The Microsoft adCenter Code Blog

Doug Stotland, Group Product Manager, Microsoft adCenter, MSN Search, told advertisers on August 22nd that they have the “capacity to pay more for a click” in response to questions about bids being to high and a growing ROI gap. At a Search Engine Strategies Conference panel, called “Meet the Search Ad Networks“, Stotland recommend that advertisers “adapt and adopt” to a changing market place.

Stotland indicted that he is often asked when clicks prices will stop rising and why the Big ROI Gap is getting bigger. According to Stotland, there are three explanations for rising click pricing:

1. Increasing demand from new advertisers and from bigger budgets of existing advertisers.

2. Irrational advertisers bidding up click prices.

3. Increasing ROI from search advertising.

I would tend to agree with this assessment as advertising on the web is probally the only form that truely is set at a real honest “market value”. If people are paying 2 dollars a click for a term some one is profitable at that range and it is usually those who do not properly track and tune their accounts that blindly chase top bid and of course end up on that “loosing side”.

Stotland’s recommendation to be on the winning side: pay more for clicks and “get more value from each click”.

Ways to get more value from clicks?

- “Target customers more precisely” (My View on this suggestion - With MSN’s Demographic Targeting, Time of Day Control and Dynamic Keyword Insertion I feel there are plenty of ways to accomplish this)

- “Improve CTR to increase volume and lower CPC”, (My View on this suggestion - This is a tenant of PPC anyone using Google Adsense or MSN adCenter needs to be very familure with)

- Increase post-click conversions. (My View on this suggestion - Search Engines send traffic it is then up to our sites to convert it the better a job you do here the more power you have in out bidding competitors and ending up on the “winning side”.)

There are a lot of advertisors that constantly complain about quality of traffic, click fraud and other factors but I have found over time that in any niche there are usualy some long term bidders that stay the course for years and always seem to remain in the upper postitions for their selected keywords. They are the ones that never stop improving their PPC Campains and never stop improving their websites and landing pages.

Personaly I feel the answer to the orginal question is no, the PPC Market is not over priced, well, at least not for very long because no advertisor can afford to blow money for very long on a loosing campain. The exception may be VoIP Giant Vonage who seems to be intent on loosing money consistantly in an insane strategy of “Growth Over Profit“.

In most niches that competitor bidding at the top who has been there for the long haul has fine tuned everything to maximize ROI.

My final advice NEVER chase the new bidder that just shows up maxes out a bid, he will  often be gone in no time at all as soon as he burns though his first budget or two.

Always determine your individual Value Per Visitor (VPV) and then stick to that metric, when you do that PPC is honestly always profitable. If that number is to low, tune the account, tune the landing pages and work on increasing it. That burden is on you not MSN, Google, Yahoo or any PPC Based Search Company.

What are your thoughs on rising PPC cost and getting a Good ROI?

Do you feel the market is over price or that it is incumbent upon the individual marketer to know what traffic is worth to them and make efforts to increase conversions?

Or is it a combination of both factors?