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Wednesday, July 23, 2008

Save Google Adwords dollars by using CPM instead of PPC

Here's a summer tip based on notes I took during a presentation. I hope I have correctly interpreted the information. In any case, you are welcome to comment whether something is wrong or you have better information.

Most company marketing people think about Google Adwords and pay-per-click advertising (PPC) however, using cost per thousand impressions (CPM) can be a more effective way of using Adwords in particular if you have a small marketing budget. And yes, I don't think you can expect the value of a 24 ore Swedish stamp will get you anywhere with a marketing campaign but let's look at an example.

Adwords - Site bids (CPM) vs. pay-per-click (PPC)

Two important things to remember with;
  • Site bids or cost per thousand impression (CPM), your landing page is not that important
  • Pay-per-click (PPC), your landing page is important, you have to design with right keywords

Example to compare cost for advertising:

You pay for 1000 impressions $0.50 per impression, if you have 10 clicks you still pay $0.50.
Continue example using $0.50 CPM average cost, with a click through rate (CTR) of 0.5% to 2-3% CTR (very good)

you can calculate the number of clicks;

1000 impressions x 0.5% = 5 clicks and with $0.50 CPM cost you will get
5/$0.50 = $0.10 cost per click

With a small marketing budget, you get more for less using site bids instead of pay-per-click advertising even though the CTR rate is lower because the conversion rate is higher.

A tip is, remove web sites with a CTR rate of less than 0.1% (not worth using Adwords sitebids on).

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