How to Calculate PPC Ad Rates
There is no definitive pay-per-click, or PPC, ad rate. Marketers must determine which search terms or phrases will drive the most web traffic to the company's website or landing page, then bid on those words. The rate paid depends on how many other marketers are also bidding on those particular words at the same time. The marketer who bids the highest will have his ad shown when people search using the keywords he bid on.
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Instructions
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Research which keywords to use in your ads. Choose keywords that are highly relevant to your business, since you will be paying to show an ad when people search for these keywords. According to Search Engine Guide, you should begin by creating a list of all the terms you think someone would use to find your business. Then use a keyword tool like Google AdWords Keyword Tool to receive additional suggestions. Also look at the search volume for the keywords you have chosen. The higher the search volume, the more often your ad with that keyword can be shown to searchers.
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Determine how much you are willing to pay for an ad to be shown based on your online marketing budget. Ad platforms allow marketers to bid on keywords. The highest bidder has his ad shown to searchers. In most cases your bid will be based on the cost-per-click for each ad. The cost-per-click is the highest amount that you agree to pay for a click on a particular ad. The major ad platforms like Google, Facebook and LinkedIn will give you an estimate of the PPC rate you must bid for each keyword to have your ad shown often. To find this estimate, sign up for a free advertising account with each network, and use the keyword management tool included. Type in a set of keywords, and the tool will provide an estimate based on its proprietary search algorithm. An example estimate might be $2.50 to $4.50 for a particular keyword. This means the you will need to bid at minimum $2.50 per click for a chance to have your ad shown when someone searches for the keyword; $4.50 represents the most you are likely to pay for your ad to be shown. Generally, the higher the search volume for a keyword, the more it will cost to win the bid.
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Choose the platform(s) on which you want to advertise. The most popular platform is Google, but other platforms exist like Bing/Yahoo!, Facebook Ads and LinkedIn Ads. The cost-per-click will vary depending on which platform you are using. For instance, search engine ad platforms will base the price-per-click on search volume, demographics and geography. However, Facebook and LinkedIn base the price per click on the type of people you are targeting. You can target by location, demographics, interests, education, career or connections. The price-per-click will vary based on how many people fit into the group you are targeting, and how many other people are targeting the same group. The number of people in the target group will be based on the number of people currently using the network who meet your selected criteria. The ad platforms will provide an estimate of how much each PPC ad will cost based on the groups you are targeting. Log into the ad platform and using the ad creation tool, type in the keyword you want your ads to be shown for. Narrow your target audience through a selection of questions and check boxes. The bid estimate will be shown once you have gone through all the targeting criteria.
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Measure the performance of the ads. Once your ads begin driving traffic to your web pages, assess their effectiveness by looking at conversion rates. According to ClickZ, the conversion rate is the number of people who click through to your site divided by the number of people who do what you want them to once they are there. Assess which keywords send traffic that is more likely to convert, and increase your budget and create more ads for those keywords while decreasing the budget on under performing keywords.
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Analyze the return on investment for your PPC ads. Look at how much you are spending per click, what the conversion rate for each ad is, and how much a conversion is worth. If you are spending $5 per click and a conversion is only worth $4, it would be wise to discontinue that ad as you are losing money. The worth of a conversion will vary based on what you are promoting. If you are selling an item, it will be the price of the item. If you're generating leads, it will be what a lead is worth to your sales team.
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