As you may have heard, MSN is releasing their own pay-per-click (PPC) search engine later this year, capitalizing on their 24.3% share of the market. It's called MSN "Ad Center" and it's already being tested.

Of course, Yahoo Search Marketing Solutions and Google Adsense will continue to dominate the pay-per-click search market...

But MSN's announcement got me thinking. Pay-per-click advertising is one of fastest ways you can drive qualified traffic to your site... but so many people are deathly afraid of it!

It's a common misconception that PPC is just too expensive for the average small business owner. That's simply not true! In fact, if you are losing even a DIME on your PPC advertising, you're doing it wrong!

The secret to profiting from pay-per-click advertising without breaking the bank is to simply know how much you can afford to spend.

And you can figure this out by plugging your key stats and figures into the following three simple steps:

STEP 1: Figure out your visitor-to-sale "conversion" rate:
To find out the number of visitors you need to close one sale, divide the number of unique visitors to your web site by your total number of sales.

So, if you make one sale from every 100 unique visitors to your site, your conversion rate will be 1 in 100, or 1%.

STEP 2: Determine your net profit on each sale:
This is the amount you pocket after all expenses are covered.

First, calculate your gross revenue. If you had 48 sales at $97 each during the month of September, your gross revenue for the month is $4,656 (48 x $97).

Then deduct expenses. Say it cost $3,183 to produce those 48 products:

$4,656 gross revenue - $3,138 expenses / 48 sales
= $31.62 net profit per sale

STEP 3: Calculate your "value per visitor": Divide your net profit per sale by the number of visitors you need to get one sale:

$31.62 net profit per sale / 100 visitors = $0.3162 per visitor

That means each visitor to your web site is worth 31 cents. This is the amount you can afford to pay to attract one visitor to your web site -- and should be your maximum bid for PPC advertising.

Now, you may be thinking that your 31-cent-per-keyword budget will automatically exclude you from bidding on competitive keywords... but that's actually a good thing!

The keywords that tend to be expensive are often much too broad to be effective for small online businesses like yours. The more narrowly targeted your keywords are, the more targeted -- and likely to buy! -- your visitors will be.

Consider this: If you sell waterproof sport watches, and you bid on the keyword "watches," it will cost you at least 90 cents to get a top-three ranking on Yahoo Search Marketing.

But if you bid on "waterproof sport watches" you'll pay around 20 cents to get the same position.

Since there are so many types of watches out there, you're far better off appealing ONLY to those people who are looking for exactly what you offer. They're the people who will buy your product!

Just remember: Never bid more on your keywords and key phrases than you can afford... and you'll get swarms of targeted, affordable PPC traffic -- guaranteed!