Ending Soon! Save 33% on All Access

Who Should Use Pay-Per-Click Advertising and Who Shouldn't Pay-per-click advertising doesn't work for every type of business. Find out if you should be using it for yours.

By Richard Stokes

Opinions expressed by Entrepreneur contributors are their own.

In his book Ultimate Guide to Pay-Per-Click Advertising, internet marketing expert Richard Stokes helps you master advanced search engine strategies from top search engine marketers to increase your sales. In this edited excerpt, the author explains why some businesses will benefit from PPC advertising and why some should avoid it.

Chances are, you've heard about the amazing return on investment that can be had with pay-per-click (PPC) advertising. A return of 300 percent or even higher isn't at all unusual with this form of advertising.

When it works, it works well. But what we don't usually hear are the stories of people who lost their entire ad spend. As with anything else in business, it's best to be realistic from the onset about your chances of success.

So who usually wins with PPC and who often loses?

1. PPC works for direct-response marketers and online retailers. Direct-response marketing is a specific form of marketing that sends its messages directly to consumers, usually to ask them to take a specific call-to-action (for instance, to call a free phone number or fill out a request for more information) or to purchase a product online.

Typical businesses that make use of direct marketing include software companies, newspapers and magazines, sellers of information products, and online retailers.

Traditional direct-response marketing relies heavily on having access to performance statistics, such as open and response rates. PPC provides many comparable statistics (such as clickthrough rate, conversion rate, coverage and many more) so the performance-based marketer should feel right at home with this channel.

2. PPC works for brand advertisers. On the other end of the spectrum lie brand advertisers. The goal of these advertisers is to build a psychological construct (the "brand image") in the minds of their target audience, typically for the purpose of influencing offline or future purchasing behavior. This image can be highly successful in convincing consumers to pay high prices for products that are extremely cheap to make. Although it may seem abstract to some, the brand itself begins to accumulate significant--perhaps even staggering--value over time. And paid search is a powerful tool that can help increase this value.

Brand advertisers depend less on the types of performance-based statistics mentioned above and more on statistics that attempt to measure both the exposure and perception of the brand in the mind of their target consumers, such as brand awareness, brand recognition and top-of-mind awareness.

While you can't measure these metrics using paid search, you can measure share of voice (SOV), which offers an easy way to determine if your ads are being seen more or less frequently than that of your direct competitors.

Paid search also offers a few other incredible advantages to brand advertisers. First, it's incredibly cheap in comparison to the seven- and eight-figure advertising budgets used for other forms of media. There's also a difference in user intent. Most advertising reaches users through an interrupt mechanism (for instance, a TV or radio commercial). Search engine users, however, are actively searching for something either strongly or weakly associated with your brand. This may be information about your product ("Enfamil ingredients"), promotions ("Enfamil coupons") or a deeper but less obvious association ("baby upset stomach").

Finally, PPC gives brand advertisers unprecedented control over their message, allowing them to vary their copy based on searcher intent, geography, culture and so on.

Why PPC May Not Work for You

There are six primary reasons why PPC campaigns fail. By far, the most common reason is that advertisers are unwilling or unable to manage their PPC campaigns properly. PPC campaigns can't be ignored if you expect to turn a profit.

Another reason is due to a lack of tracking. Without tracking, you'll be unable to figure out which keyword buys are working and which are not. You won't be able to finetune your campaign and cut the waste. Installing tracking is a low-cost, one-time effort. There's really no reason other than negligence or ignorance for this.

Finally, if your conversion rate and/or your average order size is too low, you'll be unable to afford even the most modest PPC buys. Your profit margin on successful transactions needs to absorb the cost of acquiring not only the customer but also all the other visitors who didn't buy from you.

The three other cases when PPC campaigns might not work for your business are somewhat out of your control, but there can be workarounds. The first situation arises if your target customers aren't looking on the search engines for the types of products you sell. In this case, you'll need to identify alternative advertising channels.

Another problem is that your products or services require a high-touch sales process to sell successfully. If prospects buy from you only after they talk to a field rep, then you'll need to resort to a multistage sales process. You can work PPC into this process without being unduly reliant on it. For instance, you'll likely have considerable success using Google AdWords to generate qualified leads, which sales reps can then call on.

Finally, you may run into difficulties with PPC campaigns when bid prices are so high that you're priced out of the market (this is a common problem when selling high-cost consumer services such as auto insurance). Even in these hypercompetitive markets, however, there's still plenty of inexpensive search traffic available to advertisers who are willing to work hard on improving the campaign quality.

Richard Stokes

Author, Founder and CEO of AdGooroo

Richard Stokes is the founder and CEO of AdGooroo, a Chicago-based Kantar Media company and a provider of digital marketing intelligence. A certified expert in both email marketing and conversion optimization, Stokes is a respected speaker and author on search topics. Find him on Twitter at @AdGooroo.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Business News

More People Are Exploring Entrepreneurship Because of This Unexpected Reason

More new business applications were filed in 2023 than in any other year so far.

Business News

TikTok Reportedly Laid Off a 'Large Percentage' of Employees as the App's Fate in the U.S. Remains Unclear

Laid-off TikTok employees were notified Wednesday night through Thursday morning.

Business News

Four Seasons Orlando Responds to Viral TikTok: 'There's Something Here For All Ages'

The video has amassed over 45.4 million views on TikTok.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Personal Finance

This Investment Bundle Includes a Trading Course and Stock Screener Tool for $150

Approach the stock market with an increased understanding.