Saying Goodbye to the PPC Bidding Model with Programmatic

with No Comments

Saying Goodbye to the PPC Bidding Model with Programmatic

Pay-per-click (PPC), quite a concept. I remember “buying traffic” for my clients way back in ‘98 when few companies had web sites and even fewer knew how to implement online marketing. Goto.com was the service of the day (which later became Overture) and Google Adwords would not be born for another two years. Yes, this was truly “back in the day” and I was buying the keyword “Las Vegas” for a nickel. A freakin’ nickel – and people thought I was crazy!

We began PPC advertising for a tour based web site and before long, developed a model to share with our growing list of clients. Overture made it easy to create ads and set the price you were willing to pay per click. All you had to do was sit back and watch the traffic pour in – until the rest of the world started using the same strategy. The only thing Joe Competitor had to do to steal your thunder was bid a penny more. And in retaliation, all you had to do was bid a penny more than Joe. Thus the cost of traffic gradually went up and up and up. Goodbye cheap, high quality traffic.

Enter Google Adwords. The awesome search engine that started Google’s rise to world domination first offered paid advertising in 1999 but did not offer their PPC model until 2002. Up until that point, advertising within Google was all done on a CPM (cost per mille impressions) basis. The CPM model is based on impressions, meaning you pay a fixed price for every 1,000 impressions that are served. Google made a ton of money this way, so why did they stop? Well, they realized they were leaving literally millions of dollars on the table. Why charge everyone the same for each 1,000 impressions if some of the advertisers are willing to pay more for a single click?

Google had the infrastructure to serve ads on a CPM model and knew what advertisers would pay per click, so all they had to do was make sure that the number of impressions yielding each click cost them less than what the client was willing to pay. In many cases, this was significantly less. To be transparent, Adwords is incredible, absolutely the best of breed for paid search targeting. We use Adwords every day and continue to get positive ROI from it. However, we use it solely for the bottom of the funnel conversion targeting and do not prospect or run brand awareness campaigns on Adwords. Why? Because the CPM model is more cost effective and far better suited for the top of the funnel marketing, brand awareness, and prospecting campaigns. Programmatic advertising, based on the CPM model, when properly executed, can yield lower conversion metrics across the board.

With the rise of programmatic media buying capabilities in a real-time bidding (RTB) environment, the power of the purchase has shifted yet again, this time back to the advertiser. Much like Google’s transition to power in 2002 via their perfection of the PPC model, the programmatic CPM model has resurfaced as a means to gain an edge on competitors and on the inventory itself. Advertisers can now control what they pay and what they buy – all in real time, all in a fully transparent environment. Sure the metrics of CPC still have merit but getting clicks is now much simpler for those willing to look at media buying through a different lens.

Most advertisers are seeking conversions of some type – a product purchase, a completed form, a white paper download or even a phone call. These conversions all take place at the bottom of the funnel but in order to get someone to the bottom of the funnel they need to be engaged at the top. A conversion may take three, four or even ten visits to your web site. The user needs to be made aware of your brand, product, and offering, and then ultimately convinced to convert on your web site or app. Using the PPC model, scoring a conversion could cost you hundreds or even thousands of dollars.

Programmatic advertising on the other hand allows for a much lower risk opportunity to introduce your brand, product, and offering – those same three things you need to get someone to the last step of your funnel. You can get in front of the right eyes for a fraction of the cost. Sure, some of the final conversions will come via paid search, but the triggers that help people decide to buy do not necessarily live in the search engine.

This concept can be proven through what is called “view through” attribution. For too long the paid search “conversion” has gotten all of the credit because it’s the last click before the conversion. With “view through” conversion tracking you can now see that a user saw your ad (paid for via CPM), possibly clicked your ad (also paid for via CPM) but ultimately bought after clicking a paid search ad (paid for via PPC). The overall cost to reach this conversion is much lower due to the fact that programmatic CPM buying casts a wider net for a cheaper price.

So what about waste? Aren’t CTR metrics very low for CPM-based campaigns? Anyone who has been using the PPC model for more than a few years knows that the PPC click-through rate (CTR) has been in steady decline. Even still, PPC users are used to seeing CTRs in the .25 – 1.0 range (or more). When users first switch to a CPM model they often see CTRs in the .05 to .20 range, which looks like poor performance at first glance. Take a second glance, really you need to look again.

Here are some metrics from a recent B2B marketing campaign. The three month campaign was run side by side in paid search (Adwords) and programmatic CPM (Choozle). Two conversions were measured – one for scheduling a product demo, one for converting to a paid client after the product demo. The results will surprise most of you…

PPC Campaign (Adwords)

Total Spend – $36,411

Impressions – 1.6M

Clicks – 4,678

CTR – .28%

CPC – $7.07

CPA – $238.48

Conversions – 151

Programmatic CPM Campaign (Choozle)

Total Spend – $4,400

Impressions – 3.8M

Clicks – 1,865

CTR – .05%

CPC – $2.37

CPA – $107.88

Conversions – 41

Winner? Clearly, the Programmatic CPM campaign. Not only were the metrics better but there is the added value of the brand awareness of more than double the impressions. Plus, what is not shown in this brief example is that the ROA (return on ad spend) for the Programmatic CPM campaign was 3:1 versus the PPC Campaign’s .5:1. If this doesn’t make you question the PPC-only model then perhaps nothing will.

There is unseen value in having your ad seen but not necessarily clicked on. Not to mention, many more impressions are distributed and available in the CPM marketplace. If you are focusing on long tail keywords (bronze butterfly garden hose bib) then your ad may not even be seen 1,000 times in the PPC model but this same strategy in the CPM world (posting your ad on home gardening web sites) may be able to get in front of hundreds of thousands of eyes at a fraction of the cost.

Feed your funnel. Feed it heartily with a large helping of programmatic CPM strategy that is low cost, easily optimized, and highly targetable. You will still see CPC metrics in your reporting and with “view-through” attribution (available for free in the Choozle platform) you’ll see how the CPM strategy will feed the bottom of your funnel. I’m not suggesting to abandon the PPC strategy all together but relying on it as a sole marketing strategy is so 1999. So, farewell PPC. My new (old) friend CPM is way more fun to hang out with, she is way more flexible and is a much cheaper date.

Jeffrey Finch is Co-Founder & Chief Product Officer at Choozle – Digital Marketing Made Easy™. With over 15 years in the digital media space his primary focus has been in the areas of SEO, advertising, online and affiliate marketing. He has been a digital marketing and strategy consultant for small to medium-sized businesses for over a decade and has owned and operated several online companies.