Top PPC Price Recorded In The U.S.

October 26th, 2009

Last week I read that the highest CPC (cost-per-click) price in the U.S. last month was recorded at $99.44. According to AdGooroo’s Search Engine Advertising Update: Q309, “mesothelioma” sold for $99.44 on Google and $60.68 on Yahoo for the number one ranking. The number one word on MSN was of a different persuasion altogether: “auto insurance comparison” for $55.20 per click.

First of all, if you’re like me you didn’t know what mesothelioma was. The –oma reminded me of melanoma so I knew it was probably bad, but meso- just brought to mind the Mesozoic period and dinosaurs, and I was willing to bet it didn’t mean dinosaur attack. It is, in fact, a deadly lung cancer caused largely by asbestos exposure. Law firms have been bidding on the term because of the increased number of law suits surrounding the issue.

As interesting as that is, $99.44 per click? Is it worth it, even for law firms? What kind of a return would you see on such high CPCs?

You could argue that the possible millions of dollars a law firm could take in successfully representing a mesothelioma sufferer should offset the cost to bring those new defendants to the firm, but there are a lot of variable factors: the size of the firm, exactly how they make their revenue, their budget on these keywords, and how well they convert, for example. Though instinct might tell you a $99.44 CPC is way too high to ever be profitable, AdGooroo predicts the average overall CPC to stay constant through 2010, while keywords drift in and out of the highest price list. “Mesothelioma” may not continue to go for top dollar, but if it and other keywords sell for such high CPCs I would guess that advertisers are seeing sustainable results at the time they are willing to bid at that price.

To make a comparison, let’s say your average CPC is between 60 cents and $2, and your average revenue from a single conversion ranges from $50 to close to $1,000. For argument’s sake, assuming a 2% conversion rate and 1,000 clicks and using the midpoints of the two ranges mentioned, 1,000 clicks cost you $1,300. 20 of those 1,000 clicks will convert, bringing in $10,500 in revenue. Your ROAS is almost 708%. All else being equal except the CPC and the average revenue per conversion, a $100 CPC would require revenue per conversion to average $40,400 to maintain the same ROAS.

Looking at it that way, it seems it could be reasonable to pay such a high CPC. Not every conversion will bring millions of dollars into the law firm, but you know how attorney’s fees add up! It doesn’t seem like such a stretch to rack up $40,000 from a new client.

AdGooroo suggests that the paid search industry is maturing: a lot of consolidation has occurred over the years among engines and even in ad space on each page of search results. As the changes in the PPC industry slow, advertisers have had time to catch up and become secure in their strategies. Most of these advertisers are spending more money on fewer search engines than they did in the past, so if they’ve figured out that a $100 CPC is working why not go for it? Let’s just hope the CPC on this particular keyword drops over time—the fewer people with mesothelioma the better. My prediction for the next keyword to top the list? “Dinosaur attacks.”