Definitions: Pay per Click Terms

The following definitions apply for terms used throughout this website (some may even be found outside of the Denver PPC website :).

Ad Position One Point Oh!

More a bidding philosophy than a condition. The Advertiser occupying Ad Position One Point Oh! in the paid search rankings is the competitor most likely to contribute to an increase in CPC prices for the ad space. If she has deep pockets and is occupying Ad Space One Point Oh! purposefully, by increasing her bid reactively, then she may be an Ad Space Cowboy. If there is a fool in every ad space, the advertiser consistently occupying Ad Position One Point Oh! is the one most likely to earn the honor.

Ad Space Competitor

An advertiser competing in your paid search Ad Space. You can perform a search for your favorite keywords to identify your Ad Space Competitors. Ad Space Competitors can include Advertisers with national and local geo scopes. Aside from Shooting Stars, some element of your Ad Space may also include advertisers not normally classified as your Geo Market Competitors. When this happens, it’s generally because you or they: a) have a PPC Scope Error, or b) are purposefully purchasing one or more Tangential Keywords. Some of your Ad Space Compeitors may also be your Search Space Competitors.

Ad Space Cowboy

An advertiser with deep pockets who targets Ad Position One Point Oh! within a relevant Ad Space, sometimes without any consideration for CPC, Bid Limit and ROAS. PPC prices are set by auction, so two Ad Space Cowboys bidding in the same ad space can vaporize any Bid Limit / Market Bid buffers in a short amount of time. When two or more Ad Space Cowboys compete in the same space, the results on prices within the Ad Space can be magnificent to watch (that is if you’re not involved in the Ad Space, and you own Google shares).

Bid Limit

A limit for the maximum bid established for a specified element (often keyword, product type, or ad group) calculated on the basis of estimates for conversion rates, and profit per conversion. The precise bid limit formula applicable to a client, website, product, and individual element of a PPC account depends on the related Conversion Process (see Conversion Process definition below for an example).

Bid Limits may be disingenuously confused with “Maximum Bid,” When Maximum Bids are inappropriately set to reflect Bid Limits, this leads to a loss of the windfall buffer which is often associated with PPC ad spending (the excess of the Bid Limit over the Market price). Many advertisers still enjoy a buffer of 5x to 10x the Maximum Bid amount. Squandering such a windfall can significantly undermine ROAS, particularly when two Advertisers competing in an Ad Space make the same mistake.

Conversion Levers

The forms of conversion for a particular website. Typical Conversion Levers include online sale, contact form, phone number on web page. There are click to sale conversions and click to lead conversions. Some Miller types (if you’ve got the time, we’ve got the beer) like to define and track esoteric types of conversions. This can be helpful . . . if you have the time for it.

Conversion Process

The process by which a click is converted to a paying customer. Study the website and ask the client questions to determine the Conversion Process. It can be significantly different from industry to industry, client to client, website to website, and Web Offering to Web Offering. Many clients have several layers in their Conversion Process. Although the layers can be lumped together, it is generally not beneficial to do so.

For example, the layers of a conversion process for a carpet cleaning company who has a contact form and a phone number on his website might include the transformation from a click to a contact form, from a contact form to a bid appointment, and from a bid appointment to a paying customer. A conversion rate would be associated with each layer of the process. Understanding the process, and breaking the calculation down into steps allows a PPC Ad Manager, Webmaster, and site owner to work together to improve the performance of each step in the process, thereby improving ROAS for the PPC ad spending.

Bid Limits are calculated according to the Conversion Process. The Bid Limit calculations for an online shop would be significantly different than the following example for our carpet cleaning friend: Average profit from new carpet cleaning account = $450; ratio phone conversions to contact form conversion = 7:1; conversion click to contact form = 3%; conversion contact form to bid appointment = 25%; conversion from bid appointment to payment = 75%. For this advertiser, the bid limit would be $450 x 3%x 8 x 25% x 75% = Bid Limit of $20.25.

Conversion Rate

Generically and most often refers to the process of converting clicks to online conversions. More generally may refer to larger process of converting clicks to revenue. Calculated as number of conversions divided by number of clicks.

CpNetC – Cost per Net Click

CpNetC is cost per net click, which is total cost / (clicks – bounces). Cost per net click adjusts CPC for bounces. If you have enough online conversions to evaluate the performance of individual keywords and ads groups, then use cost per conversion as an exceptional measure of performance. However, if you’re like many advertisers who earn conversions by phone, then consider CpNetC as a good alternative pay per click performance metric.

CTR – Click thru Rate

Calculated as number of clicks divided by number of impressions.

Essential Keywords

Keywords which describe your Web Offer. Essential Keywords typically outperform Tangential Keywords as measured by quality score, CTR and conversion rate. Since keyword phrases can be either Essential or Tangential by degrees, it’s helpful to think of a spectrum with Essential and Tangential representing relative qualities.

Geo Market Competitors

These are the contenders you bang heads with day in and day out. Some of your Geo Market Competitors use PPC and bid for some of the same keywords as you, in which case they will also be considered Ad Space Competitors.

Impression

For search, the instance of your ad appearing on a search results page, or in the case of site targeted campaigns and the content network, the instance of your ad appearing on an affiliate web page.

PPC Budget Squeeze

The convergence of maximum bids and the campaign budget. A PPC Budget Squeeze can cause an advertiser to fall outside of her targeted position range.

PPC Double Nelson

A PPC management tactic requiring the activation of position preference campaign option. Used for an account which is in Bargain Hunting mode, or when there is no (or very little) buffer between the bid limits and market price, to skew spending towards keywords with low relative costs per click. Works best when there exist copious quantities of long-tail keywords. Requires careful monitoring to ensure bids and position preference settings are optimized for conversions.

A PPC Double Nelson does not take into account disparate conversion or bounce rates, so unless this is taken into consideration, a PPC Double Nelson can result in an arbitrary allocation of spending across all keyword phrases.

PPC Endogenous Factors

Those factors which can be directly controlled by a PPC Manager, Webmaster, and site owner. Endogenous factors include Click Purchases, Post-Click Experience, and Web Offers.

PPC Exogenous Factors

Those factors which cannot be directly controlled by a PPC Manager, Webmaster, and site owner. Exogenous Factors include Ad Space Competition (mostly), Geo Market Competition, demand for products or services, and the volume of searches for relevant keyword phrases occurring within a specified geo scope.

PPC Scope Error

A PPC Scope Error causes an impression to occur, when the resulting ad cannot plausibly result in a PPC Conversion. PPC Scope Errors erode quality scores, and generally result in low CTR’s, low (or zero) Conversion Rates and a detrimental ROAS.

Search Space Competitor

A website achieving page one organic search listings for your targeted search phrases. Search Space Competitors can include your Geo Market Competitors as well as ancillary / tangential listings. The intensity of competition within your search space can sometimes be determined by how many Geo Market Competitors are presently occupying your search results, how long they’ve been there, and other factors. Some of your Search Space Competitors may also be your Ad Space Competitors.

Shooting Stars

Shooting Stars are advertisers who have created a campaign laden with PPC Scope Errors. Shooting Stars cause ads to appear widely for irrelevant untargeted searches. A realtor in Chicago who purchases the term “house” nationwide is a Shooting Star. For such a realtor, in terms of PPC, he ain’t gonna make it!

Tangential Keywords

Keywords which do not describe your Web Offer, but are otherwise related in some way to: a) your Web Offer; or b) your target visitors. Relative to Essential Keywords, Tangential keywords typically earn relatively poor: a) quality scores; b) CTR’s; and c) conversion rates. In some circumstances, Tangential Keywords can generate significantly higher traffic than Essential Keywords. Since keyword phrases can be either Tangential or Essential by degrees, it’s helpful to think of a spectrum with Tangential and Essential representing relative qualities.