Pay Per Click Advertising - part 2

Another advantage is the simplicity of the pay-per-click
process. You just bid and you're up and running. It doesn't
demand any specific technical knowledge, though the more
you know about search engines and keywords, the easier -
and more effective - the process will be.

The downside is that pay-per-click is essentially a bidding
war. A higher bid than yours will lower your position on
search engine results. This means that you will have to
raise your bid to regain your position - which can
obviously become quite expensive, especially if you are
bidding on a popular keyword.

In order to determine if pay-per-click is a cost effective
form of marketing for your business, you must do some
computing to figure out how much each visitor to your site
is worth. You can compute this value by dividing the profit
you make on your website over a given period of time by the
total number of visitors for that same time period. For
example, if your site made $5,000 in profits and there were
2,5000 hits, each visitor would be theoretically worth 50
cents. The basic formula is profits divided by visitors.

The figure of 50 cents per visitor is the point at which
your business breaks even. The idea, of course, is to show
a profit, not to merely cover your costs. Therefore, you
are aiming at a figure less than 50 cents per click.

Be aware that the most popular keywords often cost
considerably more than 50 cents a click. The only way
around this is to bid less for these phrases or you will be
paying too much for each individual hit.