PPC Management: When To Give Up On A Loser

By Dave Brown
Posted Thursday, July 22, 2004

Pay per click (PPC) advertising can be a dream come true. You can get traffic almost immediately from some PPC search engines. And it can be mighty cheap too. Next to joint ventures, PPC search engines have been responsible for most of my online income. I've gotten some great returns on PPC campaigns. And I know other people who have too.

Right now, I have one PPC campaign that's making me $56.69 for every $1 I spend. I know, that's pretty incredible. And it's not typical. But I have another that's making me $8.84 for every $1 I spend. Yet another makes $7.73 for every $1.

But I have other campaigns that have lost me money. Making money, instead of losing it, with pay per click search engines involves wise management. There are many different factors that decide whether you'll be in the red or in the black. And you need to be aware of what these are.

In fact, there are times that even the best management of your PPC campaign won't save it. Some of them will be losers and there's nothing you can do about it. But you need to know when to decide that you have a loser on your hands. At what point should you bury it and move on?

There are a number of different factors to consider. There's no simple answer. I can't tell you to simply abandon your PPC campaign after 200 clicks without a sale. Or to quit after you've lost $50.

First of all, you need to know how much your profit will be on each sale (before advertising costs). For example, if you're selling your own product for $47 through Clickbank, then you'll make $42.48 on each sale after Clickbank takes their fees.

But if you sell someone else's product for $47 through Clickbank, and you get a 50% commission on each sale, then you'd only get $21.24.

But you need to know even more than that. You also need to decide how much of that $42.48 (or $21.24) you're willing to spend on advertising. In other words, what's the least you're willing to earn on each sale? This will determine how much you can afford to spend on advertising.

Let's assume you make $42.48 per sale. If you decide that you'd be happy with a $20 profit, then you can spend as much as $22.48 to make each sale.

So now you know what your advertising budget is. Next, estimate what your conversion rate will be. If this is a brand new product you're promoting, then you may have no idea. In those cases, I tend to use 1% as a rule of thumb. That means that 1 out of every 100 people that visit the site will buy. Let's use 1% for our example here.

So if you're willing to spend $22.48 to make each sale, and you expect to make one sale out of every 100 visitors, then you can afford to spend 22 cents to get each visitor to the site. This means that you can afford to bid 22 cents on each keyword on the PPC search engines (max).

At this point, you can go ahead and set up your PPC campaigns. Find your keywords. Place bids. I won't cover these issues right now because they're off the topic. The purpose here is to know when to drop your campaign because it's a loser.

Now, just because you *can* bid 22 cents on each keyword, it doesn't mean you should. You should bid as low as you can to get good traffic (whatever you consider *good* to be).

In our example, let's fast forward. Imagine you've already gotten 150 clicks, and your average bid has been 22 cents a click. So you've spent $33, and you haven't made a sale yet. Should you ditch this campaign?

No. *On average* you can spend $22 per sale. But that's an average. Which means that sometimes you'll spend more, and sometimes less. And if your conversion rate is 1%, then that's also an *average*. So don't freak out if you haven't made a sale after 150 clicks.

When you decide to drop a campaign though, make the decision based on how much you're spending on it. Not the conversion rate.

When I first start a campaign, I'll often wait until I spend at least double my advertising budget with no sales before I consider dropping it. Maybe even triple my budget if I'm emotionally attached to it. ;-)

But if I haven't made any sales by then, I'll usually stop the campaign. However, you may want to wait longer if you're willing to spend more money to see if it works. I think I'm probably more of a conservative.

At any rate, I *rarely* end a campaign before I get 300 clicks. 300 is typically the minimum number of clicks before I feel I can judge whether a campaign will pay off. And I will generally only end it then if I've had *zero* sales.

Sometimes, though, you'll make a quick sale and get excited. But then you see few or no sales after that. If you find that you're consistently spending more than your budget for the first few sales, then get ready to end it if you don't figure out how to make it better.

I want you to realize, too, that when you bid less on your keywords, you can afford to live with a lower conversion rate. But when you bid more, your conversion rate has to be higher to provide you with the profit you want.

I've only talked about *starting* a PPC campaign so far. But sometimes, you may have a PPC campaign that's paying off, and then it starts choking and gasping for air after a while.

In that case, you need to decide when to pull the plug and retire it. Otherwise, it may eat up all the profits you've already made.

I'll usually be more lenient in this case. Since the campaign has made me money in the past, I'm more likely to give it the benefit of the doubt and keep it running. I don't know if that's a good idea or not. But sometimes, it's just hard to say goodbye to an old friend. After all, maybe it's just a temporary downturn.

But you still have to cut it off at some point. If I find myself breaking even (or even losing money) on each sale for any length of time, then I'll start thinking about ending the campaign.

In our example here, if you notice that you've been spending $45 per sale lately, then start thinking about the future of this campaign. Try to figure out what's changed and see if you can fix it.

How long should you wait before you abandon it? Two weeks? A month? Ten sales? A hundred sales?

It's completely dependent on your situation. If you make 20 sales a day, then obviously worrying after only 20 sales is unwarranted. On the other hand, if it takes you 4 months to make 20 sales, then maybe you shouldn't wait quite that long. Listen to your gut.

In the end, be aware that PPC management is not a rigid science. You have to use a certain amount of judgment. But try not to be emotionally attached. If a little voice in the back of your head is telling you that you're spending too much for too little, then listen to it.

What I've given you here are guidelines based on my own practices. I'm sure there are other people who do it differently and are also successful. But these strategies work for me. And I'm sure you can adapt them to work for you.

About The Author
Dave Brown is a self-taught marketer and software developer. He also publishes the uncommon and uniquely original newsletter on making the most of your life - A Fresh Perspective. You can learn more at
(http://www.dave-brown.com)
dave@dave-brown.com