Learn how to make your ads more competitive and cost-effective at the same time
Last week, at the end of our blog post we promised to reveal the secret to making your ads bring more visitors to your site while also spending your budget more effectively. Today, we make good on that promise. The secret to success is taking advantage of something the fancy marketing types call Yield Optimization.
Using Yield Optimization to Get the Best Results
LookSmart's ads are displayed using this yield-based auction. Other well-known PPC ad networks and search sites use this same method, it's now a de-facto standard for text-based search advertising. It works like this:
- Find the ads that are clicked on the most and figure out their click-through rate (CTR). The click-through rate is calculated as the number of times the ad was clicked on divided by the number of times it was displayed.
- Multiply the CTR (click-through rate) for each ad times the Max CPC (bid price) for the keyword. The result is called the yield. It also goes by other names like "effective CPM".
- Display the ads with the highest yield in the places on the web page where they are most likely to get clicked.
The beauty of this method is that is serves you, the advertiser, and the web site owner who gets paid when you are successful. Why does this work?
- First, the ads that get clicked on the most bubble up to the top of the auction and get clicked on more. Web site owners love getting paid.
- Second, advertisers can get to the top position by improving their ad text and adding keywords. By making your ad really relevant and by choosing the search terms that really resonate with your potential customers, you get more clicks.
- Lastly, advertisers can stretch their advertising budgets further and get more visitors for a lot less than advertisers with higher Max CPC bids. Let's look at how this works. Assume that you have an ad that is getting shown 1000 times. Another advertiser is bidding on the same keywords you are and also gets shown 1000 times.
If your ad gets 100 clicks @ $1.00 each you pay the web site owner $100. Let's say the other advertiser's ad is not as well-written as yours and only gets 25 clicks. Your click-through rate is 4 times better than your competitor's. If the other advertiser is bidding $1.00 per click like you, the web site owner only gets paid $25 by your competitor.
In this scenario, you only have to pay $1.00 for each of your prospects. But your competitor, who hasn't optimized their ad like you have, has to pay 4 times as much to get the same number of visitors as you. This means that you're getting 100 visitors to your web site for $100 when the market (your competitor) says those visitors are worth paying $400 for. That's a 75% discount on the market price.
Also, because you are more valuable to the web site owner than your competitor, you get the best position on the web page, further ensuring that your ad is visible to your audience.
That's how you use the yield-based auction to your advantage: by keeping your ads relevant and choosing relevant keywords, you keep your costs down while keeping your ads in the best place to attract your customers.
Wait... More Clicks at a Lower CPC?
Yes. By working on your ad copy to make it more relevant and by choosing relevant keywords, you can increase the number of potential customers you're reaching at a fraction of the cost your competitor is paying for the same keyword.
In our next blog post, we'll look at some of the tools in the LookSmart AdCenter that help you put yield optimization to work. In the meantime, we'd love to get your feedback or phone call...and your business! Check out the LookSmart AdCenter at adcenter.looksmart.com.
Allen Hammock
Product Marketing Manager
allen.hammock@looksmart.net
