Search Engine Marketing: What Is Your Cost Per Click?

Search engine marketing, or SEM, is one of the most cost-effective advertising media around. But buying it can be confusing, because it uses a completely different sales model.

Most advertising is sold using variations on a cost-per-thousand basis: You pay a flat rate for every thousand

You only pay for search advertising when someone responds to your ad by clicking on it. This is why search ads can provide a higher return on investment. For a more detailed discussion of pay-per-click advertising, see SEM: The Power of Pay-Per-Click Advertising.

Search ads are sold and managed in an automated, online marketplace. Instead of picking from a fixed price list, you bid in competition with everyone else and pay based on demand for that keyword and its value to you.

You're bidding for the right to have your ad displayed on the search results page generated when somebody has typed a particular keyword or search term into the search engine. Because you sell life insurance, you want your ad to pop up when somebody searches for the phrase "life insurance." So, you bid on that keyword, and whether your ad is displayed depends on where your bid falls among all the other bids.

But top placement doesn't necessarily go to the highest bidder. The search engines take many variables into consideration, including how many times people click on an ad. If an ad gets few clicks, it's presumed to be not of interest to searchers, and it's placed lower on the page or dropped from rotation. You'll need to keep an eye on your daily reports to see which ads have become inactive, so you can fix them and try again.

Winning bids for some keywords may be as low as 5 cents, but the more desirable ones can be pricey. Certain legal terms and medical terms, linked with diseases that are subjects of class-action lawsuits, can cost as much as $150 per click. When you bid on keywords, you get a lot of information about which keywords are popular with searchers and which are most in demand by buyers. And, of course, you can tinker with your keyword purchases to find the best blend of price, response, and final results.

A good tactic to lower the price of the most desirable keywords is to change them slightly. For example, if "smog check" is too expensive, try "smog service." Your ad won't show up when people type in "smog check," but you may still get plenty of response.

Another tactic to reduce cost and increase response is to limit the times of day or geographic area in which your ads appear. If you have a local business, you can have your ads appear only to those who are using computers within 10 or 20 miles of your shop.

Each search advertising platform does things a bit differently. There is a ton of information on creating bidding strategies, both online and in books. Select one search provider to start your search engine marketing efforts, and read its tutorial before you start. Go back to the tutorial and help files frequently, because, as you learn more, you'll find more to learn.

The best way to learn -- and to advertise successfully -- is to constantly test and refine your ads and practices to find what works best for your company. To find out more about testing your search ad copy, read Writing and Testing Search Ads.