Don’t pay too much for your Google Adwords

Number one ranking for nearly every Google Adwords search term? Best read this because you may be paying too much.

Google Adwords provides a great interface to choose relevant keywords that people are searching for with their keyword tool. But there are several drawbacks if you’re new to using it and your required cost per click can be easily misinterpreted. This error is prevalent in most Google Adwords campaigns and comes from the use of the average cost per click estimates the tool generates.

Let’s take the search term “Google Adwords“. The default average cost per click rate when this was written was $17.26. It shows heavy advertiser competition and consistent search volumes. This always leads to mistake number 1. Many marketers will take this as read and bid at or over this level to ensure high placement of the Google Adwords search term.

What they should do is put in a bid to the interface and re-calculate. At an $18 bid the average calculates down to $6.22. Anyone smell a rat?

Step two is to continue re-calculating bids down. Put in $7 and automatically your cost per bid drops to $3.81. Estimated ad placement is still 1-3. Put in $4 and your cost per bid drops to $2.78, still with 1-3 placement. Keep going until you find where 4-6 placement kicks in. For this search term it kicked in at $1.80.

Most people would be happy with this; they’ve saved heaps, and automatically bid at the tipping point which in this case is a bid of $1.95 averaging $1.50 per click at placement of 1-3. Mistake number 2. This is where you need to think.

How relevant is the advert to Google Adwords. Staying within the guidelines for advertising set by Google, if you are bidding for a word that is very relevant to your business your best strategy here is to go for the 4-6 placement. Google ranks Adwords not just on the amount of money you are prepared to pay, but also on the success of the advert. If your advert is more relevant than most of the adverts you see then go for the cusp of 4-6. If it isn’t as relevant go for the cusp of 1-3.

It doesn’t end there. The next question is how relevant is thelanding page for the advert. Google also crawls the end of the journey. Mistake 3 is to send users to your home page because that is the entry of your website. However, if the link and the page you send people too is more relevant, Google will promote your advert over other adverts. Make it relevant.

That is not to say build a page for your Google Adwords campaign. Mistake number 4 is not worrying about the user experience on your website. Orphan pages are like mini-sites, they are temporary and they do nothing for a consistent brand experience of your users. Land them at a natural point page, relevant to your advert, that is a permanent feature of your website. Google provides a measure of this within the campaign ad group keywords. It is a magnifying glass you can mouse over and will tell you how strong the landing page is.

These key aspects of relevance can mean Google will view your advert as more relevant to the search term. Now book your advert and let it fly.

For a week.

Mistake number 5 is the most common – not revisiting your advert. After a week you will get a handle on how successful your campaign is going to be. It will also show average ad positions and clicks. This is where you start to average down your cost per click.  For those adverts with lots of clicks, you are probably sitting at a number one position. Drop your bid. Google likes your advert, it’s making them money, so they place it high. Be brutal, pay less.

I always drop my bids in 50 cent increments. The Advert falls and then rises as it is relevant to the search term and makes Google money. I keep doing this every week until it stops rising back. But I don’t look for position number one as the end game, more like 2 or 3.

Position number 1 always comes at a premium but doesn’t necessarily perform better. Test it and see if you have a sweet spot for you to sit at 2 or 3 and get the same number of clicks you would get at position 1. Essentially, you can drive your cost per click down. In some cases to a third of what position number 1 is paying.

So next time you get your Google Adwords generated report from your SEO firm or advertising agency and you’re number one on every search term, start dropping your bids. You’re paying too much.

Customer insight via Google

This is the second part of my statement that the real value of Google is not in the lead generation, but in critical bits of information about brand and consumer behaviour. This is about what are people searching and how are they looking for your product.

Google provides timely information about how your customers behave, how they buy and what, at a particular time, they are looking for.

I previously did this with the history backed up from reports from Google Adwords and if you have that you can get really granular and operate very, very quickly. I still use that but only in exceptional circumstances.

However, times have changed for the better so here is a graph from Google Trends for “government bonds” searches in New Zealand.

Consumer behaviour and demand

It shows a very sharp rise, surprise surprise, in people searching for government bonds in the last month. Something to do with that credit crisis.

What it really reflects is fear. And a very tangible mass movement of investors trying to bury their money safely in a ditch so they can’t lose it. In fact here is the chart for the search “invest in gold”.

Google searches as people run for gold

There really is no better reflection of the motivations of the mass market, outside the market, that happens in real time through Google Trends and the Google Adwords reports. This is because they are updated more frequently than you can run a market survey, the data is much greater than an opinion poll and its all free and immediately accessible.

If someone managed to compress, monetize and distribute this a little better we could see the end survey research in its traditional form. Most good marketers, who are talking to there customers will know where the market is leading. This gives you the product they want to buy and a trend of when they are trying to buy it. All you have to do is work out the price.

It represents real time market demand.