Search Engine Marketing, whether it's paid or organic, is a science.
While it is true that you can put together an ad on Google or Yahoo!, pick a few keywords that describe your business, then bid on them and be up and running with a Pay Per Click campaign in a few minutes, the actual process requires considerably more thought. Here are a few key points to consider:
What is the goal of your ad? If you are an e-commerce merchant selling mainline products, you probably want to generate a sale. If you are operating a decorating business, your goal more likely is to generate a lead for follow-up. That goal will shape how you structure your campaign.
What kind of landing page do you want the user to click through to? Is it a specific product page with all the information necessary to complete the order or do you want your customer to land on your home page in order to get more information about your company? You may want your ad to be product specific or have a more general message.
Is there a special "deal" that you can offer in your ad? Phrases like "free shipping", "save 10% now" or "sale ends tomorrow" create a sense of immediacy that can increase the likelihood someone will click on your ad.
You don't have to have the top ad listing in order to be successful. While being #1 likely will bring you more clicks, you don't want to overpay for them. Typically, as long as your ad appears in the first five positions, and has a compelling offer, you will get your share of clicks.
The keywords you select for your ad are critical. In fact, the difference between a cost-effective campaign and one that just costs you money often are the keywords you select.
Try to avoid buying general terms, unless your site has a very, very broad selection of product. The keyword "cars" might bring anyone who is looking for anything having to do with a car - that probably doesn't do you much good if you are selling radiator hoses.
Stick to words and phrases that relate as specifically as possible to what you are selling. A good rule of thumb is that the more general a keyword is, the more expensive it is.
The page customers land on when they click on your ad should contain similar words to those used in the ad. Reinforcing the ad message is important for two reasons: first, it tells people they are "at the right place" and second it will help your Quality Score on Google and Quality Index on Yahoo!.
Google in particular attaches great importance to the relevance of your landing page and you may be able to secure a higher ad position with a lower bid than other advertisers.
Monitor your campaign regularly. This is particularly important at the outset when you are establishing what works and what doesn't. Pay per click advertising isn't day trading - you don't have to be glued to the monitor but you don't want hours to go by without seeing if your clicks are converting into your desired result of sales or leads.
A large search agency might suggest that you need 1,000 or more clicks to determine if your campaign is working. As a start-up or small business, you (or your agency) should be able to draw conclusion with far less clicks than that.