Remember... Traffic Doesn't Matter!
(Continued from Part 3) For example, let's say that you're willing to pay $1 per click for the keyword "laptop computers". A lot of people are searching for this term so you receive 100 clicks costing you $100. But because it's a general search term, you only receive 1 sale to make $100 profit. In this case, you broke even.
A SEM expert would conduct further research and determine that it only costs $.50 to bid on "HP 9100 laptop" because it only receives 10 clicks per day costing $5. However, because this term is much more targeted, you'd have a much higher conversion rate. And a 7% conversion rate would mean that for every $5 you spent in advertising you'd make $70 profit which is a 1400% ROI.
Always Try to Get Better
So, a good search engine marketing expert will continually test and tweak the best converting keywords and keyword groups and increase the bids on those to generate greater profit. Furthermore, they'll reduce or even cancel bids on poor performing keywords that either break even or lose money. And they'll even split-test different ads throughout search engine marketing to see which perform better.
Along that line, many people believe that the highest bid always receives the highest position in the sponsored listings. This isn't true. You see, the search engines want to make the most amount of money possible. So let's look at a brief example. Let's say that the search engine has two advertisers bidding on the same keyword. One advertiser is willing to spend $1 per click on their search engine marketing and receives 100 clicks and the second advertiser is only willing to spend $.50 per click and receives 1000 clicks.
Which Advertiser Will Make More Money for the Search Engines?
Well, the first advertiser will only generate $100 profit ($1 X 100) and the second will generate $500 profit ($.50 X 1000). So, they make more money with the advertiser that's paying less money per click and they therefore give him the top spot.
Now you might be asking, "Well, how does the guy paying less per click get the top spot?" Basically, they write better ads and they give the SE user what they're looking for. You see, Google and the other search engines use what they call a "Quality Score" which is a score, on a scale of 1-10, that ranks the effectiveness of each ad and the page that the SE user lands at. Therefore, any search engine marketing expert worth his salt will always make sure that each ad and landing page gets a score of 10 and then split-test ads for their effectiveness.
The effectiveness of a particular search engine marketing plan is finally evaluated by using Web Analytics. Web analytics is the process of collecting vital information about the visitors arriving at your site like where they came from (i.e. Google, another search engine or another website) and what they do after they arrive at your site. For example, say you receive 100 visitors from a website and only .1% do what it is you want them to do like place an order. This would be very poor and thus web analytics would tell us the source of traffic isn't very good.
On the other hand, if 10% of people placed an order then web analytics would determine that that source is very good. And because effectiveness can have an affect on the PPC that you pay, web analytics is a very powerful tool.