Spending is Believing: Paid Search Budgets and Growth

by Andreea Cojocariu on August 9, 2011




Many small businesses think that having a website is all you need to generate revenue online or to grow
their customer base. It’s a common misconception that many newcomers to online marketing have.  My advice for all small businesses is to have an integrated approach, starting Pay Per Click (PPC)–also called Cost Per Click (CPC)–SEO, and social media.  We’ll discuss PPC for now.

Paid search will grow about 47% this year.   Many companies are already seeing results, reporting a 26% increase in traffic from paid search ads. (Internet Retailer 2011).  In June alone, conversion rates grew 24%. (PM Digital Research 2011)

So why all the growth? PPC is instant. You don’t have to wait for search engines to crawl your site for your potential target market to find you online. Once the ad is live, you hope to see traffic and conversions.  You set your budget, create your ad, post, and monitor it. It sounds easy as pie, but it’s really bit more complicated than that.

Depending on your industry, competition is high. With the projected increase in ad spend for PPC, you can count on competing with others trying to sell the same service or product. So the key is to have the perfect budget.

Now budgets scare people, especially now as everyone is trying to save money. But the truth is, you have to have a realistic budget in order for an ad to place in the top three and convert.  The average PPC budget is around $500 a month. That sounds like a lot, but spreading those dollars among your keywords per day really equates to a few dollars per click–if that much.

The biggest factor impacting budgets is competition.  Again, depending on your industry, you may have a lot of online competition already, especially if you’re a retailer. The higher the competition, the more you’ll have to spend per click to get top placement. But it’s more than just industry competition. Competition is analyzed at the keyword level. If they keyword you want to target in your ad has a high competition level, expect to pay more.  Does that mean you should steer clear of those keywords? Not necessarily. If you think that specific keyword fits your business and you’re willing to increase your budget, then I say go for it.  Or you can find alternatives.

So if you’re working with an agency, and they tell you that your minimum budget should be around $500, that’s standard.  Don’t let that scare you because you could be missing the opportunity, the 24% growth in ROI from PPC, to increase your profits.


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