This article is part of a 4-part series on Getting Started with Pay-Per-Click and Google AdWords. If you'd like to review these posts, click the links below:

In this second post of four on getting started with PPC and Google AdWords, we look at how to size up a market.  (If you missed the first post, read that one first - Getting Started with Pay-Per-Click and Google AdWords).  The goal today is to know whether there's enough traffic to justify an invest PPC advertising.

As such, not every market drives online volume comparable to its brick and mortar activity. So, to determine whether PPC makes sense for your niche, consider these 3 questions:

  • How strong is demand for this product?
  • How competitive is this market?
  • How much will clicks cost?

How strong is demand for this product?

Come up with a keyword phrase you think people will use most often when searching for your product. Now go to the Google Traffic Estimator Sandbox and enter your keyword phrase.  If we leave the second field in #2 blank, Google will return traffic estimates based on a payout sufficient to yield the top position on the page 85% of the time.

The tool gives a Google search volume estimate on a 1 to 5 scale, plus an estimate of the number of clicks you can get at a given bid price.  Now, we can see whether the search volume for a given product is healthy or anemic.  These are the traffic estimates for the terms we entered:

How competitive is this market?

At the Google homepage, you can get a fast and dirty idea of how competitive a market is. Figure if there are 50 or more bidders on a search term, it's cutthroat but very lucrative for the winners. Fifteen or fewer, it's relatively easy to compete although there may not be a big revenue base to go after.

Enter the term weight loss. Thirty-three pages of paid ads turn up for about 327 bidders. Enter the term cockatoo. Only four bidders appear on the first page and that's it.  But, the real measure of competition is the bid price per click, so let's turn to that.

How much will clicks cost?

As we saw earlier, the Google Traffic Estimator Sandbox provides a way to check the price for various keywords without having to log into your AdWords account.

Assume you're selling a $50 weight loss supplement, the profit is $40, and the conversion rate is 1%. This means 99 of 100 clicks don't buy. At the high end of $2.73 a click for the broadest version of the term weight loss, you'll eat about $270 before you make your first sale. Moreover, this scenario would repeat itself 46 times a day! Ouch.

For the exact term, weight loss, the high end runs $870 per day. At a $40 profit per sale, you need nearly 22 sales to break even. This would require an 8.6% conversion rate. By bidding for less competitive positions on the page (to reduce your outlays) and by improving ad copy and landing page effectiveness (to boost conversion rates), a profitable opportunity might exist with this keyword phrase, but you need to be careful.

Conclusion

In our next post, we'll take you through the process of creating a Google AdWords account, delve deeper into the mindset needed to succeed and look at some advanced tools Google provides.

SEO kit

Originally published Mar 20, 2008 11:32:00 AM, updated March 21 2013

Topics:

PPC