PPC Ad Position Vs Conversion Rate And Cost

PPC Ad Position Vs Conversion Rate And Cost

I have been asked the same question by a number of my clients; I do find it difficult explaining this at times without sending through a mathematical formula. I decided to write this into an email, and now a blog post. It is a simple concept once you can get your head around it.

A lot of testing has been done by Google and online marketing agencies to verify whether ad position actually affects the conversion rate of a site. It has been proven that the conversion rate varies less than 5% across the 11 ad positions available – which is very low considering the variation in pricing for certain keywords.

http://adwords.blogspot.com/2009/08/conversion-rates-dont-vary-much-with-ad.html

Now to the guts of the post! You sell $200 Widgets online, with a 100% profit margin – You need to make the cost per aqusition less than $75 to make the exercise viable.

If you have $5 to spend per day, top position costs $2.50, second position costs $1 and 3rd position costs $0.50.

Budget: $5.00 per day.
1st position = $2.50 per click.
2nd position = $1.00 per click.
3rd position = $0.50 per click.

1st position = 2 clicks per day.
2nd position = 5 clicks per day.
3rd position = 10 click per day.

Research supports that there is a variance of 5% across all of the 11 ad positions, so:

1st position = 2 clicks per day / Conversion rate 1% = 0.04 Conversions/day * 30 (month) = 0.6 conversions per month for a $5 daily budget – $150 Monthly Budget – In order to make a sale you need $250 to spend – not viable.

2nd position = 5 clicks per day / Conversion rate 0.99% = 0.095 Conversions/day * 30 (month) = 1.485 conversions per month for a $5 daily budget – $150 Monthly Budget – In order to make a sale you need $101 to spend – not viable.

3rd position = 10 click per day / Conversion rate .98% = .098 Conversions/day * 30 (month) = 2.94 conversions per month for a $5 daily budget – $150 Monthly Budget – In order to make a sale you need $51 to spend.

Viable – $49 profit per sale – (ROI 49%) Wooo Hooo! In theory for every $1 you spend you will get a return of $1.49.

What this means is, if the PPC campaign objectives is conversion or sales orientated having a lower ad position actually provided a better ROI, than a higher position.

Placing an ad in the top positions is really only good for a branding exercise. I have noticed that it is common to think that being number 1 for PPC ads are the best position – but nothing could be further from the truth!

E-Web Marketing
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E-Web Marketing

We’ve been in the digital marketing field for over 18 years and worked with hundreds of Australian (and international) businesses to grow their web presence. Specialising in SEO, search ads (PPC), social media, content marketing, email marketing and conversion rate optimisation.
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E-Web Marketing

<p>We’ve been in the digital marketing field for over 18 years and worked with hundreds of Australian (and international) businesses to grow their web presence. Specialising in SEO, search ads (PPC), social media, content marketing, email marketing and conversion rate optimisation.</p>

2 Comments
  • Posted at 3:08 am, March 4, 2011

    Ohhhh such a good point about ad position. Likewise, the statistics you end up with from your first $20 spending, is NOT scalable. IE Adding another $20 will not produce the same statistics as the first $20. Pick you daily budget and stick to it for a solid 2-4wks to get reliable data.

  • Posted at 1:56 pm, March 4, 2011

    I agree, but I wouldn’t base the data on a time frame. I would only base the data on the amount of clicks produced to make an informed decision, or of course impressions.

    If you are in a very niche industry, you might only get 10 clicks a week. If so, over the period of 1 month you only have the data for 40 clicks, which really isn’t that much.

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