What is keyword competition?

Keyword competition is the amount of competition a specific word or phrase has – 

The higher the competition, the more expensive it will be to purchase a pay per impression ad from Google or Bing.  

The shorter the phrase, the higher the competition (in most circumstances).  

I.e. the word “loan” is going to have extrememly high competition, since many businesses and corporations are fighting over the top space in search engines for the word “loan.” 

The word “loan” has extremely high competition, because they have 500k monthly searches, and the cost per impression ranges from $36 – $72 per click.  The reason being is because the word loan is going to be a high profit word.  The higher the profit, the more competition, gneerally results in higher cost per click.

If you break that down and do something more like: ‘ home loan, ‘ the competition is still going to be high, however now you are being more specific.  Small companies are going to have a really diffucult time winning the keyword ‘loan,’ since they cannot compete with larger banks for the space due to budget restrictions.

Break that down even further

home loan in northern florida – now you’ve gotten more specific , the competition isn’t going to be quiet as high, and real estate agents will be fighting over this, however it’s not going to be the $80 cost per click 

– another thing to remember when doing cost per click – even though you have a cost per click, this doesn’t mean that every click that is generated is going to result in a sale.  That is why it is critical during the first few months of a PPC campagin to audit and watch the traffic.  This is where a lot of people mess up on their budget – they don’t watch the analytics and they just through $10k at the advertisers expecting it to generate revenue.  Throwing 10k at the screen is great – if you can afford it – however it’s pointless if the cost per click ends up draining your funds.

Another thing about PPC campaigns is that there are shady companies out there that will drain your budget.  You have to keep an eye on this.  There are tools that will help you, however it’s something you have to monitor.  Don’t just set up a PPC campaign without looking at the analytics monthly. (i’d recommend looking as often as possible and tweaking when necessary)

The goal of your PPC campagin is to maximize your sales per click – and to maximize ROI – 

in order to do that, you have to remove negative keywords, eliminate overpaid keywords (i.e. – don’t pay for the word ‘loan’ if it’s an $80 cost per click, and it takes 10 visits to make a sale, and you only make $500 per sale – if that is the case, you just paid $300 to make $500.  Ideally, you want to pay $1 to make at least $2 (bare minimum, which, in my personal opinion, is still too high, however, that is only something you can decide, based on your industry.)   If you can spend $1 and make $10, keep going.  You found a super secret recipe and shouldn’t share with your competitors.