Pay-for-Performance Search Engines Defined

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Pay-for-performance (PFP) search engines allow you to bid for placement of your chosen keywords on a per-click basis.

If you're the highest bidder for a particular keyword, such as "legal services," your site shows up at the top of the search results. Each time someone clicks on your link, you're charged the amount you've bid, up to the limit of cash in your account. If you bid less, your site's ranking will fall accordingly.

To determine how much you can afford to pay for a keyword, you'll need to estimate your conversion rate. A conversion rate is the percentage of visitors who make a purchase once they've clicked through to a site.

Once you decide how much you should pay to acquire each new customer, you'll know how much you can afford to bid for your keywords. Here's how it works.

If you make $50 (U.S.) profit per sale on a product that costs $100 and your average conversion rate is one sale per 100 visitors, then you can pay up to $50 for 100 click-throughs -- a 0.50 percent click-through rate (CTR)(50 divided by 100 equals .5 percent).

PFP advertising of any kind can be vulnerable to fraud. For instance, someone could simply click on the link to your site many times, and you'd have to pay for each click. When investigating these search engines, find out whether they have fraud protection mechanisms in place.

GoTo's site offers an example of what you should look for in the way of fraud prevention.

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