Posted Monday, September 20, 2004
The year is 2000, Google is seen as the leader in the search engine industry by now. Many of Googles competitors are trying their hands at different advertising models as a way to generate revenue. Google currently seeing the most growth of them all saw the potential it had as an advertising medium and therefore was sure to follow suite sooner or later.
It did so with the launch of a keyword-targeted advertising program aimed more towards bigger companies. However it was not until later in the year when Google launched the Google Adwords program that they became a mainstream player available to even the smallest of businesses.
The original Adwords program worked well enough, however it worked on the basis of payment by impressions which didn't guarantee the advertiser a single click so in February 2002 it received a major overhaul with the introduction of the Google Adwords Select program (nowadays it's usually just known as Google Adwords as the original program has been discontinued).
What is Google Adwords?
Adwords is Googles version of the pay-per-click advertising model. It allows you to display ads which link directly to your website when searches are done for your chosen keywords or keyphrases. These ads are located to the right of the results which Google gives you for a search and they're also displayed on Googles many partner sites which include AOL, Earthlink, HowStuffWorks and blogger. Recently with the launch of Googles Adsense program your ads could also be displayed on websites related to your keywords.
When you create a Google Adwords ad, you choose keywords for which your ad will appear and specify the maximum amount you're willing to pay for each click. Remember Googles Adwords program uses a PPC model so you only pay when someone actually clicks on your ad and hence visits your website.
Adwords enables you to save money as its program Discounter automatically reduces the actual cost per click you pay to the lowest cost needed ($0.01 above competition) to maintain your ads position on the results page.
Google is competing well in this arena, in fact they now dominate the market, pulling more advertisers and revenue than former industry leader Overture.com does. I don't know how long this will last though as Yahoo INC! has just bought Overture. What has Yahoo got up its sleeve?
Advantages of the Google Adwords program
Just as the popularity of Googles search engine is derived from its strong technologically advanced features and results so too is its advertising program Adwords. Google Adwords has many advantages over similar programs such as Overture.com and Findwhat.com.
One of these has been mentioned already, it's the Adwords Discounter feature which will lower your cost per click price to one cent above your nearest competitor to allow to stay ahead of his or her ad. This means that you don't have to be constantly checking if your competitors have lowered their bids in order for you to minimize your price, Google does this for you.
The way Google Adwords positions your ads is also another great advantage of the program. In Adwords the position of a certain ad is determined by multiplying your CPC (cost per click) by your CTR (click through rate) and not simply by CPC alone as this would allow the big fish to win all the time.
Googles stipulation that your ads must have a CTR of at least .05% means that a company with deep pockets simply can't outbid the competition. They also have to outwit them by using good ad copy and appropriate keywords. Even if your competition is willing to pay sky high prices for clicks this still won't save them, as if they can't write good pulling ads they will be dropped from the program, leaving you to move up a position.
Other advantages which Googles program has over similar ones include setup time and specific country / language targeting. With Adwords your ads can be live on Google within five minutes of creating them so you can potentially begin to see results immediately, ads on Overture usually go live after a three to five day waiting period. Adwords allows you to choose who should see your ads from among 50+ countries and 14 languages, this means you have more control over your ads so you can be sure they're only shown to a highly targeted audience which means your more likely to be successful.
How to profit with Google Adwords
Now you know why Google Adwords is such a good thing, let's move onto how to actually use it in order for your business to make profit. First things first, you should determine how much you can afford to pay for a click. Doing this is important as it enables you to better understand the amount of money you can bid on keywords in Adwords while still remaining profitable. To do this your conversion ratio is needed, calculate your conversion ratio by dividing your monthly unique visitors by your monthly sales, then convert your answer into a percentage by multiplying by 100.
Imagine in a month you get 20000 visitors and sell 500 products each with a gross profit for you of $50. Your conversion ratio simply put is (500/20000)*100 = 2.5%. This means that for every 100 people who visit your site 2.5 buy your product.
Your gross profit per 100 visitors is calculated by multiply the gross profit on your product by your conversion ratio, to continue with the previous example - $50 x 2.5 = $125. Divide your gross profit per 100 visitors figure by 100 to determine how much you can bid in Adwords.
In this case you could afford to pay up to $1.25 for a visitor and still break even. Rarely will you have to pay this much for a click, remember that the minimum CPC on Google Adwords is only 5 cent so play your cards right and you can have high profits.
Choosing your Google Adwords keywords
Next on to picking your keywords. These are the words which when searched for will trigger the appearance of your ad next to the search results. Choosing the right keywords is imperative to the success of your campaign. A good approach to choosing the right words is to imagine what you'd search for if you were looking to buy a product similar to your own.
Remember as with Overture, the more popular a word or phrase is the higher CPC you'll have to pay and generally clicks from general words convert to sales far less often than clicks from specific terms so it's always better to have a few highly focused keyphrases that get clicks than to be number one for the most general word or phrase in your industry. In Googles own words:
"General or broad keywords will generate many impressions with few results."
Do you want "few results"? You certainly don't so avoid the expensive popular words and stick with the less popular but more profitable keywords. Finding such specific keyphrases can be time consuming, but it's worth it as research has shown that although much cheaper using specific phrases helps get more highly targeted people to your site and hence helps you get more sales.
On Googles Adwords website they recommend using spelling variations and plural versions of your keywords to reach everyone in your target audience. I think this is a good approach as not everyone of your potential customers will search a keyword in the same way, some will use plural versions and others will use singular versions. Similarly some may use American English rather than traditional English, this of course only applies to certain words whereby Americans use different spelling than British, Irish and other English speaking people would.
Adwords keyword matching options allow you to refine further when your ads are shown by allowing you to choose whether your ads are shown for certain types of searches on your keywords. There are four types of keyword matching options available, these are broad, exact, phrase and negative. Assume your keyphrase is 'marketing course'.
With broad matching your ad shows when users search on the keywords 'marketing' and 'course', regardless of other search terms used or of the order in which they are entered. Broad matching is the default, you don't have to do anything extra to use it.
Exact matching requires you to place square brackets around your keywords, like the following: [marketing course] Your ad will show when users search only on the phrase 'marketing course' and will not show if other words are included or the words are entered in a different order.
The third matching option is the phrase option, this is similar to exact search in the sense that the keywords must all be present and in the right order however your ad will still show even if other words are present in the search. To use phrase matching you must include your keywords in quotes, for example "marketing course".
Negative matching is the fourth option available. It allows you to block your ad being shown if a certain word is present in the search query. If your keyword is 'marketing course' but your marketing course is to do with offline marketing and not internet marketing then by using negative matching you can choose not to have your ad shown for 'internet marketing course' as people searching for this are looking for something different than what you offer. In this case 'internet' is your negative keyword. You simply place a dash before your negative keyword to use this option (ie '-internet marketing course'). Now if a user searches for 'marketing course' on Google your ad will be shown, it will not however be shown when the term 'internet marketing course' is entered as the query.
Using exact, phrase or negative keyword matching gives you more control over who sees your ads so you won't pay for clicks that are unlikely to produce well-targeted results so always try and use these options, doing so could result in lower CPC, higher CTR and higher ROI. To demonstrate this fact I conducted a dummy ad to find the prices using broad, exact and phrase keyword matching options for the term 'internet marketing'. The currency I used was the Euro, I left the maximum CPC at the default of â,¬5. The results are as follows:
internet marketing 11.0 â,¬2.65 - Default broad search cost â,¬2.65 a click and expected clicks is only 11.
"internet marketing" 30.0 â,¬0.74 - With phrase matching expected clicks per day was 30 and cost â,¬.74.
[internet marketing] 37.0 â,¬2.41 - Exact matching cost â,¬2.41 a click and expected clicks was 37 a day.
You can see from above that using both exact and phrase matching options resulted in a lower cost per click rate than simply using the default broad match option. I highly recommend using keyword matching options.
As mentioned earlier Google Adwords allows you to block your ads showing for searches conducted by people from certain countries and people who speak a certain language. There's no point in letting your ad be seen by people who won't understand it. Likewise if your product is only sold to a specific country than that country's residents should be the only people who get to see your ad, as if your company only sells products within America then any other nationals clicking on your ad are simply costing you money for nothing.
Creating your Google Adwords ad
Knowing which keywords to use and how to format them with keyword matching options alone will not make your Adwords campaign a success, you must of course also write a good ad which generates interest among those who will see it. To do this your ad must use attention grabbing copy such as 'free', 'new', 'sale', 'tips', 'limited offer' and give the advantages of your product at the same time. This however isn't easy as Google allows you a headline of at most 25 characters including spaces and only two other lines of at most 35 characters including spaces, so stick to the point as room is limited. Sticking to the point means avoiding using words like 'on', 'at', 'of' and 'an' unless you really have to.
Your ad should target your keywords, by this I mean it should include them. Always include your exact keywords in the title of the ad as this is proven to boost your click through rate immensely, the reasoning behind this I believe is that when users see the keywords they've just searched for in an ad particularly in the title of the ad they immediately associate that ad with a good find and will be more likely to click on it.
After just reading the previous paragraph you may be tempted to simply repeat your keywords somewhere else in the ad in an attempt to raise your CTR, however on Googles editorial guidelines page they state that they will not allow repetition of words or phrases in ads as ads without repetition are clearer. This doesn't however mean that you can't use closely related words similar to your keywords which you have used in your ad title, these similar words will help back up the searchers believe that he or she has found a very relevant ad. Avoid what's known as superlatives, these are phrases such as 'the best' and 'we're number 1', these serve no other purpose than to make you appear cheap and tacky, which will turn most potential visitors off.
Apart from letting the searcher know your ad is relevant using your keywords in your ad has another advantage, namely that of making your ad stand out among the other ads also on the page. Your ad stands out as Google will highlight in bold any occurrences of the search terms not just within the main search results but on the page as a whole including within any Adwords ads present.
Try if you can to include a call-to-action phrase. A call-to-action phrase is a phrase that which as the name suggests provokes the reader to do something, in this case click on the ad and go to your site. Unlike a banner type advertisement you can't use generic call-to-action phrases such as 'click here' or 'visit this site' as this does nothing to help the searcher make up his or her mind as to click on your ad or not. To quote Google again:
"The limited text space should be used for concise, informative language that sets you apart from your competition."
'Click here' or 'visit this site' is not informative language, it's language that simply wastes space and that does nothing to help you, the searcher or indeed Google for that fact. Take Googles advice into mind and
"Use a call-to-action unique to the service or product you provide."
Examples of unique call-to-actions include: "Join now for 20% discount", "Register for membership now", "Download free trial now" and "Order now for free shipping".
Remember your Adwords ad space consists of just a headline and two lines of text, you need to use this space efficiently to have a chance at success, so to recap I believe the best strategy to use this limited space is to include your exact keywords with or without other words in your headline, give a brief line about your product using words similar to your keywords in the first of the two 35 character lines and use a unique call-to-action phrase in the second.
All that's left to do as far as creating your ad is concerned is to enter destination and display URL. Not really much I can talk about here, except to point out that your destination URL should be a landing page specific to the product or service dealt with in your ad and not simply your home page. Remember users have clicked on your ad because they're interested in what the ad offered and not necessary interested in what your company offers as a whole. Landing pages will always convert more clicks to customers than if you had simply linked to your home page.
Other Google Adwords issues
This section of the article will cover briefly other Adwords related issues such as money issues, adgroups, tracking and testing.
As with any advertising campaign budget management is very important, without it you could quickly find yourself in trouble. In Adwords after you have chosen all your keywords and maximum cost per click amount Google will suggest an amount for you to set your daily budget. This amount is usually about right, and I would suggest sticking with it in most cases, however depending on how deep your companies pockets are, it may be a good idea to raise this suggested amount a little at the start of a new campaign as your ad will be shown much more and you will be better able to view how your ads are performing, then if after analysis of click through rates you decide it would be better to lower your daily budget do so.
Don't let being in position one dominate your mind when deciding what cost per click to pay for keywords. Doing so may mean your spending more than you really need to, when Google gives you the average position of your ad based on your current cost per click settle for 1,2 or 3 as all these ads will be above the fold (the fold is the point on a page where you have to start using the scroll bar to continue reading).
Remember your position is based on CPC and CTR at all times except the very start of a new ad, so if you use the advice given in this article already you should be able to obtain high click through rates and hence your ad should rise above other peoples ads without you having to spend a cent more than them.
Now onto adgroups, adgroups is a campaign management feature which allows you to group keywords together in order for you to have an ad shown for a number of different keywords rather than the usual one ad for one keyword method. I rarely use adgroups as I find using the one ad for one keyword way produces much better results as ads are highly targeted to the specific search terms used and hence more likely to be clicked on.
Trying to write an ad that can achieve a high CTR for 20 different keywords is impossible. Hence if you do decide to use adgroups in your campaign keep them as small as possible at five or less keywords.
Using adgroups sacrifices the single most effective thing you can do to increase an ads CTR and that's having your exact keywords in your ads title, remember with adgroups the same ad is shown for all keywords in that group. To use the one ad for one keyword approach you will need to create a new ad for each keyword manually as by default all ads are put into the same adgroup when you sign up.
I know, I know, using adgroups saves time, sometimes it saves a lot of time however I'm not in business to make time, I'm in business to make profit and lots of it and so are you for that fact, so if it takes some time to properly setup a good Adwords campaign well then so be it, hence I recommend avoiding the widespread use of adgroups for all but the very largest of campaigns.
Adwords should be no different than any other advertising campaign in the sense that you need to track everything and be continuously testing. Adwords will automatically track clicks, impressions and clicks through rates from when your ad goes live until either you or Google pull it. You should constantly analyze these stats for all your ads, discontinue the ones that are performing badly and raise your daily budget for the ones that are doing well so as to multiply your success.
However tracking CTR is only half the battle, you'll also want to track conversion rates from certain ads, that is how many people that clicked through from one of your ads actually bought the product the ad offered. This can be done using affiliate software whereby you could set up a specific tracking URL for each ad and then refer to your affiliate stats to determine conversion rates that way. This specific tracking URL would be entered as your destination URL.
You could also as Google suggests attach an identifying parameter by putting '?referrer=source' at the end of your destination URL. Imagine your normal destination URL was (http://www.yoursite.com/product) simply turn that into (http://www.yoursite.com/product?referrer=source). The source would be your keywords to enable you to uniquely identify the ad from which the visitor came. You could then use a web statistics program to determine how many people that bought your product where referred by a particular source / ad.
Testing has been the backbone of many great advertising campaigns on the Internet to date. In Adwords you should test different copy, keywords, CPC and daily budgets on a constant basis in an effort to attain the highest click through rates possible.
Run similar ads together for the same keywords to see what little differences can do to an ads CTR, keep the ads with high CTR's and pull the ones with low CTR's, create more and more ads to run against previously successful ones and again drop the ads with lower CTR's (unless of course the CTR's of these ads is extremely good too but your others are just better). Don't forget to test different things on your landing page too, to try and boost your conversion rate.
Google Adwords guide - Conclusion
Google Adwords when utilized correctly can be a great source of new customers for your business at a very low price. Google doesn't charge you a cent until your daily budget has been reached so you could in theory start to profit without spending anything. I fully endorse Adwords and highly recommend you use it.
Well that's another article finished, its seems to take me longer and longer to put articles together these days, anyway it's all good. You have just read approximately 25,000 bytes of thoroughly researched information regarding the different aspects of Googles award winning Adwords program. Others charge for information like this, but not me. Till next time.
About the Author
David is the webmaster of (http://www.akamarketing.com). Visit his site for free articles and tutorials focusing on Internet marketing and website development issues. AKA Marketing also includes free ebooks, webmaster community forums and the latest news from the Internet world.