Comments on: Economics of PPC Pricing: Why Performance Deals Often Fail

By: Alan Mitchell

Alan Mitchell — Fri, 22 Apr 2011 09:31:24 +0000

Thanks Alan, you’re right – bringing in other fields can help see PPC in a different light.

By: Alan Coleman

Alan Coleman — Thu, 21 Apr 2011 10:04:43 +0000

Quality post Alan!
PPC get’s really exciting when you merge it with expertise in other topics.
Economics is clearly another passion of yours.

By: Alan Mitchell

Alan Mitchell — Fri, 12 Feb 2010 03:29:56 +0000

@ Robert

Thanks for your comment.

Youre’ right – the site’s natural conversion rate will impact how sucessfully the PPC agency can deliver sales. A poorly-designed, amateur-looking, over-priced site generally won’t convert as well as a reputable, intuitive, user-friendly site with a strong brand and good value for money.

For that reason, I think any performance model offered to a PPC agency should be relative to the current conversion rate of their site. A decent benchmark using a few month’s worth of data is therefore needed before a performance deal can be created.

Good point about conversion optimisation – I guess with any performance deal (where the agency gets paid based on conversions) it’s in the agency’s interests to work with the client to improve conversion rate through regular multivariate testing.

By: Robert Brady

Robert Brady — Thu, 11 Feb 2010 19:11:45 +0000

Alan,

Very well thought-out post. You obviously know your economics. This shows how hard it is to find a compensation model that accurately aligns the incentives for both company and PPC manager. Further complicating the issue is the fact that the site’s ability to produce conversion could adversely affect PPC efforts. Perhaps conversion optimization would be a better step to take?