8 different pages including 10 images in total, the stats will show 1 "unique visitor" (myself), 18 "hits" (8 pages and 10 images), and 3 "visits" (at 10, 1, and 5 o'clock). There may be a slight difference between stats software, but be sure to count "unique visitors" when figuring your per visitor profit and determining how much you can afford to bid.

Need More Money to Bid?

     Now that you know how much money you can spend, you go to one of the PPC search engines. Then, you find out that even the entire 37 cents won't give you good placement. That's entirely possible.

     When PPC search engines were new to the Internet, 10 cents gave you a top placement. Today, you can easily find bids of more than $1.00. Do you have to outbid them, even though you know you will lose money? Absolutely not. The purpose of any business is to make a profit, not to be ranked at the top of search engine listings. Don't get involved in heated auctions. unless you can afford them.

© February, 2002