RESEARCH BRIEF (PPC for Subscription Sites)

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1 RESEARCH BRIEF (PPC for Subscription Sites) CALL FOR RESESARCH PARTNERS MEC is currently undertaking a series of new research projects and is seeking qualified partners. Research areas include: Site Design Conversion Improvements Pay-Per-Click (Google, Overture, etc.) Natural Search Campaigns Order Process Strategic Marketing Alliances Subscription Sites For more information, please visit. UPCOMING WEB CLINICS 1. Wednesday, July 7-4 PM EST - Optimizing Your Website's Landing Pages 2. Wednesday, July 21 4 PM EST Long Copy vs. Short Copy 3. Wednesday, August 4 4 PM EST Utilizing a "Configurator" to Increase Conversion To participate in any of the above clinics, please THE NAME OF THE CLINIC to: We will respond with instructions on how to participate in the call. Page 1 of 9

2 UPCOMING RESEARCH BRIEFS 1. Optimizing Your Website's Landing Pages 2. Utilizing Amazon Stores 3. Long Copy vs. Short Copy Topic: PPC for Subscription Sites Previous MEC reports have focused on pay-per-click (PPC) search engines, both large and small. You will find these reports listed at the end of this brief. Our focus in most of those articles has been optimizing PPC campaigns in general or for retail sites specifically. But what about utilizing PPC engines to drive traffic to a paid-subscription site? Can PPC campaigns still produce a positive ROI? What special guidelines should you keep in mind for these sites? This report will answer those questions and will offer 12 key practices for optimizing PPC campaigns for subscription-based sites. HOW EFFECTIVE ARE PPC SEARCH ENGINES FOR SUBSCRIPTION SITES? To answer this question, we launched a series of test campaigns for three different subscription-based sites: Company A is a well-respected news site that sells annual subscriptions. It offers no free trial period, and no free or discounted "partial" membership. Company B is a web-based company that sells a monthly subscription to its coupon/reward benefits club. It offers a money back guarantee but charges customers up front. Company C offers articles and tips for IT and database professionals. It charges for a monthly subscription, with the option to purchase a discounted quarterly or annual membership. It offers a money back guarantee and a free limited-access membership to the site. Consider the following PPC data for these three companies over a 38-day period: Page 2 of 9

3 PPC Campaigns for Subscription-Based Sites Company A Company B Company C Clicks 7,333 20,204 34,863 Average CPC $0.05 $0.19 $0.08 Campaign Cost $ $ $ Paid Subscriptions * Conversion Rate 0.041% 0.342% 0.181% What You Need to UNDERSTAND: The three companies converted their pay-per-click traffic at 0.04%, 0.34%, and 0.18%, respectively. Although Company C had a lower conversion rate, it was able to generate more clicks at a much lower CPC than Company B. * Note: Although Company C only generated 63 paid subscribers, it also generated 2650 free subscribers. Were these campaigns successful? From the perspective of a retail site, the simple answer would be no. A typical retail store might use a conversion benchmark of 1-2%, with an excellent campaign converting above 2%. KEY POINT: However, many of the keywords for information-based sites are less competitive than retail-based keywords. This may allow you to make up for a lower conversion rate with lower average bids. KEY POINT: In addition, paid subscriptions often account for recurring revenue at a fairly high profit margin. The true indicator of the success of these campaigns would have to come from the lifetime value of a paid subscriber. In the following table, we calculate the minimum lifetime value of a subscriber that would allow each of these campaigns to "break even". Break-Even Point for PPC Campaigns Company A Company B Company C Campaign Cost $ $ $ Paid Subscriptions Break Even Point (per subscriber) $ $55.63 $44.27 What You Need to UNDERSTAND: In the three campaigns above, the average value of Company A's subscribers would have to be at least $ to break even. Company C, on the other hand, only needed an average lifetime value of $44.27 per subscriber to break even. A number of factors will affect the profitability of your PPC campaigns, including your target audience, competition for keywords, offer price, profit margin, and so on. Page 3 of 9

4 But it's important to mention an additional critical factor that can impact the success of PPC campaigns for subscription sites. Subscription sites may benefit greatly from customizing a landing page and a subscription process specifically for PPC marketing channels. Company C had a carefully customized landing page and subscription process sequence, while Companies A and B did not. Company C continues to utilize PPC engines profitably, while companies A and B have abandoned the marketing channel because their average customer values were too low to break even. To help you determine the profitability of your own PPC campaigns, we have prepared a special spreadsheet: KEY POINT: We recommend a series of micro-tests to determine if PPC advertising will be a profitable marketing medium for your subscription site. However, the following key points should help you optimize your campaigns for the greatest possible return. 12 EFFECTIVE PRACTICES FOR SUBSCRIPTION-BASED PPC CAMPAIGNS 1. KEY POINT: Strongly consider offering a free trial period, a no-hassle money-back guarantee, or a discounted or free limited-access membership. Many publishers have had success with offering a free or discounted membership that will automatically renew at the regular rate when the trial period is over. Offering a free trial or money-back guarantee expresses confidence in your content offering and takes the threat away for potential subscribers that might be "on the fence". 2. If you don't offer some kind of free membership, definitely offer a free newsletter. PPC traffic that visits your site may take advantage of your free newsletter offer. This will give you an opportunity to sell them a site membership in the future, without having to pay to reach them again through the PPC engines. For more on this topic, see our reports on Capture: 3. Consider offering a quarterly, semi-annual, and/or annual membership at progressive discounts. This will encourage long-term memberships, which can increase the average lifetime value of your subscribers. 4. Be aware of the economies of scale. For most subscription sites, the costs involved in creating content do not increase as your sales increase. This differs from retail sites, which incur greater overhead and maintenance costs as sales increase. Thus, it is usually true that the profitability of each paid subscriptions will actually increase as more people join your site. Page 4 of 9

5 5. On Google AdWords, utilize negative keywords, smart display URLs, and geotargeting (where appropriate). For more on optimizing your site for Google AdWords, see our recent report on that topic: 6. Review our word report on Overture: 7. Utilize Google AdWords and Overture, but don't overlook smaller PPC engines as well, which will often allow you to bid less (due to less competition) and achieve a higher ROI. For more on this topic, see our report on Smaller PPC Engines: 8. Avoid using hype in your ads. This is especially true for subscription sites whose target market may be inherently skeptical. For more on this topic, see our report on "Transparent Marketing": 9. Focus on the most relevant keywords. These terms will simply convert better than words or phrases that are not as appropriate for your offer. 10. Thing BROAD not DEEP. Rather than focusing on getting the number-one position for a few keywords, purchase as many (relevant) keywords as possible. 200 terms at $0.10 per click will usually perform much better than 15 terms at $0.50 per click. Overture, Google, and Teoma will help you identify more relevant keywords with their keyword suggestion tools: https://adwords.google.com/select/main?cmd=keywordsandbox 11. Don't bid in round numbers. Bids often cluster at levels such as $0.10 or $0.25. Set your bids a penny or two higher. 12. Create customized landing pages for specific keyword bids. Our next Research Brief will focus on using multiple landing pages to increase your conversion rate. While PPC search engines have been established as a very effective marketing medium for most retail sites (especially those with less competition for keyword bids), the situation is much less clear for subscription-based sites. In the examples presented above, our test sites required an average lifetime subscriber value of $44 to $122, which is not always easy to achieve. However, through a series of micro-tests utilizing the guidelines listed above, you should be able to determine whether PPC is an effective marketing medium for your subscription site. Page 5 of 9

6 RELATED MEC REPORTS: Google AdWords Tested: Overture Tested: Small PPC Engines Tested: Content Sales Tested: Offer Pricing Tested: Capture Tested: Capture Pop-Ups Tested: Page 6 of 9

7 As part of our research on this topic, we have prepared a review of the best Internet resources on this topic. Rating System These sites were rated for usefulness and clarity, but alas, the rating is purely subjective. * = Decent ** = Good *** = Excellent **** = Indispensable Search Engine Watch **** 30+ PPC Search Engines Reviewed, 600+ Listed **** Google AdWords: Best Practices **** Campaign Optimization under Google's Smart Pricing *** Google's Regional Targeting Power *** Think Negative *** How Search Engines Make Money *** PayPerClickAnalyst.com *** Paid Placement Alternatives to Overture and Google *** PPC Search Engine Bidding Strategy *** WebmasterWorld.com PPC Search Engines Forum *** Page 7 of 9

8 JimWorld Forums: Smaller PPC Engines Forum *** How to Assess the Quality of a PPC Engine *** Managing a PPC Search Engine Marketing Campaign *** Coping with Fraudulent PPC Traffic *** Overture Says Forget CPC, What's Your ROI? *** Balancing Paid and Organic Search Listings ** PayPerClickGuru.com ** GoogleBlog ** Smart Pricing for Contextual Ads at Google ** Google Provides Tighter Localization ** Up Close with Google AdWords ** Pass Out the Cigars for Google's New Baby: AdWords Select ** SearchDay: Google Launches AdWords Select ** Google's Overtures at Overture's Advertisers ** Page 8 of 9

9 Google Takes On Overture with Pay-Per-Click Ads ** Google Changes the Pay-Per-Click Landscape with AdWords Select ** Google AdWords: Sublime Poetry? ** The Google AdWords Happening ** Overview of Pay-For-Placement ** Credits: 1. Editor Flint McGlaughlin 2. Writer Brian Alt 3. Contributor Aaron Rosenthal 4. HTML Designer Cliff Rainer Page 9 of 9

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