The Search Engine Marketing (SEM) Industry is estimated to reach US$23 billion by 2010 and the vast majority of SEM investment in the coming years will involve pay-per-click.

Pay-per-click is a simple marketing technology that has been around for a long time. What it basically is about is: The user bids on a search term/advertisement; the amount the user bids determines what tier the user falls into as compared to other bidders; the user pays the amount he bids each time a searcher clicks on the advertisement.

It’s a very simple concept. Many buy pay-per-click advertising because they want site visitors, and more importantly, want to convert these visitors into customers. However, many have been burnt by pay-per-click because they didn’t watch their click sales ratio, thereby wasting a lot of money, or were hit by click fraud.

It is also a sad fact that for all the clicks and conversions via pay-per-click, many SEM players will miss the lead generation that natural Search Engine Optimization (SEO) offers through greater Internet acceptance and traffic. The fact is people are far more likely to click on a natural listing. Studies show that about 60%-70% of the links people click on are organic, not the pay-per-click variety.

Remember, a few cents per click may not seem like much at first, but if you have a few hundred visitors a month clicking on your advertisement, and these are not converted to customers, your money is being thrown out of the window. Likewise, if you put a 10 cent bid and receive a dozen visitors and every one of these buys a product/service of yours, then it makes sense to increase the bid on your advertisement.

Essentially, pay-per-click strategy is an art because there is no precise mathematical way to predict the perfect middle between what you pay per click and what your converted customers are purchasing. The key is to experiment by starting off bidding low and then monitoring your click-throughs in order to see if they convert to actual sales. If you get no click throughs, increase your bid slowly till you do. Do remember that when adopting and using pay-to-click, constant vigilance is a must. Remember click fraud is becoming an increasing statistic worldwide.

Pay-per-click advertising is a good supplement to search engine marketing and search engine optimization if it is used intelligently. The following points should be cardinal rules when employing pay-per-click:

• Ensure a strategy is in place
  Target your online ads around your business strategies and priorities.
• Choose the right search terms.
  Avoid broad phrases and terms which also cost much more. Instead strive for more descriptive and specific search terms that reflect your products or services.
• Look into having software that can regulate your bids and turn off keywords
  You might be interested in clicks during business hours Think about bid management software.
• Work on and place effective ads
  It is important to note that Google, Yahoo! Search Marketing and other services have limits on characters per line. With Google, it's tough not to push the limits because space is so narrow. With Yahoo! Searching Marketing, focus on getting your message across without consuming every character. Long ads may discourage people from reading them.
• Test
  Effective evaluation is a must and the secret to this is to test, test, test. Try different keywords, ad copy, landing pages and calls to action, and find out what fits best to your company. Remember there is no fixed formula of success.

When it comes to pay-per-click, SEM vendors and companies who have a coherent plan in place and one that produces outstanding conversions will be the winners. These winners will make their online dollars work for them.

By Shanti Anne Morais