Object of this Case Study:  To demonstrate the difference in the costs of online ads for the keywords "lasik"  and "life insurance" when searched with a local component.  The cost of the online ad varies by position, and is the click charge that the marketer pays when a visitor at a search engine sees the marketer's ad and clicks on it for more information.

Background:  Costs of keywords can vary substantially by geography.  It is always good practice, if you are a business that needs to deliver products or services locally, to advertise in metropolitan areas which are within reasonable travel distance of your home base.

There are two common scenarios.  For a product or service that MUST be delivered locally, marketers usually expect that the cost of keywords nationally would be less than the cost of keywords locally.  For example, the cost of the keyword "lasik" when advertising in Yahoo! would be less than the cost of the keyword "lasik Chicago" for a marketer who wishes to serve the Chicago area.  That is because you can not do lasik surgery over the Internet. 

Likewise, the cost of the keyword "life insurance" nationally should be higher than the cost of the keyword "life insurance Chicago".  That is because personal presence is not necessary to fulfill a life insurance purchase - although it is often desirable.

However, remember that often things do run "true-to-logic".  There are many demographic and marketing factors which could influence the cost of keywords.

Although we are using search terms in the examples below that have a local component, the results displayed are based on Yahoo's search engine for domestic results.  Results in Google might be much different and need to be examined independently.

Table 1.  Keyword Research, Monthly Count, and Cost of Ad by Bid Position in $ vs locality for the keyword "lasik + locality"

Search Term and Monthly Count of July 2005; Annual Search Count Approximately 17X Monthly

 Yahoo! Ads

Cost per Click, $ by Position
For Yahoo! Search

Search Term

July  2005

#  of Ads Online

1st

5th

10th

15th

20th

Last

Table 2.  Keyword Research, Monthly Count, and Cost of Ad by Bid Position in $ vs locality for the keyword "life insurance + locality"

Search Term and Monthly Count of July 2005; Annual Search Count Approximately 17X Monthly

 Yahoo! Ads

Cost per Click, $ by Position
For Yahoo! Search

Search Term

July  2005

#  of Ads Online

1st

5th

10th

15th

20th

Last

Results and Observations:  

• When we see a costly keyword in the 1st position followed by a very rapid decline, it is possible that 1 or a few advertisers wish to hold that top position - for whatever reasons.  When we see a very slow decline in cost by position, then we believe there are many competitors involved and all jockeying for position. 
  

• Assuming that advertisers are basing their costs on demand, there are hugh differences in demand by region. For example, for whatever reason, not wearing glasses is much more important to los angeles and new york residents, than to miami residents. (This is just an opinion).
  

• In the case of Table 1, lasik surgeons in Rockford, IL would be wise to consider advertising online for the keywords "lasik Chicago" if they are not already doing so.
  

• In general, you must become involved in Pay-Per-Click by carefully researching your keywords and establishing your visibility according to your monthly budget and projected ROI.  Then measure results and improve the campaign.