The Siren Song of the 5-Cent Click

As much as PPC pricing formulas may have changed over the years, it seems human nature has not. Or to use a phrase popular with my father-in-law (who likes to sound profound in as few words as possible): “Ever thus.”

Cheap Is Sexy… Even if It Isn’t Rational

This week, I’m talking about the siren song of the five-cent click.

Following the popularization of paid search by a company called GoTo in 1998, many dabblers in PPC liked the idea of coming in at the “minimum” bid just to see if they could show up on the “list” of advertisers. At the time, this was one cent. It’s also worth recalling: every advertiser’s bid was posted next to its listing. The practice of paying for top billing near (at the time, “in”) search results wasn’t yet widely accepted, so there was a look of respectability (albeit cheapness) to the lower-bidding advertisers. And maybe just a hint of desperation plainly evident in the two or three advertisers engaged in grotesque bidding wars for placement on popular terms.

This ambivalent attitude toward placement lasted about as long as it took the broader business community to figure out that low bids meant next-to-no-clicks, and no new business. As businesses became addicted to PPC by way of the cheap clicks, they learned that higher bids led to rapid business growth in many cases. You’d think that would have led to more rational thinking about bids. Eventually, it did.

But our inherent cheapness (as an attitude, not a business strategy) is more of a permanent condition, so the attitude persisted. And it crops up now and then in the form of misguided tactics.

At different stops along the way, before we went to confusing and complex auction formulas, some players in the industry seemed to think the “minimum bid” was of some consequence, because they were bent on bidding the minimum. Going from one cent to five cents was an outrage. Then 10 cents was too much. Most people by now have stopped asking what the “minimum” is.

But we still seem to get lured in from time to time. In the AdWords display network, it’s particularly important not to overbid. Bid to your metrics, right? If you’re not achieving your desired CPA, bid down and down in the ad group and/or keywords terms until you hit the target CPA range, right? Hmmm, maybe not.

Above a certain CPC in the display network, you’re at least eligible to show up on high-quality, self-respecting sites. Other advertisers will be paying up to reach them. If you don’t bid high enough, you have no hope of getting onto them. So a low bid (say, below 20 cents) in the display network is like an open invitation to be paired up with all manner of marginal and cheesy websites that rarely provide clicks that convert. In buying them by the ton, you’re wasting money, opportunity, and time.

Cheap clicks won’t usually be your best strategy on the display network, any more than naively expensive ones would be. You wouldn’t put mud in your car’s gas tank, expecting it to run. Nor would you fill it with caviar. Plan your campaigns accordingly.

The Zero-Cent Chimera

I’d be remiss if I didn’t mention that the “original” price for a click was zero cents. Speaking of persistent attitudes, you’d think by now businesses would realize that SEO is not free, and the opportunity cost of failing to launch, optimize, and grow a PPC campaign would be glaringly obvious in a world of volatile algorithms and shrinking screen real estate for the old “10 blue links” SERP layouts.

Before the world got used to paid search, even the idea of paying a penny for “free” search engine traffic was too much for many of the entrenched minds in the industry to bear.

Some opportunistic business owners who had a ton of “free” traffic, too, got addicted to the zero-cent click. Eventually, they were vastly outnumbered by the broader business community that entered the space and eventually drove up the prices of paid clicks to near their market value.

But folks, that was 2004. It’s now 2011.

Recently I talked with a business that had begun as a widely popular content site before shifting over to being a merchant selling specialty products. Up until 2004, it had been pondering its monetization strategy. Tinkering with some product sales as well as ads, it hit on a winning formula. Its niche was growing fast and the product sales did very well. Good-bye advertising model, hello life as a merchant.

In 2011, the Panda algorithm ostensibly cut the site’s traffic and revenue by 80 percent. But this was not really a single event. The reality is, nearly all e-commerce merchants are tailor-made for paid search, and few should be relying on SEO in the same way they might have in 2004. It could be only a matter of time before Google and its algorithms decide you are not really a “high quality content site,” and start ranking different types of sites ahead of yours.

This is not to say that SEO is bad or that PPC is best; simply that a balanced approach is needed.

The company decided not to spend one dime on PPC. Instead, redoubled its efforts on SEO, to “address the hit they had taken from Panda.”

An addiction to free clicks, it seems, can create powerful habits that are hard to break.

Enough With the Bait and Switch

But it’s worth breaking that habit. Customers with buying intent appreciate an upfront approach, and respond well to ads. Customers with research intent may still enjoy those parts of your site. If they’re good and interesting, they should continue to rank well. But trying to shoehorn every purchase path into the old “rank well on Google with pages full of “information” and then hope to somehow-convert-them-after-they-get-there model isn’t doing consumers any favors. So as a result, that type of approach will also be less and less popular with search engines, who are, after all, simply trying to do the best possible job of sorting out searcher intent.