The secrets of getting results from pay-per-click ads - Part 1

Here is a subject that's become increasingly important to e-commerce sites: pay-per-click advertising.

All major search engines now permit sites to appear near the top of particular search results by paying a fee. The largest pay-per-click service, Overture.com (formerly GoTo), feeds the ads of its two top-paying customers into the results of AltaVista, AOL, Ask, DirectHit, Excite, Go, HotBot, iWon, Lycos, MSN, Netscape, and Yahoo. The third top-paying client also appears in the third position in all those engines except Netscape. The fourth and fifth ads appear only in six engines, and so forth.

I've often wondered how important it is to pay for the top spot. Because the No. 1 position often costs much more than No. 2 and No. 3, wouldn't the 2nd and 3rd positions be more cost-effective?

One answer, based on the actual historical experiences of advertisers, comes from Dave Carlson, the CEO of GoToast.com. GoToast provides an automated bid-management service that adjusts a Web site's ad spending to keep its ads in position No. 1, 2, or 3 in Overture and 18 other pay-per-click vehicles.

In GoToast's study of ads in positions 1, 2, and 3, Carlson found the following number of visitors, conversions, and return on advertising dollars:

Position Visitors Conversions Return on Ad $
1 100 1.24% $2.16
2 64 0.51% $1.36
3 73 0.63% $2.59

In the above chart, for every 100 visitors who clicked ads in position 1,64 clicked ads in position 2, and 73 clicked ads in position 3. Interestingly, advertisers who paid to be in position 3 actually received a greater number of visitors and a higher percentage of conversions than ads in position 2.

More important, ads in position 3 provided a much higher ROI than ads in position 1 ($2.59 for every $1 spent versus $2.16).

"If everything's equal," Carlson says, "the third position is the most successful." Carlson speculates that visitors who click an ad found in position 3 are more ready to buy something, perhaps after having examined the sites advertised in positions 1 and 2. In addition, it costs fewer cents-per-click to keep an ad in position 3 than in position 1, making the return even higher.

My guess is that a well-written ad in position 3 will often out-pull a mediocre ad in position 1. My own surveys of click-throughs in the "Top 10 News Picks" section of E-Business Secrets show that my readers are just as likely to click News Pick 9 as News Pick 3 or 1. People don't merely click the first thing they see.

(News Pick 10, on the other hand, tends to get about 30 percent more click-throughs than the others, probably because I usually select as News Pick 10 something humorous or offbeat.)I'll continue this discussion of pay-per-click advertising and how your site can get the best results for the fewest advertising dollars in Part 2.

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