Paid Search Engine Advertising – Updated for 2010

by John Eberhard

(This is an update of an article first written in 2007)

Over the last 5-6 years, we have seen the rise of a new medium which at the current time is quite effective in driving traffic to web sites: Paid Search Engine Advertising. This term refers to paid advertising that a company can run on search engines, so that when a person enters a specific search term or phrase, your ad appears.

For instance, if someone goes to a search engine and enters "antivirus software", you will see regular search results that come up for this term, but on Google, Yahoo and MSN, you will also see paid advertising, usually labeled as "sponsored links." That means that some company that sells antivirus software has paid to have that listing appear when anyone enters the search term "antivirus software."

Similarly, if you entered "golf equipment," you would see the regular listings but also a bunch of sponsored links from companies selling golf equipment.

One can choose any word or phrase at all and choose to have your ad appear when people enter that phrase on that search engine. However, you want to select words or phrases that are at least somewhat popular, i.e. that a lot of people are entering. That way you get decent exposure for your ad.

One of the biggest advantages to this type of advertising is that you only pay when someone actually clicks on your ad and thus arrives at your web site. You start an account with one of these search engines, put some money in it, and every time someone clicks on your ad and comes to your site, your account is debited. This has an advantage over most other types of advertising, where you pay whether there is any result or not. With paid search engine advertising, you only pay for actual traffic coming to your web site.

Google, Yahoo and MSN are currently including sponsored links as part of their search results. For Google, the most popular of all the search engines currently, the sponsored links appear in the narrow, far-right column and along the top, highlighted in yellow, whereas the regular search results appear in the wider left-hand column. Google’s paid ads program is called "AdWords."

There are a number of other benefits to this type of advertising. First of all, with search engines, one always has the advantage that the web visitor went there specifically to get information on what you sell. If you sell antivirus software and you can put your ad in front of people that are looking for antivirus software, it doesn’t get much more targeted than that.

Secondly, it is very easy and quick to get started. In order to understand why I say it is easy to get started, we will have to explain a little about the regular search results on search engines, the way these have evolved, and what one has to go through in order to get listed high in the regular results.

Years ago, when search engines first started, the goal of the search engines was to provide relevant search results. And they have pretty much had this goal ever since. In this sense what they meant and what they were trying to do was to provide results that matched, as much as possible, what people were actually looking for when they entered a word or phrase. As an example of this, if someone went to a search engine and entered "Scott Brown," theoretically they would want to see as the first entry, a link to Senator Brown’s Senate web site. Similarly, if someone entered "Microsoft," the first entry he would hope to see would be the actual Microsoft web site, not a bunch of sites that were distributors for Microsoft products or a bunch of sites criticizing Microsoft.

The problem that has arisen is that, as in our above example with Microsoft, the people with the web sites who were distributors of Microsoft products, or with web sites criticizing Microsoft, wanted their sites to be listed first. They wanted more traffic, and the higher you are in search engines results, the more traffic you’ll get. So what happened is that the webmasters for those other sites would study the search engines and figure out what system they were using to decide which sites would come first. All search engines make the decisions on web site rankings automatically, using a mathematical formula or algorithm.

So those other webmasters would figure out what criteria Google and Alta Vista and other search engines were using to rank sites, and they would artificially change their sites to better fit the criteria and defeat the search engines’ goal of relevancy. In other words, sites ended up being listed as #1 or very high for certain key words or phrases, that shouldn’t have been.

As a result, the criteria of the search engines to decide the rankings for web sites in their regular search results have changed dramatically and repeatedly over the years. The result of this, for webmasters, is that you have to either spend about half your life studying the search engines and what their criteria are and how to achieve good rankings in the regular results, or pay an expert to do this for you. Plus, when you make a change to your site that is calculated to improve your rankings, you will usually have to wait about two months before you will see any improvement.

So compared to that, paid search engine advertising is a much easier and faster medium. You can start an account and have your listings up and running within hours. And you don’t have to struggle through and worry about the myriad requirements of the search engines in order for you to be listed high in the regular results. Not to say you can’t do that too, but what we’re saying is that paid search engine advertising is a lot easier and currently is very effective.

Getting Started

Google is the largest of the search engines, so we recommend that you start by setting up an account with them.

Determining Your Best Search Terms

One of the first things you will have to do is to select the key words or key phrases on which you will pay to have your ad appear. Here’s how we recommend you do this:

1. Try to adopt the viewpoint of a person who would be looking for your product or service. Think about what words or phrases they might type into a search engine in order to find your product or service. Start making a list.

2. Go to the web sites of one of the companies competing against you. From your browser select View | Source. This shows the HTML source code of that particular web page. Near the top you will see a paragraph like this:

<META NAME="keywords" CONTENT="pay per click search engines, pay
for placement, pay ranking search engines, bid position, pay per

This is called the meta-tag area of a web page, which is hidden when you view the page normally but is visible when you select View | Source. Meta-tags on a web site are important in order to achieve good rankings in the regular (non-paid) search results of a search engine.

After where it says CONTENT=, and within the quotation marks, are search terms or phrases that that company thinks are significant for their product or service. Those are phrases where they hope to appear near the top of the regular listings when people type those phrases into a search engine.

For your competitors’ sites, you can figure that the phrases within the meta-tags area might be good search terms for you. Go to the web sites of at least 2-3 of your top competitors and make a list of the key phrases they use in the meta-tags area.

Bids and Bidding

For paid search engine advertising, during the process of setting up your account and your ads that are connected to specific key phrases, you will be asked how much money you want to bid for that key word. In other words, how much money you are willing to pay each time someone clicks on your ad and goes to your site.
In general, the higher you bid, the higher your ad will appear amongst all the ads of all the advertisers running ads for that keyword. It is definitely not necessary to be in the #1 position in order to get people coming to your web site.

How much you should bid for a given key word or phrase depends on several factors:

a. What is the price for your product or service and how much is the profit? For instance, if you deliver a service and the average cost of that service is $3,500, with a profit of $1,000 on each delivery of that service, then you can afford to bid some money. However, if you sell something for $12.99 and your profit on each item is $6.00, then you have to bid relatively low. In general I recommend that if a company is selling an item that sells for less than $500, that they shouldn’t even be advertising with PPC.

b. What is the conversion rate on your web site? In other words, of all the people that go to your web site or go to a specific page that sells a specific product, how many of them actually buy the product? Or for lead generation for higher ticket items, what percentage fill out the form sending you their contact information and thus become a lead?

The conversion rate is important, because not every person who clicks on your ad on Google is going to do what you want them to do on your site. For example, you might bid $1.00 for a specific phrase on Google. Then by monitoring how many people click on your ad, and then comparing that to how many actually become leads, you might find that 10% of the people who click through to your site actually fill out your form and become a lead. So each person who clicks through to your site will cost you $1.00, but since only 10% of them fill out your lead form, then each lead will cost you $10.00.

This relates to profitability and how much you can afford to spend per lead or sale.

c. How much do you want to spend? If you want to be aggressive and get a lot of people coming to your web site, bid higher. If you want to be careful and not spend a lot of money, bid lower.

In general we recommend bidding $1.00 per click when first setting up an account or new campaign. Then review your account over the next week and see how high that places your ads. And see if you are getting a fair number of clickthroughs. If your ad is appearing low and your clickthroughs are low, raise the bid.


Google, Yahoo and MSN all allow you to set a daily budget for your campaign. So figure out what you want to spend for your clickthroughs for a month and divide by 30, and that’s your daily budget.

Writing Your Ad

The next important issue is the writing of your ad. The ad will consist of a headline, ad text, and an Internet address. On Google AdWords, you get a strict limit of number of characters per line for the headline (25 characters including spaces), and two lines of text with 35 characters each.

The headline will appear in bold. So you want to grab the person’s attention with your headline. It is usually a good idea to include the key phrase in the headline, though this is not a hard and fast rule.

One of the many advantages of paid search engine advertising is that you can write your ad copy, and put the ad up, and then see what the response is, and if it does poorly, it basically doesn’t cost you anything.

Bear in mind that these search engines expect you to get a certain level of response, so if your ads are doing poorly they will lower them in the rankings or even suspend your ads from certain key phrases. They are businesses of course, and have to make a buck too.

But the point is that you can experiment with different wording for your ad and your headline. Whenever you make a change, Google automatically records data on the change, so you can review your “change history” later to see which changes you made when. Then when your response goes up or down, you know what the change was that caused it and when that change was made.

Your Landing Page

When you set up your ad on Google, Yahoo Search or one of the other search engines, you will have to choose a "landing page" for the ad. That’s the page where the person lands when he clicks on your ad. A few tips on how to work your landing pages:

1. In all cases, it is best NOT to have the landing page be the home page of your site. We recommend to create a new page whose sole purpose is to be a landing page for that paid ad on one of the search engines.

2. Do not put navigation buttons on the landing page to the rest of your site. Design the page so that the only thing they can do on that page is fill out the form you want them to fill out. This will always increase response, and giving them full navigational buttons to every other page under the sun on your site will always lower response. Giving them only one option controls the process to a much greater degree.

3. Design the landing page so that there is a bit of sales text on the top of the page, including any graphics as needed, and then there is a phone number and a form on the lower part of the page. If possible, do not make them click through to yet another page to fill out the form or buy the product.

4. Create a separate landing page for each of your ad campaigns for each of the search engines. In other words, if you are advertising your widgets on Google and Yahoo Search, create a landing page for your ad on Google and a separate landing page for the Yahoo ad.

The reason for this is that when you create the form, there is a line in the HTML code where you can specify what the subject line of the email will be, when the person clicks "submit" and the form contents are emailed to you. We recommend giving 4-digit codes to all promotions that you, so give one code to the Google ad and a different code to the Yahoo one. Then when the emails arrive, you’ll be able to tell how well your ads are doing on each search engine.


Google now has a feature called geo-targeting, where, when you set up your campaign, you can select where your ads will appear geographically. So if you have a local business that sells to the public in the greater Los Angeles area, you can select the metro LA area and your ads will only appear there.

Managing and Measuring Your Campaign

On Google, Yahoo Search, and MSN, by logging into your account you can see various statistics on your account. Here are the most important things to look for in measuring how you’re doing:

a. Impressions: These are the number of people that saw your ad, meaning they entered that specific key word or phrase, and your ad appeared. You can see the total impressions by day, for the week, and you can break it out so you can see the impressions for specific key phrases.

High impressions means that you have selected key phrases that a lot of people are entering.

b. Clickthroughs: This means the number of people that, having seen your ad, clicked on it and arrived on your landing page. The search engines will show the clickthroughs as a raw number and also as a percentage compared to the impressions.

High clickthrough percentages means you have been successful in writing an ad that a good percentage of people were interested enough to click on, to go to your site.

c. Conversion Rate: This means the percentage of people that clicked through and went to your site, that actually did what you wanted them to do. If you are selling products right on the site, the conversion rate means what percentage of people that arrived there actually bought the product. If you are advertising to generate leads, the conversion rate is the percentage of people that clicked through that filled out the form and sent you their information.

The conversion rate is a measure of success of your landing page. If you are getting good conversion rates that means you have done a good job of writing and designing the landing page. If your conversion rate is poor, that means you need to look again at the landing page and figure out where you could change it to make it better, or at what points you might be losing people.

In our experience:

1. A good clickthrough percentage is anything over 0.5%. If you are getting 1.0% or better, that’s pretty good. If you are getting less than 0.5%, you should test some changes to your ad.
Remember that a poor clickthrough percentage is a reflection of your search engine ad, not your landing page. So make changes to your ad, not your landing page, when trying to improve it.
2. A good conversion rate is anything from 3% to 5%. The highest conversion rate we have ever gotten on a web site is 50%. If you are getting 2% or less, you should test some changes to your landing page and try to improve it.

And likewise remember that a poor conversion rate is a reflection of your landing page, so make any needed changes there.


In the constantly changing landscape of the Internet and Internet marketing, paid search engine advertising is currently a very successful tool. We recommend you try it sooner rather than later.

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