CPC PPC and Traffic Acquisition Explained

Using Google Resources for Keyword Research and Know Your Numbers

Why you should always be able to calculate the cost of acquiring traffic, the anticipated income, and the market price of keywords for your product niche, or risk leaving money on the table!

Someone asked me the other day why so much time is spent concentrating on PPC, CPC and the cost of traffic. It's easy - if you don't know your numbers in business, whatever the business, you're doomed to failure from the start. Whether you're talking about keyword research, AdSense/AdWords or other pay per click advertising, or just looking to buy some bulk traffic or ezine adverts, the only way to know that it will be profitable is to know the numbers. Chiefly, it is in the infopreneur/affiliate marketer's interest to know:

• the cost of traffic acquisition
• the conversion rate
• the income per action

In other words, it is necessary to have a good handle on how much the campaign will cost, what proportion of the resulting leads will become customers, and how much each anticipated action is going to make. It is only when in possession of these three indicators that the calculation as to whether a campaign is worth the time and money can be performed. Before making any sense of these numbers, it is necessary to understand a few terms.

PPC

This acronym refers to a specific model used to acquire traffic, Pay Per Click. It is the model used by Google AdWords, amongst others, whereby the advertiser pays a fee for each visitor directed to their site via an advert that they supply. From the point of view of an online entrepreneur, the model is very powerful in allowing adverts to be tested for a relatively small fee.

What is more important is the amount of control that the advertiser has over the budget. For example, the PPC provider (be it Google or another) will let the advertiser know up front how much each click will cost (see CPC, below). Added to that, the advertiser can also pick a budget for the campaign that fits their needs, and know how many guaranteed site visits that will bring.

It is a very, very, powerful, and flexible, traffic acquisition model indeed.

CPC

CPC is the Cost Per Click. It is the amount that an advertiser has to pay, per click, to receive a single visitor. Depending on the traffic source (paid inclusion, context sensitive advert, email advert, site advert, etc.) this can vary greatly. A reasonable indicator (for reasons explained below) of CPC is the Google AdWords cost.

This can range from $0.05 (five cents) right up to $10 and more. For a single click. This is a very important metric, as it allows the site owner to calculate the expected profit of a campaign, based on the cost of traffic acquisition.

The profit is equal to the selling price, multiplied by the conversion rate, multiplied by the number of visitors, minus the CPC multiplied by the number of visitors. So, if a site owner sells a $37 eBook, from a sales page converting at 10% (0.1), then the profit from a 100 visitor campaign, with a $0.05 CPC would be:

profit = (($37 x 0.1) x 100) - (0.05 x 100)
profit = $370 - $5
profit = $365

Simply turning this equation around allows the site owner to calculate the highest CPC that they will tolerate, for their product price and conversion rate.

Google AdSense and Google AdWords

A final word, since this is a keyword research blog, on AdWords and AdSense.

Google AdWords works by allowing site owners to bid on keywords. The more bidders there are, the higher the CPC. Then, the Google AdSense system is used to display adverts on pages which seem to match the keywords in content and context. The owner of the site running the advert then gets paid a (small) portion of the CPC.

So, when researching keywords, it often pays to look at the Google AdWords Keyword Tool and check the CPC. It's a great indicator of keyword value, be it for an AdSense affiliate, or an AdWords advertiser.

Specifically, the AdSense and Keyword Research Guide gives direct instructions from both sides of the marketing fence.

Until next time,
Guy