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Conversion occurs when the visitors conducts a transaction (such as buying a product, registering for a newsletter, and so on). In the context of AdWords, conversion is the final step of a successful clickthrough. The conversion rate is the percentage of visitors that complete such a transaction, and is used to judge the effectiveness (and return on investment) of visitors acquired through campaigns such as pay per click . Effective conversion tracking requires web analytics tools which use of some scripting/cookies to track visitors actions within a website.
Advertising on search engines now works by charging you a fixed amount every time a user clicks on a "sponsored link" or pay-per-click ad. The price of each click depends on the popularity of the keyword associated with the ad. The total cost of the campaign is the number of clicks times the cost-per-click or CPC.
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