It seemed a lot easier in the beginning. When we were all a bit younger and everyone was talking about Goto.com, it felt like we could make money in paid search using just about any keyword we wanted. But then everyone else found out about our secret and the per-click bids started going higher and higher. That’s good news for Google and Yahoo!, but what about you? What do you do when your best keywords are rising to bids you can’t afford?

Why Are Paid Search Per-Click Fees Rising?

Scarcity. An economist would tell you that when there are more buyers for the same supply of goods, prices go up. And while you may not think of search keywords as a “good,” the truth is that there is only one #1 ranking for each keyword, and when several companies want that spot, the price inevitably rises.

And it is undeniable that more and more marketers are discovering search marketing. US paid placement is expected to continue growing faster than any other sector of online advertising, at 17% a year according to Jupiter Research. And European marketers reported in 2003 that they paid approximately €2.00 each time a searcher clicks on their paid listings and 55% regard that cost as “relatively cheap,” according to Forrester Research ($349 fee required). Studies like those make you wonder if per-click prices will continue to go up.

How Do You Combat Rising Per-Click Fees?

Rising prices are not really a problem, as long as you can get the proper return on your investment. But if you are finding your return dwindling, as so many are, it’s time to take action:

  • Don’t blindly chase the #1 ranking. Don’t get me wrong—#1 rankings are great, but only when your return is more than your investment. You can’t overpay on every click and make it up in volume. Sometimes, less-popular queries show similar conversion rates for both the #1 and the #10 results.
  • Chase the “tail” instead.No, not your own tail—thesearch tail

    . Instead of rushing headlong after the most popular keywords that have the highest per-click fees, why not go after more specific keywords that fit your business more closely? Instead of buying “shoes,” why not buy “safety shoes” if that is what your company makes. Not only will you pay less per-click, but your conversion rate will be far better as well. If you target enough of these lower volume keywords, you’ll quickly pile up the sales you had with the popular ones, but at a fraction of the cost.

  • End the keyword bidding wars. If you work in a large company, you may find that several of your product groups are bidding against each other for the #1 result. If so, then centralize all keyword planning. Ensure that all business units coordinate with the central team before placing bids so that they are not bidding against each other. That way you can either lower your bids to reduce costs or raise your bids if the sales payback justifies the price hike—you are better off either way.
  • Remember the OPM principle. Smart investors use Other People’s Money, and you can, too. Combine your paid search campaign with suppliers, distributors—anyone who you can convince to share the per-click fees. Agree to a landing page that drives the right traffic to each site for that keyword and you’ve lowered your costs without lowering your sales.

Paid placement is an economic market—if you are not constantly driving your business to be more efficient, then your competitors will be able to outbid you. Find ways to cut your costs without cutting your sales and you’ll profit from paid search for many years to come.

For even more ideas to put the spark back into your paid placement campaigns, check out Search Engine Marketing, Inc..