It is not merely a rule of thumb but a foundation for various business models on the Internet: Your website either receives traffic for free through so-called “organic” search engine results, or you have to buy traffic.
If your website is to be found among the top-ten search engine results for a competitive term like, for example, “Hawaii rentals” on Google, you have to beat 19400000 other web pages that Google has listed in its index for this keyword (August 2006). Not an easy task – that is why buying instantaneous traffic from a Pay Per Click Program is such an excellent online marketing technique and fantastic business for the providers alike.
Pay Per Click (PPC) describes an advertising method in which advertisers pay each time someone clicks their ad. The major PPC systems include Google AdWords, Yahoo Search Marketing Solutions and MSN adCenter, all of which place PPC ads along with their search engine results and their network of website as well. The cost per click can range from some 5 Cents to as much as 50 USD and more, depending on the competition for that particular keyword. If clicks are very expensive, the cost might eat up your complete margin and hence render this online advertising tactic impractical.
Cost is the obvious disadvantage, while advantages include that is very quick and reliable to generate traffic (literally minutes), which is on top easily measurable. Measuring results is crucial to determine whether a PPC system can be profitable for your website:
The key metrics to understand are conversion rate and breakeven click value. The conversion rate is the proportion of casual visitors to your website who become paying customers. A conversion rate of 2 percent would mean, for example, that 2 out of 100 visitors buy from your site. The breakeven click value then is the maximum amount of money you can afford per click in order not to loose money.
At this point, it is simply a numbers game to determine if Pay Pay Click Programs are feasible for your website or not. And this obviously is also determined by the nature of the products you are selling: The higher the value and margin of your products, the higher the breakeven click value, and thus, the higher the likeability that the PPC system does make sense for you.