Paying for placement is a fact of life. With the success of Overture and Google AdWords has come the reluctant realization that paying per click does work and can drive qualified, cost efficient traffic to websites. As an example of this, you only have to look at Overture’s ballooning revenue numbers, growing from $822,000 in 1998 to well over 600 million in 2002.

The purpose of this column is not to expound the virtues of pay per click (PPC). This was dealt with in a previous guest column by Register.com Product Manager Evan Britton. If you need further proof, we can put in touch with an Overture or Google advertising sales rep. Today, however, I’m trying to save you money on your pay per click. Consider it a late Christmas present.

This week, I’ll look at the main PPC players and explain how the various syndication networks work. I’ll also look at how you can save money by spreading your budget over multiple keywords and engines. In the next NetProfit, we’ll be looking at other ways to save on PPC, including targeting the right keywords and geographic markets, day parting, maximizing click throughs with effective titles and descriptions, finding the right place to rank and how to avoid bid gaps and traps.

The Players

There’s a lot of pay per click options. If you had the inclination and the time (not to mention very little life to speak of) you could find hundreds of them. Don’t bother. Here are the top ones: Overture, Google AdWords, Findwhat, 7Search, Kanoodle, Espotting (UK), ePilot, GoClick, Ah-ha, Search 123, Sprinks and Xuppa. Of these, Overture and Google will produce well over 90% of all PPC traffic. Like the rest of the search industry, PPC is dominated by a few players. If the UK market is a target, Espotting is the dominate player, followed by Overture.

How Overture (and most of the Others) Work

The model pioneered by Overture (then Goto) and used by most of the other PPC engines is fairly straight forward. The more you pay, the higher you’ll rank. You bid for keywords on a per click basis and bidding is open on a 24-7 basis.

Recently, Overture has introduced an auto bid feature that automatically eliminates bid gaps that may result from bidding more than is required to stay ahead of the next lowest bid. Unfortunately, PPC strategists have discovered that this feature can be used to trap competitors into paying higher bid amounts (more about this in the next NetProfit)

How Google Works

Google takes the basic bid for placement model introduced by Overture and throws a Googlian twist in it. With Google, your placement depends not just on the amount you bid, but also your listings popularity with searchers. The more click throughs you receive, the higher your listing will climb. Like Overture, Google allows you to put the maximum you’re willing to bid and it will automatically adjust your current bid amount to ensure that you’re only paying 1 cent more than the next highest bidder.

Here’s how the bid amount and clickthrough formula works

In the first example, the bidder has set a maximum cost per click of 46 cents and has a clickthrough rate of 1.21% . This gives this advertiser a Google ranking value of .56

.46 X 1.21% = .56

In the second example, the maximum cost per click is 32 cents but the clickthrough rate is 4.3%.

.32 X 4.3% = 1.38

This would give the advertiser a Google ranking value of 1.38, giving them top spot even though they’re paying less than the first bidder. It’s Google’s way of policing against advertising for irrelevant terms.

What about LookSmart?

LookSmart is a strange hybrid that falls somewhere between being a directory and a pay per click engine. To be included in their directory, LookSmart charges you a $0.15 for each clickthrough. The 15 cent charge does not guarantee any placement. Its actually more like Yahoo’s Express Submission fee, charged on a per click basis rather than in one shot. LookSmart still has a one time initial submission fee of $49 and a minimum monthly charge of $15. For more on Looksmart, see LookSmart changes to cost-per-click listings.

Syndication Networks: Who’s Showing What Where?

The real benefit of the main cost per click engines are not in the traffic they can themselves provide, but the traffic that comes through their syndicated search partners. These syndication deals generally take the top few PPC listings and show them combined with the partner’s search results. Here’s a rundown of the major PPC engines primary syndication partners.

Overture: Yahoo, Lycos, Excite, Altavista, MSN, Go, Alltheweb & Hotbot

Google: AOL, Netscape, Compuserve & Earthlink

Findwhat: Dogpile, Canada.com, Infospace, Excite, Webcrawler.

Kanoodle: Search.com, Netzero, Mamma

Sprinks: About, Dogpile, Infospace

Ah-ha: Mamma, Canada, Dogpile, Netflip

For a more complete listing of syndication partners, see Who’s Partnering with Who? on PPC Bidmaster. Remember, not all these deals will give you equal billing. Generally on partners that may show multiple PPC listings from different sources (such as Dogpile and Canada.com) top billing will go to Overture or Google.

Spread out the Clicks

The rule of thumb is that the more competitive the search real estate, the more expensive it’s going to be. The most competitive keywords on Overture, for instance, can go for as high as $30 or $40 per click!  For example, “online casinos” is going for $30.01 and “teleconferencing” for $41.16 on Overture as I write this.

The first strategy here is to find other relevant terms that may be going for less on Overture. Although the traffic numbers probably won’t be as great, you may find both the cost and the quality better. For example, “audio teleconferencing” is only $10.40. It’s more specific, will probably convert just as well and is a bargain at a quarter of the cost! Similarly, “online casino games” is just $10.07.

The second strategy is to try some of the lesser known PPC engines in addition to Overture or Google. Because they lack the prime syndication deals, their traffic volume will be much less, but a click is a click, especially when that click is a fraction of the cost! Remember, you’re only paying for the traffic that actually finds you. Again, as an example, “teleconferencing” is just $1.90 on Findwhat, $0.45 on Kanoodle and $0.31 on Ah-ha.

We’ve Only Just Begun

Today we looked at the various PPC players. In the next NetProfit, we’ll get right down to the business of stretching your PPC budget to give you the maximum impact for every dollar spent.