Is it worth paying more to be number 1 on Google PPC?

For many companies, using Google Pay Per Click is a good strategy to attract target prospects. It is important to be on the 1st page of Google as typically only around 1/3 of people using search will look beyond the first page and fewer than 1 in 6 will go beyond page 2. 

Higher ad positions achieve better conversion rates

According to Google, having an ad position of 2 (2nd from top) will have a conversion rate of around half the ad in the top position. 

With my PPC experience I would agree that the higher the ad position the better but there are exceptions for individual brands / ads. The data below (from one of my PPC clients) shows the improved performance the higher the ad is shown, compared with ad position 8. When the ad was shown in:-

• ad position 1, it attracted 90 times as many visitors
• ad position 2, it attracted 30 times as many visitors
  
• ad position 3, it attracted 20 times as many visitors
  
• ad position 5, it attracted 10 times as many visitors
• ad position 7, it attracted   5 times as many visitors
  

So the obvious start point is to aim for the highest ad position. However, the actual ad position achieved will depend on your maximum Cost Per Click bid and your Google Quality Score. The quality score will depend on a range of factors including your account history, the landing page and ad text.

Can you afford to bid for the number 1 position?

In the above example, let's suppose that when the maximum Cost per Click bid is £1 you achieve an average position of 3. Moving to position 1 will provide 4.5 times more traffic. The extra amount you will need to bid to achieve an average position of 1 or 2 (all other things being equal) will depend on the competition for that keyword. It might be that you only need to bid a few pence more. Alternatively it could be £3 or £10.

The right strategy will depend on how well your site converts these visitors to customers and the value of a profitable customer. The best way to approach this is to:-

1. calculate the value (not revenue) of a target customer e.g. £100
   
2. identify the customer Conversion Rate e.g. 1% of visitors
3. calculate maximum Cost Per Click bid price = Avg Customer Value / Conversion Rate (in this example £1)

So in this example, £1 maximum bid price would provide an ad position of 3rd from the top. Although, higher bid prices would attract significantly more website visits, the higher cost of achieving the extra visits would exceed the value / profit of the extra visits. i.e. There is no point paying £150 to get a customer worth £100.

So is it worth paying more to be number 1 on Google PPC? 

Sometimes the answer will be yes but it will depend on analysing the various factors outlined above and calculating the maximum bid price based on the value of your customer. 

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Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.