Google Adwords 2
Google Paid Placement Review II
Vikas Malhotra, eBiz Consultant
19th Dec, 2003
Introduction
In this, the second part of the article on Google Adwords, I’ll offer some basic advice about bidding and keyword selection to help you run a smart PPC campaign.. Though for explaining the concepts in this section we will be utilizing some of the tools of Googles archrival Overture also.
For running an effective Adwords campaign there are two components or areas that one has to focus on.
Target Keyword selection
Optimizing Bidding strategies
Target Keyword selection
Lets begin with a note on proper keyword selection & organizing.
First of all, there are a few basic characteristics of search queries/keywords that are important to note. The first is that only the most popular search queries are alike. For many sites, the targeted search keyword mix on a particular page will be quite broad. This is important as those pages will serve as the landing pages.
The second most important point is that studies suggest that
between 40% and 55% of all search queries are three terms or longer. This indicates that people are starting to use the power of search to better target their requests .
Hence keeping these factors in mind it is incumbent upon the site owner or agency to develop a comprehensive keyword list that fits their site and marketing objectives. These lists can be generated using any of the search term term sugestion tool like Wordtracker or Overture inventory search term tool.
However, the Google has minimum CTR threshold that must be met for keyword listings. Pending that Google automatically penalizes for poor click through. So it has to be made sure that sure that the keyword selections meets that minimum requirement of click thorough.
Some general keyword selection & organizing tips are:
# Use specific keywords, rather than general ones.
# Avoid single-word keywords (or at least be suspicious of them, as they aren't usually very successful). Instead, start out with 2 or 3 word keyword phrases.
# Use keywords that precisely describe the products and/or services that you actually have to offer.
# Collect all keywords that are highly related to a particular product or service into a single Ad Group, and then show an ad about that exact product or service. Use the 2500 Ad Groups available to you in your account to your advantage - to advertise each product or service that you offer in a very targeted way.
# Avoid 'what if' keywords. An example of a 'what if' keyword: an advertiser selling greeting cards running on the keyword 'Christmas gifts'. Well the logic is, because cards normally go with gifts, 'what if' someone searching on 'gifts' might also need cards? Better to run on the keyword ‘Christmas cards’.
Thoroughly understand how each of the keyword matching options functions.
Then make an informed decision, and don't hesitate to experiment. Full details on the matching options are available in the AdWords FAQ.
If you are using broad or phrase matching, then use negative keywords to your advantage. Info on this is also in the FAQ.
Bidding Strategy
For arriving at a optimum bidding strategy the first important step is to calculate the value of every visitor on your site. This is necessary so that you are able to calculate the bid amount or the amount you are rationally willing to pay to get each customer.
The unique value of each visitor can be calculated in a three step process.
Step I
A) Conversion Rate: Figure out how many unique visitors you need, to close one sale.
Unique Visitors / Total Number of Sales = Conversion Rate
Example: If over the month of November, you calculate that your web site received 10,000 unique visitors, and you sold 200 footballs, your equation would look like this:
10,000 Unique Visitors / 200 Sales = 50 Unique Visitors Per Sale So in this case, your conversion rate would equal 50, which means that you typically close 1 sale for every 50 visitors to your site.
Step2
B) Net Profit Per Sale: Figure out how much profit you earn on a single sale.
Gross Revenue - Total Expenses / Total Number of Sales = Net Profit Per Sale
Example: If over the month of November, you sold 200 footballs for $100 each, your gross revenue would be $20,000 (200 X $100). And if you calculated your total expenses (production, packaging, shipping, admin etc...) for the month of November to be $15,000.
This means that:
$20,000 Gross Revenue - $15,000 Total Expenses / 200 Sales = $25 Net Profit Per Sale
In this example, your Net Profit Per Sale would be $25. This is "in your pocket, after expenses, you can bank it" profits.
Step3
C) Visitor Worth: Figure out how much a single visitor is worth to you.
Net Profit Per Sale / Conversion Rate = Visitor Worth
Example: This is the easy part. Just take the Net Profit Per Sale that we calculated in part b ($25) and divide it by the Conversion Rate that we calculated in part a. $25 Net Profit Per Sale / 50 Conversion Rate = $0.50
So in this example, each visitor to your web site is worth $0.50. (Not to be confused with the value of a customer, which is $25!) This means that you can afford to pay as much as $0.50 to attract one new visitor to your web site without losing money.
However you would obviously want to pay less so that you can take home a profit as well.
To better manage this math it should be done at a level of Adwords groups for some keywords can be more valuable than other in driving visitors to your site.
However as long as you know unique value of each visitor to your site, you can not go too haywire with your bidding.
Now once this exercise is over,lets look to optimize the Adwords campaign by trying to find the best prices & best keywords to bid on.
Place strategic bids for cheap but popular keywords.
Once you’ve done the preliminary homework, you’re ready to start combing through your list of keywords one by one, looking for those that are frequently searched by your target market, but that aren't highly competitive (i.e. expensive!).
A really useful tool at this stage in your research is
CompareYourClicks.com, a free site that will take any keyword or phrase you type in and produce a comparison chart of the top bids in 9 of the PPC search engines including Overture, FindWhat, Sprinks, Bay9, and more.
Overture offers a similar Get Current Bid Tool, though it obviously doesn’t offer bidding comparisons for the other PPC search engines. (I guess we can forgive them… it’s their competition after all.)
Simply type your keyword into either of these tools, and you’ll be presented with a list of the top bids for that particular search term. For example, when I type "mortgage home loans" into the Overture Bid Tool, here’s the list (out of 40 total) I am presented with:
Oak Street - Home Mortgage Loans Online
www.oakstreetmortgage.com
(Advertiser's Max Bid: $8.50)
Home Mortgage Loan
www.werloans.com
(Advertiser's Max Bid: $8.49)
Home Mortgage Refinancing Loans
www.fullspectrumlending.com
(Advertiser's Max Bid: $5.51)
Compare Home Mortgage Loans
homeloansearch.securesites.com
(Advertiser's Max Bid: $5.50)
Homelink Mortgages - Wholesale Lender
homelinkmortgages.com
(Advertiser's Max Bid: $5.01)
The mortgage industry is very competitive, so it shouldn't be too surprising that bids for visitors are heading up towards $8 per click.
However, let me draw your attention to a couple of missed opportunities in bidding strategies that exist here.
Opportunity #1 - Save Money By Closing The Gaps!
First of all, remember that we're looking at bids in Overture ( for trends to bid at Google) but also cant overlook the fact that Overture is a giant of the PPC search engines, where ranking among the top three bids means that you also get exposure under your particular keyword or phrase in Yahoo!, AOL, Lycos, AltaVista, Netscape, Hotbot, and Cnet. So it obviously makes sense to try and rank among the top three listings in Overture whenever you can afford it .
However, do you notice a problem with #2 – werloans.com? They're bidding 2.98 USD more than necessary to keep their ranking in the top three! They could easily save themselves money by dropping their bid to $5.52! & still ranking at 2.
What's more, if #4 - homeloansearch.securesites.com can't afford to compete with the top 3 bidders, then they should drop their bid by a whopping 48 cents to $5.02. They'd keep their #4 ranking, but avoid wasting an unnecessary 48 cents per visitor!
When you're looking to place your bids, watch for gaps like these and take advantage of them! Never bid more than necessary... and monitor your bids once you've placed them to remove any gaps like these that may appear. You'll save yourself a lot of money in the long run - money that you can use to bid on more keywords to drive even more traffic to
your site!
Opportunity #2 - Go For The Traffic Your Competitors Are
Neglecting!
Grab the low-hanging fruit first. Why get sucked into an expensive bidding war for one common search term when you can bid pennies for multiple keywords and phrases to generate similar volumes of traffic for a lot less cost!
Just to give you a simple example, I searched the keyword " mortgage home loans " in Overture's Search Term Suggestion Tool and was provided with a list of approximately 100 related keywords that included " home mortgage loan rate," "second mortgage home loan," and "home loan mortgage company."
Then I did a traffic and bid comparison on the keywords I randomly selected from this list using information from both Overture's Search Term Suggestion Tool and Current Bid Tool, and here's what I discovered...
Keyword: Traffic #1
Spot
#2
Spot
#3
Spot
#4
Spot
home mortgage loan 16,289 $8.51 $8.49 $5.51 $5.49
home loan mortgage company 5,328 $6.12 $5.00 $4.88 $4.87
second mortgage home loan 3,974 $7.01 $4.47 4.47 $4,47
home mortgage loan rate 6,258 $3.31 $3.30 $3.21 $2.52
Obviously, "home mortgage loan" is the phrase more frequently searched - that's why it's sooooo competitive at $8.51 per visitor for the #1 spot.
However, who says you have to bid on the most frequently searched term when you can go after smaller traffic streams... like the bargain find "home mortgage loan rate" at just $3.32 cents per visitor for the #1 spot..
It attracts decent amount of searches & will get you the maximum exposure at half the price of the home mortgage loan searches..
Of course all this research can be carried over to Google for normally this kind of gaps exist there as well. To validate these at google one can compare the Bid prices that googles system automatically suggests for different terms. This will give youa fair amount of idea of the competitive positions at google.?The PPC search engines are one of the few low-risk paid advertising opportunities that allow you a LOT of control over your success. If you follow these few simple rules that I’ve laid out here, keep your bids lower than your maximum bid at all times, and choose keywords targeted to your market, it's actually quite easy to funnel targeted traffic into your web site.
Plus, you can really give yourself an extra edge by looking for keywords that your competitors are neglecting and scooping up these untouched traffic streams, while taking advantage of bidding gaps.
In fact many businesses also use a software package like Bid Rank or GoToast to manage their listings. These software packages track your listings, and can adjust your bid if you drop in the rankings. Now of course you can use Googles Ad word tracking to monitor your conversions as well.
Many companies also outsource the management of their PPC campaigns.
Most SEOs now offer PPC management services. These options cost money, but they usually pay for themselves by running your campaigns more efficiently.
Keep in mind that you don’t have to use a software package or a consultant to start your PPC campaign. But you do need to know what sort of cost per click you can afford. If you decide that $2.00 per click is your maximum bid, then stick with it. Don’t get into an emotional bidding war if you lose a top ranking.
It’s much smarter to look for new and cheaper keywords.
Remember any marketing campaigns’ final benchmark is a good ROI & at the end of the day. money in your pocket.
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