Doing a Keyword Analysis

Doing a Keyword Analysis

If keywords are important, how do you know which keywords to use?
1. Guess.
2. Take your guesses and run them through a keyword-analysis tool.
Do not stop at Step 1! If you guess, you’ll guess wrong!

Wordtracker is almost certainly the best keyword-analysis tool around (www.Wordtracker
.com). It’s the system used by most search-engine professionals because you can do more with
it, more quickly. We don’t have room to describe this tool, but it’s worth spending a few hours
and doing a really good analysis with this tool.

We’ll look at a free way for carrying out a keyword analysis, though ideally you should
use Wordtracker, which you can “rent” for around $8 a day (one day’s usually plenty). The
following’s a simple procedure that uses your brain power and Yahoo!’s Keyword Selector Tool.
1. Quickly write down all the obvious keywords, the ones you’ve already thought about. If
you’re selling golf equipment, an obvious choice might be golf equipment . . . and golf
clubs, golf balls, golf cart, and so on.
2. Now think from your customers’ point of view. Put yourself in their shoes . . . can you
think of terms they might use?
3. Ask employees, partners, family . . . what other terms can you come up with?
4. Go back over your list, and add plural versions of singular terms and singular versions of
plural terms.
5. Look for words that are likely to be frequently misspelled, and add them, too. (Some
words are misspelled as much as one third of the time they’re used, so these represent
a significant opportunity for reaching people.)
6. Go to the Yahoo! Search Marketing Solutions web site (http://searchmarketing.yahoo
.com/) and find the Keyword Selector Tool. (Unfortunately, Yahoo! keeps moving things
around; sometimes it’s easy to find, other times it’s hidden away. Dig around and you
should eventually find it; look for the Advertiser Center or something similar.)
7. Type a keyword into the text box and press ENTER.

Google also provides a free keyword-analysis tool, though it’s also hidden away a little. Go
to adwords.google.com and begin setting up a Google AdWords campaign—quickly enter a
little fake data so you can move through the steps and you’ll find a Keyword Tool link in the
Choose Keywords step.

8. The tool returns a list of similar keywords and the number of times the keyword has been
used in a prior month on the Yahoo! PPC network (see Figure 22-3).
9. Look down the list for terms to add to your own list. Enter another term, including terms
you find in this list, into the text box at the top and try again.
This tool will give you ideas for keywords, and some notion of how often searchers use a
particular term. It won’t tell you how much the term will cost, though.

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Understanding Keywords

Understanding Keywords

A keyword or keyword phrase is a word or series of words typed into a search engine by someone
seeking something. Keywords are used to trigger the display of your PPC ads. You’ll “bid” on
keywords—for instance, you might bid, say, 55 cents for the term camping equipment. When
someone types camping equipment into their browser, the PPC system looks at all the bids for
that keyword phrase, and places the ads on the results page accordingly—most systems place the
highest bid at the top of the list, as in Figure 22-2, although Google uses other characteristics.
More importantly, ads that people click more frequently get a rank “boost” in the system.

As you can see, keywords are essential. In fact, you have to pick the right keywords, because
■ The right keywords bring the right people to your site; you don’t want to pay for people
who won’t buy!
■ Some keywords are more expensive than others. Some keywords might be several
dollars, while similar ones might be ten cents.
Here’s an example, taken from Yahoo! Search Marketing Solutions (www.overture.com), for
top bids at the time of writing:

vioxx $11
vioxx attorney $38.06
vioxx attorney denver 10 cents
Keywords are critical! Before you can begin a PPC campaign, you must understand the
keywords.

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So, Can You Make Money?

So, Can You Make Money?

Many readers, after thinking about the last few pages, are probably now in shock, especially if they’ve run a few numbers through their heads. They remember that
■ A click costs at least 5 or 10 cents through the major PPC systems, and often much more.
■ Conversion rates are often 1:100 or 1:200.
How on earth can I possibly make money with PPC? The simple answer is, in many cases,
you can’t. Here’s an example. Let’s say your product will give you a gross profit of $10, before
paying for the PPC costs. Not an unusual sum—many products are in this ballpark, such as
books, music, small gifts, and so on. Let’s give you a fighting chance, and assume you’ll have
a conversion ratio of 1:50. And we’ll assume that you can buy clicks for 10 cents:
■ 50 clicks are needed for one sale.
■ 50 clicks cost $5 (50 × 10 cents).
■ Thus one sale costs $5, so your ROI is $1 for every $1 spent on advertising ($10 preadvertising
profit = $5 profit after advertising; $5/$5 = $1).
You’re making money, but unless you sell a lot of whatever this is, you’re not getting rich.
So let’s see what happens when you change just one thing in the calculation. Let’s try separately
altering the conversion ratio, the click cost, and the gross profit per sale and see how each affects
the equation.
■ Your conversion ratio is 1:100—you just broke even.
■ Your conversion ratio is 1:200—you just lost $10.
■ Your click cost is actually 30 cents a click—you just lost $5.
■ Your click cost is actually 50 cents a click—you just lost $15.
■ Your gross profit is actually $6—you just made $1.
The fact is, PPC doesn’t work for everyone! In particular, you’ll have trouble making PPC
work if:
■ Your products have low gross profits.
■ Your web site has a low conversion ratio.
■ Click costs are very high for the keywords you want to use.
Remember:
■ High Gross Profits + High Conversion Ratios + Low Click Costs = Good!
■ Low Gross Profits + Low Conversions Ratios + High Click Costs = Bad!
Any one of these elements can cause a problem. If all three are bad, you’re in real trouble!

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Calculating Click Value and ROI Later

Calculating Click Value and ROI Later

If you’re already in business and selling through your online store, you should have a closer
estimate of your conversion ratio. From there, you should be able to figure out the real
conversion ratio. It won’t necessarily be the same as the conversion ratio you’ll get from your PPC campaign; for many reasons the PPC conversion ratio could be higher or lower. But at least
you’ll have a real number to work with, rather than a pure guess.
How do you figure out your conversion ratio? Look at your web site statistics and find out
how many people visited your store over a particular period. For instance, choose your last
month of operations, and look for a statistic such as:
■ Unique Visits
■ Unique Visitors
■ Customers (an ambiguous term, but unfortunately the one used by Yahoo! Merchant
Solutions)

If you’re using Yahoo! Merchant Solutions, click the Reports link in the Statistics column and
look for the Customers statistic.

Once you know how many people have visited your store during that period, you need to
find out two more things:
■ The number of orders taken through the store
■ The average gross profit on each order
Now you can calculate your conversion ratio. To do so, divide the Number of Visitors by
the Number of Orders. For instance, if you had 1,538 visitors one month, and you processed 12
orders, your conversion ratio is 1:128. That is, you need 128 visitors in order to make one sale.
The average gross profit number, of course, allows you to figure out your breakeven click
value. For instance, let’s say:
■ The average gross profit on the orders is $35.
■ For every order you needed 128 visitors.
■ Thus, your breakeven click value is 27.34 cents. If you pay more than this for every
click, you’ll lose money.
This is still just an estimate, of course, because until you run a PPC campaign, you don’t
know if the conversion will be worse, the same, or better.
Once you actually run the PPC campaign, you can get exact numbers. You won’t care
so much about breakeven click value anymore because you’ll be able to see your ROI and
determine whether you’re making money. You’ll know just how much you’re spending for each
click, and you’ll also know your conversion ratio, under two conditions:
■ If you’re sure you’re getting all your site visits from PPC campaigns, then you know all
your sales are derived from PPC advertising and you can accurately calculate your ROI.
If you get traffic from various sources, though, you can’t do this, unless . . .
■ You install software that tracks sales from your PPC campaigns.

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Calculating Breakeven Click Value- What’s the ROI?

Calculating Breakeven Click Value- What’s the ROI?

Calculating Breakeven Click Value
So, here’s how to calculate breakeven click value. Let’s use some sample data:
■ Click conversion rate: out of every 200 people clicking a PPC ad and arriving at your
site, one will buy.
■ Average profit per sale, before advertising costs: every sale brings $150 in gross profit.
The calculation is very simple. Divide the average profit by 200 (in order to make one sale,
you must get 200 clicks): $150/200 = 75 cents.
What does this mean? If you spend 75 cents for every click—that is, 75 cents each time you
use a PPC ad to bring a visitor to your site—and you sell to one person in 200, you’ll break even.
You won’t make money on the sales, but you won’t lose money on the products sold, either.

What’s the ROI?
What’s the ROI on an advertising campaign in which you pay the maximum click value? Nothing.
You have no return. The profit you make on the sales goes to paying the investment in the advertising.
Here’s how to calculate ROI:
Gross profit derived from the advertising divided by the sum spent on advertising
In the previous example, the advertising cost was $150 (200 clicks at 75 cents), and the
profit, after subtracting the cost of the advertising, was $150.
$150/$150 = $0
Consider another scenario. This time you spend 40 cents per click; you still need 200 people
to come to the site for each sale (so you spend $80 on clicks), and the gross profit, before click
costs, is $150.
$150 − $80 = $70
$70/$80 = $0.875
In other words, for every dollar you spend, your ROI is $0.875.

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Understanding Conversion Ratio, Click Value, and ROI

Understanding Conversion Ratio, Click Value, and ROI

There’s one huge disadvantage to PPC ads, though . . . they cost money. Sometimes a lot of
money. Often, in fact, so much money that you will lose money if you buy PPC ads! In order to
use PPC, you really must understand Conversion Ratio, Breakeven Click Value, and Return on
Investment (ROI):

■ Conversion Ratio The proportion of visitors to your site who buy from you. This is the
foundation of any click-value or ROI calculation.

■ Breakeven Click Value The “breakeven” value of a click is the maximum sum you
can pay for a click and not lose money. Of course, you want to pay as little as possible,
but there’s a point at which a click doesn’t make you money and doesn’t lose you money.
If you go over the price, however, you start losing.

■ Return on Investment The amount of money you make after investing in advertising,
typically expressed in terms of the sum returned for every dollar invested. If you pay
$1,000 for ads, and make a profit of $10,000, your ROI is $10 per $1 invested.
You need to consider these things three times:

■ When you have no background information When you first begin considering PPC
ads, you may not know what your conversion ratio is. That is, you don’t know how
many people coming to your site will buy from you. You can, however, do a simple
“guesstimate” to figure out whether PPC will work for you. At this point, you can decide
if PPC is worth doing.

■ When you know your conversion ratio Once you understand what your conversion
ratio really is, you can calculate more accurately whether PPC will work for you. At this
point, you’ll have a much better idea of the likelihood of success.

■ When you’re running a PPC campaign Once you’re buying PPC ads, and people
are coming to your site, you can calculate ROI exactly. It’s then that you’ll know exactly
whether (under current conditions) PPC works for you.
In order to calculate click value and ROI, you must first know—or estimate—your conversion
ratio. The conversion ratio is the relationship between the number of people carrying out some
process and the number of those people who move on to the “next step.” For instance:

■ If 100 people see an ad, and three click the ad, the “conversion” is 3:100, or three percent.

■ If 100 people come to your web site, and ten sign up for a newsletter, the “conversion” is
10:100, or 10 percent.

■ If 100 people come to your web site, and one buys a product, the “conversion” is 1:100,
or 1 percent.

Of course, it’s the last of these that we’re most interested in. Of all the people who come to
your site, how many will buy? This conversion ratio is the core of any ROI calculation.

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Understanding the PPC Process

Understanding the PPC Process

The basic process of using Pay Per Click is pretty simple:

1. Decide to which pages you want to direct traffic from your ads. You can bring traffic to
any page you wish, not just the home page.

2. Register with a PPC system—you’ll provide a credit card to be used to pay for the ads—
and “load” the account with some money to begin with.

3. Write one or more PPC ads (carefully follow the system’s ad guidelines, or the ad won’t
be placed).

4. Associate keywords with your ad—that is, decide which keywords will “trigger” your
ads to appear.

5. Place a bid on each keyword for each ad—in other words, tell the PPC system how much
you are willing to pay every time someone clicks your ad.

6. Turn on the ad campaign and wait for the traffic to appear.

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The PPC Systems

The PPC Systems

There are many PPC systems, but only three big ones, and a few “second-tier” systems:
■ Google AdWords Perhaps the best-known PPC system is Google AdWords (http://
adwords.google.com/). Since Google is the single most important search engine, this
system displays many millions of PPC ads every day.
■ Yahoo! Search Marketing Solutions (formerly Overture) This system is also huge,
and displays many millions of ads each day (www.overture.com/). Overture was the
original PPC search-engine company.
■ MSN adCenter MSN, Microsoft’s online service, actually gets its PPC ads from
Yahoo! at present. However, it’s in the process of building its own PPC system and by
the summer of 2006 will probably have stopped using Yahoo! ads entirely.
The “second-tier” systems include services such as FindWhat (www.findwhat.com/),
LookSmart (www.looksmark.com/), Enhance (www.enhance.com/), ePilot (www.epilot.com/),
Espotting (www.espotting.com/), and Kanoodle (www.kanoodle.com/).
Others also exist. In fact, there are literally hundreds of PPC systems . . . most of which are
not worth dealing with. For example, when you figure the time it takes to configure the systems,
it’s not worth the small amount of admittedly cheap clicks you’ll get—and some that border on
the fraudulent (you’ll get little or no traffic from them, but will pay a setup fee that you’ll never
see again). In general, you’ll want to avoid very small PPC systems, and stick to the first- and
second-tier systems.

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What Is PPC?

What Is PPC?

Pay Per Click (PPC) is big business. In fact, it’s the primary manner in which Google makes
money—almost all its income, 98 percent, comes from PPC—and is very important to Yahoo!
as well. Pay Per Click has brought mass-media advertising to small businesses. Businesses that
would never have spent money on radio, TV, or newspapers, are now spending it on PPC . . . and
sometimes even making a profit!
Sometimes? Well, the fact is that PPC doesn’t work for everyone, as you’ll learn in this
chapter. You need the right combination of gross profit per sale, Pay Per Click price, and website
conversion ratio. If you don’t have the right combination—and many businesses simply
don’t—PPC will lose you money. Get everything lined up just right, though, and PPC can
provide a regular, predictable flow of profitable business to your web site.

Pay Per Click refers to an advertising mechanism in which advertisers pay each time someone
clicks their ad. More specifically, though, these days it refers to ads displayed on search-engine
results pages.
You can see an example in Figure 22-1. At the top of the search results are two small
ads—shown on a light blue background in this instance. In the top-right corner, notice the words
Sponsored Links. More ads appear down the side of the page—again with the words Sponsored
Links, but this time above the ads.
Each time someone clicks one of these links, the company that placed the ad is charged. How
much? Somewhere from 5 cents (on Google) or 10 cents (on Yahoo!) to many dollars! Some
PPC ads cost as much as $50 per click, occasionally even more!

Because large PPC systems generally “feed” a variety of sites, when you buy ads through
a system such as Google or Yahoo! Search Marketing Solutions, your ads may end up on many
different search sites. But you may also have your ads distributed elsewhere, like on the pages of
thousands of different web sites, thanks to the Google AdSense distribution program.
PPC advertising has a number of advantages:

■ It’s very quick. You can start getting results from the search engines in a day or two (in
theory, a few hours, but in most cases it takes a little longer to get everything sorted out).
■ It’s reliable. Using PPC to get traffic to your site is very reliable. You can generate a lot
of traffic, and always appear for appropriate searches in the major search engines . . . if
you’re willing to pay enough.
■ It’s easy to measure. You can see just how much traffic you’re getting, and even figure
out how much of the traffic turns into business.

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