Popularity of PPC search engine advertising

In 2005, $ 5.7 billion dollars was spent on search engine advertising. Out of this $ 4.71 billion dollars was pocketed by PPC advertising - that is a massive 81%!

The figures prove the popularity of the PPC advertising model. Even now, as more and more advertisers hit the Internet marketplace, they are opting for PPC search engine advertising because they can advertise at a low cost and the hits start coming fast. So far the scenario has been good. For information sake, the average keyword cost on Google and Yahoo - the two big leaders in the PPC market - is 45 cents/keyword.

But this influx of big playing advertisers is bound to push up keyword rates higher to a point when many small businesses will start feeling the pinch, and once keyword rates skyrocket, the whole PPC business is going to get tougher. Advertisers need smart, well-written ads, a wholesome marketing budget to ensure the campaign does not fizzle out, and a whole lot of monitoring to ensure that they do not become victims of click fraud.

Another worrying aspect is the conversion ratio. So far, there is nothing to prove that the visitor-to-buyer conversion ratio is above average. In fact, there is nothing to prove that it is even average. No business wants to reveal how many visitors it received from a search engine and how many got converted - these are business secrets.

PPC search engine advertising is mainly popular because of the following factors:

• PPC programs are fast to implement.
• As the investment is minimal and can be paused, the risk is low. Also, an advertiser can work with very low budgets. An advertiser can control his costs too and manipulate ad positions.
• There are no long-term contracts to sign, so there are no shackles in a PPC campaign.
• Most advertisers get instantaneous results.
• The Results MIS is so instant that it can be measured on a daily basis, if required.
• A small, time-limited PPC campaign can be great to test if your product is right for Internet marketing.

Factors that go against PPC search engine advertising

The biggest fear that stalks PPC advertiser is click fraud. Click fraud is a massive issue in PPC advertising. Statistics reveal that 38% of all clicks are frauds - and that is a big number. Search engines make comforting noises, but the fact is that they make money when click fraud occurs. So even though they may make the right sounds and install anti-fraud software, there is no escaping the fact that they make money out of fraud clicks. You will be surprised to know that search engines make 99% o f their money from advertisements. Also, search engines do not have a solid mechanism to compensate a victim of click fraud.

Conversion ratio is another worry. Though industry experts say that around 10% is a good conversion ratio, the information is not definite and may be skewed due to statistics from large websites where huge volumes take place. As far as small businesses go, there is no fixed conversion ratio and it depends from business to business.

Another worrying factor is the increasing cost per keyword. More and more advertisers from around the world are piling on the Internet and every one of them wants to make their presence felt. All this leads to frenzied bidding which may well throw a genuine advertiser out of the search results column.

The future of PPC advertising

Internet advertising analysts are of the view that the PPC model will change, perhaps for the better. These are the changes predicted:

• From paying per click, the advertiser will have to pay a CPA (cost per action) - that means the advertiser will have to pay only when the visitor who clicks through to his website buys something. This is manna from the heaven for any advertiser, but it has yet to be tasted.
• The pay per click advertising model will be supported or even called a pay per call model. What will happen is that when the Internet world is taken over by Internet telephony and surfers surf the net wearing headphones and speakers, the pay per click (or the pay per call) ad will have a telephone icon next to it. The visitor will click on the icon and generate an enquiry and that will trigger the charge to the advertiser and set the search engine's cash register jingling.

Both these are exciting changes waiting for technology to enable them. Until then, we are back to the good old PPC.