In ecommerce, what happens when there alot of clicks and no sales?

I hear that businesses pay yahoo a certain amount per click for sponsored ads, say $0.56, for example. But what if hundreds or thousands of people click on an ad but don't buy? Wouldn't that be like giving money away?

Yes -- that would be giving money away, ignorance (even stupidity)

If it is an ecommerce site, the goal is CONVERSION -- turning those visitors to buyers.

If you are buying PPC from vendors such as Yahoo or Google Adwords, and you're getting a lot of clicks and no sales, then you need to start examining why:

- check the landing page quality -- when they click on your ad and go to your site, are they finding what the ad promised? If not, then they leave

- are those clicks valid or are they fraudulent? Do you have a click fraud software installed to help you weed out bad clicks (e.g. competitors sabotaging your ad) from the good ones?

- do you know at what stage you are losing the visitors on your page? Do you track where they are going? They may click on homepage --> then go to product category page --> and then poof. So what is it in the product category page that makes the visitors go away -- e.g. poor quality pictures, poor copy, hard to navigate, etc

The above are just a few of the things to consider. But if this is your situation -- lots of clicks with no sales -- something is VERY WRONG. And you need to find out what before you give money away. Pay per click can be very draining and expensive if not tracked properly and not giving the results wanted

Basically if their are lots of clicks but no sales you have to pay what the keyword was worth regardless. There is a set budget you can set to stop any day or month. So you can have a budget of $300.00 a month so set $300.00 a month certain keywords you use will cost more (some .25 cents or up to $5.00) and you can set it for certain areas as well. Once you use up $300.00 your ads stop until either set again or ready for next month.

Its called a "conversion rate"- the amount of people that click that turn into sells. Its low for payperclick an estimate of 10% actually turn into sales but if you are good with getting listed (great keywords) and sell something people want the conversion rate can be higher then that.. A lot of people will say work on your natural listings and use ppc as a bonus in their marketing campaign because they can run it on a budget and are willing to spend it.

It's a numbers game. A certain percentage of those clicks will buy something. If the company finds out that their yahoo ad is ineffective, they may wish to drop yahoo. However there are some companies who won't care whether it's effective or not, because it is just part of their overall marketing budget. Like coca cola for example. If you see a billboard for coke, do you really think that thousands more people will see that billboard every month and decide right then and there that they feel like a coke? Of course not. But that billboard, as well as all of the other forms of marketing that coke submerses us in on a daily basis contribute to a kind of subliminal marketing. We're brainwashed :D

Yep.

In that case, bid lower, and change the wording of your ad to target your market a bit better. For instance, let's say your ad was, "Click Here for Free Money." Everyone is going to click on it, but no one is going to want to put in the effort to get your product. Instead, you would say, "How to Build a Business for Free." And then you would only attract higher potential customers, and save money on the clicks of people who are just free loaders.

I suppose it would.

But as much as the sales they desire, many companies also simply want to get their name out there. And imagine if you're on a site every day and see their big name displayed...even if you do (or don't) click on it - the company is subconsciously in your head!

That means you are losing money. U should have a squeeze page to collect email address and do your follow ups from there.