To ppc or not to ppc? What are the advantages and pitfalls in this type of online advertising?
Just how big is the online market?
You will be aware of the internet’s power in advertising, but just to outline the market we are talking about let me relay some hard figures. In terms of human traffic that use search engines, Reuters estimates that in December 2008, over 5.6 billion people were using Google as their search tool. In similarly mind-blowing numbers, in that same month, around 2.2 billion people were using Yahoo! These two search engines are the main contenders for dominance in the internet market, with next in line being Microsoft sites pulling in around 940million users. It is clear to see that with so many eyes logged onto screens, advertising in such a space is now a highly lucrative business. Leading the field, Google pulled in 72% of the online advertising revenue, $3.1bn in the first quarter of 2008.
How the pay per click system of online advertising works
According to the Nielsen Company which describes itself as “the world's leading provider of marketing information, audience measurement, and business media products and services”, the “active reach” of Google in the week ending July 29, 2008 was 86% in the UK. The term active reach indicates the number of people that actively choose one search engine over another. In defining the price advertisers must pay to use the pay per click (PPC) system, search engines use their percentage of active reach. If an advertiser enters into a PPC contract with a search engine, the engine displays the advert on the right hand side of the search results page, and a fee is paid each time the advert is clicked. Using a popular engine like Google will most likely ensure visibility to part of the 5.6bn people using that website, but it is an expensive way to go about advertising. Each click can cost an advertiser up to £2 or even more. Together with the active reach of a search engine, PPC customers are also charged according to the “time on site” statistics. This is simply how long someone using a search engine will stare at the screen where the adverts are placed. The longer the internet user stares, the more the advertiser pays.
Search engine tactics to increase the price of PPC
So to increase both active reach and time on site statistics, Google launched Google universal. This modification of the original website includes links to videos, news, maps, images, recipes and many other subcategories of a basic search. These subcategories, called “vertical searches”, are all Google properties, options such as YouTube, GoogleMaps and GoogleEarth, and if explored, the adverts remain onscreen. With these modifications, it means that PPC becomes more expensive to advertisers.
Increasing the services of their search engine means people are more likely to choose Google, and then spend longer on the results page, meaning advertisers will be charged more.
However, this option can still be viable. It is clear that PPC is a form of advertising which will be seen by the greatest number of potential customers, and because of this, it is hugely valuable to a business. But it must be used as a tool in the arsenal of an online advertising agency. When PPC is combined with the more complex marketing strategy of search engine optimisation (SEO), it is a powerful asset. Google make their millions through PPC, but if advertisers became less reliant on PPC and trust their business to the innovative services of SEO companies, they could stop throwing their money into the all consuming flames of Google and start seeing some serious return.
By Ruth Asquith.
