Pay Per View Advertising means that there is no guarantee that people will even click on your ad.
Pay Per Sale Advertising (commission sales) means the person hosting the advertising has no guarantee that you will even make a sale. Pay Per Sale is basically the Scrooge McDuck way of making money because it means you never spend a dime unless you are guaranteed a profit first.
You might be selling Useless Ugly Widgets (UUWs for short, pronounced EWWs) and frankly if your UUWs are really terrible nobody is going to buy them no matter how much you advertise. If you were selling Useless Cute Widgets you might actually make some sales, or possible Handy Ugly Widgets more sales - and if you were selling Handy Cute Widgets then they would be flying off the shelves due to the overwhelming sales. Paying someone on commission to sell HCWs is a waste of money because they sell themselves anyway. But nobody wants to waste their time trying to sell UUWs because they know it is an extremely difficult sale to make.
Pay Per Click Advertising is the happy middle ground between these two types of advertising, wherein the advertising host (publisher, search engine, etc) is still getting paid based on the number of clicks - and the advertiser is guaranteed traffic based on the number of clicks purchased.
However one of the problems I have noticed is that people place too much emphasis on attaining a higher Clickthru Rate (CTR), which for those who don't know is a measurement of how many people saw your ad and what percentage of people clicked the ad.
So for example if 1000 people viewed your ad and 25 people clicked it, your CTR would be 2.5%.
However let us pretend for a moment that you used false advertising to encourage people to click your ad. You jazzed it up and made it sexy. But when they went to your website they saw you were selling UUWs, exclaimed "Yuck! Who would buy that ugly thing!" and then left the page.
Which means zero sales.
[Note: I am going to be mentioning some statistics soon. If you want to learn more about these statistics please read Search Engine Click Thru Rates.]
Let us pretend for a moment you are selling real estate in Toronto and you are spending a LOT of money on PPC advertising. As a real estate agent your goal is to sell houses that are worth over $500,000 (or more) and you get 5% of every sale you make - which is $25,000.
But in order to make that $25,000 you might be spending upwards of $1,000 (or more) in advertising each individual house. If you are spending that on PPC and perhaps spending $5 per click (real estate advertising is very expensive and there is a lot of competition). That $5 per click only gets you 200 people to your website. Most of them will browse around and leave in the first 30 seconds. What you are after however are the people who spend 5 to 10 minutes on your website and then contact you asking for help in purchasing the house in question.
Now ask yourself, when it comes to house sales (or selling widgets) how important is the clickthru rate on the advertising?
Let us say for example you had a very high clickthru rate of 10%, would that be a guarantee that the people would browse around and actually contact you to buy your house?
The answer is nope. It has no bearing on sales whatsoever.
Having a High CTR is really just bragging rights.
Business Owner - "Oh look, people are clicking my ad quite often!"
Colleague - "Are they buying anything?"
Business Owner - "Err... Nope. Not yet. What am I doing wrong?"
And sales is what matters most when you are running a business and advertising it.
People tend to get distracted easily by shiny objects or bragging rights. Having a high CTR is really meaningless if you don't have the accompanying sales.
For example if your ad was shown to 1000 people, 25 people clicked it (2.5% CTR) and then all 25 people purchased your product, well then you've got yourself a hot ticket item that everyone will want to purchase. But that doesn't really happen however. Much more likely you will have a CTR that is too high and a Purchasing Rate that is too low.
For example did you know that the Purchasing Rate goes up after midnight in your time zone? Between 12 AM and 5 PM people are more likely to purchase things because they are tired, low on cognitive power, and more likely to buy foolish things. That is why middle-of-the-night infomercials are so profitable. People buy it because their cognitive powers are reduced and they are easily tricked into buying widgets they think are useful (and often turn out to be annoying to clean).
So your goal instead should be to advertise between the hours of 12 AM and 5 AM because that is the time period when people are more likely to whip out their credit card and make a purchase. With PPC you can actually choose to limit your advertising to a specific region in the world (your time zone, your city, or even specific neighbourhoods) and to limit the advertising to specific times of day when people are most likely to make a purchase.
Let us all pretend for a moment you are trying to sell Expensive Fancy Widgets (EFWs) then you might also decide you only want to advertise to people who live in rich Toronto neighbourhoods like Rosedale, Leaside, Bridle Path, etc.
Basically you explore every option available to you in an effort to increase the Purchasing Rate of your target audience.
Clickthru Rate Vs Purchasing Rate Conclusions?
Stop worrying about the clickthru rate and worry about how many people are visiting your website and what percentage of sales you are making. If you are getting 1000 visitors and 10 people buying your products that is better than getting 10,000 visitors and only 1 person buying a product.
