Choosing The Right Strategy For Your Online Business -
Pay for Inclusion versus Pay per Click
by Richard Zwicky
Back in the old days of the Internet - in 1993, - there were
284 locations on the entire World Wide Web. According to Bill
Clinton, only 8 of them ended in .com or .net when he was sworn
into office. As of January 1, 2003, there were 171,000,000
domain hosts in use. In 1995, the largest search engine database
was Altavista, and it had most of the Internet categorized. Today
Google and FASTsearch own the largest databases. Yet neither one
of them has even 10% of the Internet covered. It's estimated that
more than 8,000,000 web pages are added to the Internet every day.
None of the search engines are able to keep up to that pace. So
how will your website stand out? How will it acquire the traffic
it needs to succeed? There are many ways to approach the issue
of marketing an online business, but for the sake of this
article, we'll concern ourselves solely with online tools, and
ways to expedite success. In that vein, we'll concern ourselves
with Pay for Inclusion and Pay for Placement (or Pay per Click)
advertising.
What is Pay for Inclusion?
Some engines, such as AltaVista, Inktomi, Looksmart and FAST,
use a pay for inclusion model. What this means is that to be
guaranteed to be found within that specific search engine index,
the website operator must pay a fee to be listed. It's similar
to the fee a business pays for a Yellow Pages listing. These
fees vary from monthly to annual. Looksmart charges a listing
fee, plus a fee of $0.15 per clickthrough.
Engaging a Pay-for-Inclusion service does not come with any
placement guarantees. If your website is not properly optimized,
but you paid an inclusion fee, it is guaranteed to be indexed
and listed somewhere within that search engine. If you want to
ensure success with a Pay-for-Inclusion search engine, then your
website must still be optimized. Without proper optimization,
which includes an analysis from the perspective of all the
factors that the search engines look for, a pay for inclusion
service will not deliver the desired benefits to the website
operator.
When properly matched with a comprehensive Search Engine
Optimization regimen, a Pay for Inclusion program will result
in powerful results: Qualified Traffic, Customers, and Relevant
Traffic.
What is Pay for Placement, or Pay per Click?
Pay per Click advertising is the process by which a web site
operator can arrange for a website to be placed in a pre-defined
position within certain search engines, such as Overture.
Search Engine Placement is always a Pay-Per-Click solution.
While advertising websites are only permitted to buy advertising
in search queries that are relevant to their content, they are
not sorted by relevance but rather purely based on bid value.
Pay per click services allow advertisers to bid for each visitor
directed through to their web site, based upon the number of
clicks the ad receives. Pay per Click search engine placement
should be realistically viewed for what it is - an online
auction. Advertisers bid against each other for a fixed position
within a list of search results. The advertiser who bids the most
is given the top spot in the list. Each advertiser bids according
to their budget, and has to know his or her Return On Investment
(ROI) to determine how much money should be spent on acquiring
new customers.
How Do I Know Which Strategy Is Right For My Website?
For those advertisers where the ROI is sensible or worthwhile,
pay per click search engines are valuable customer acquisition
tools. But is it right for you? While it can be expensive,
here's a way for you to easily determine the ROI for your online
business, and determine if it is the right choice for you. Take
out a sheet of paper, and at the top of the sheet mark down the
average price of the goods you sell - we'll use $100.00 for the
purpose of the example. From that number, make some simple and
basic calculations, outlined here:
1. $100.00
2. -$ 50.00 Cost of Goods
3. -$ 5.00 Transaction Cost (bank charges, credit card)
4. -$ 8.50 Shipping Fees (This assumes you're delivering
a product, it needs a box, label, and has a
delivery cost.
5. -$ 10.00 Customer support costs - time on phone, email,
etc...supporting and processing the transaction.
What's 1 hour of your time worth?
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$ 26.50 Margin
Assuming this margin is correct for your website, is a Pay per
Click campaign right for you? You'll need to look at your stats
to judge this properly. You need to determine how many of your
visitors are converting into buyers. IF your website has a 4%
conversion rate, and your category is moderately competitive,
you will probably need to budget at least $1.00 per click to get
spot #3. Spot #3 is important because more often than not it's
the top 3 spots per page of search engine results that are
reserved for Pay per Click advertisers.
Assuming your website gets into the top three spots, here's how
the math works if you get 100 clicks in a month. Since it's all
percentage based, the same holds true if you get 25 clicks or
10,000 clicks.
100 clicks @ $1.00 per click = $100.00 cost.
4% conversion = 4 sales = 4x $26.50 (margin on sale) = $106.00
Cost = $100.00
Margin = $106.00
Profit = $ 6.00
So, if the above were true, and IF the pay per click
advertisement sent you 100 visitors per month, you would make
$6.00. Would you make much less having spot #4 instead of spot
#3 ? If it meant one less sale a month, that would be worth it.
You would make $70.00 more by selling less! Does spot #3 get
much more traffic than relevant results in spots 4 through 10?
Not at all for spot # 4, 5, 6, and only a little bit more for
spot #'s 7-10. Remember, people usually look at the title or
site description to see if it is relevant. Pay per Click is
worth the money if your website is not found under any relevant
queries in the top 20, but its value drops quickly if a website
is found easily in the free listings within the search engines.
Is Pay for Inclusion Less Expensive?
If we use the same calculation as above, and your website had
4 sales from a pay for inclusion engine where you paid $39.00
per year, or $3.25 / month, your profit would have been $103.25.
What About The Cost Of Search Engine Optimization?
Search engine optimization does not have to be expensive. You
can do the work yourself, but you need to ensure that it makes
sense to do so. By this I mean, is doing it yourself a cost
efficient, business proposition? Any time that you as an
individual put into search engine optimization is time that you
take away from business fundamentals and essentials. It's time
away from customer support, content creation, service,
administration, product research, other marketing, etc... What
is that time worth? It's got to be part of the ROI calculation
too. More and more people are choosing to outsource this work.
It's estimated that 70% of online businesses will outsource
non-core operations this year. It only makes sense. It's smart
business to focus on what you know and do well and to hire
others to support you in the other areas. Not many smart
businessmen write their own contracts - they get their lawyer
to do it. They want to ensure it's done right. Doing it right
in the first place saves money in the long run. Outsourcing
means getting someone else to do the work for you, properly. It
does not mean getting someone to tell you what to do, or how to
do things.
What's Right For Your Website?
In the long run, a website operator that has a well optimized
website will beat out a non-optimized website that concentrates
on Pay per Click advertising for customer acquisition every day
of the year. He may make fewer sales in a year, but he will make
more profit from each sale. If the website is properly optimized,
it will enjoy better placement in more search engines. This means
it will survive, and prosper in the long run.
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Richard Zwicky is a founder and the CEO of Metamend Software,
(http://www.metamend.com) a Victoria B.C. based firm whose
cutting edge Search Engine Optimization software has been
recognized around the world as a leader in its field. Employing
a staff of 10, the firm's business comes from around the world,
with clients from every continent. Most recently the company was
recognized for their geo-locational, or LBS technology, which
correlates online businesses with their physical locations.
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