In my last post, I explained that Google rewards you by lowering the price of your clicks if your ads are relevant. This should immediately spark off two questions in your mind:
- How is that possible?
Especially when I'm the one setting the price for my bid. - Why would Google do that?
It's not in their interest for me to pay less for a better service, is it?
This is the SECOND thing you need to understand about Google AdWords if you want to stop paying too much for your ads. The price you set for your bid is NOT the price you pay, and the person who bids the most is not the one who brings in the most money for Google!
There are two reasons.
The first is a simple question of honesty in the bidding system on the net (eBay and others use the same system too). The price you pay is not the price of your bid, but is just one penny more than the price of the bidder just above you.
However, the second reason is much more important. It stems directly from your Click Through Rate (or CTR), which is actually much more important than your bid amount.
Remember, the CTR shows the number of people that click on your ad when Google displays it. A 1% CTR means that 1 person out of 100 clicks on your ad.
Let's assume that your competitor has a CTR of 1% and pays £1 to be in second position.
If you have a CTR of 2% and you do it right, you're going to pay 51p to be in second position and push your competitor, who's paying £1, down to third position.
To put it more clearly, if your ad is twice as relevant as your competitors' ads, you are going to pay half the price for a higher position. I'm pretty sure you're starting to like AdWords (otherwise, re-read the preceding text once or twice).
And the best part is that it's a virtuous cycle.
As a matter of fact, ads that show up at the top of the list are clicked on more often. If your ad moves up thanks to its relevancy, you're generally going to see a rise in the CTR for the simple fact that it has become more visible.
It's up to you to keep the mechanism going by bringing your prices down to keep yourself at the right place on the list (a little later, we'll see that the 1st or 2nd position is not always the most profitable).
Do it! And you'll start saving a good bit of your AdWords budget!
At this stage, and if you haven't already tried, there are generally 2 types of disbelievers among you:
- Those that think that you'll never get twice the amount of clicks by bidding less.
- Those who think that their competitors are certainly not that stupid or lazy to let this type of situation persist.
The truth is that this situation isn't rare. It's even the norm!
Here are two examples of ads for the same keyword "e-commerce":
The first one has a click through rate of 1.9%, the second has a click through rate of 3.9%: more than double.
Don't think for a second that when our marketing team wrote the second ad that they "knew" that it would get better results than the first one. They had no idea what the outcome would be. Even though the 1.9% was satisfactory, they wanted to do better than the first ad and tried out different ideas and variants.
Sometimes it's enough to switch the second and third lines, put in a few capital letters, or just change one word to get incredibly different results (we'll get back to that).
Some more good news: Google is an incredible marketing studies tool! In the past, we (small companies) didn't have access to marketing studies like big companies did. We could never say to ourselves "Here's my marketing message to attract customers. I'm going to draft it up and ask a polling organization to approve it by running a customer study". This wasn't adapted to our needs in terms of the time we had to devote to it, and wasn't compatible with our budgets.
The great thing about AdWords is that you get these results in real time. You just need to take the time to create a series of associated ads (not just one) for each keyword.
Want some more good news? Do you remember my Darwin reference from the last post on this subject? Well, Google is going to favor the ad with the best CTR. Consequently, the poorer an ad's performance, the less it's going to be displayed for visitors. Conclusion: You don't even have to worry about "weeding out the bad ads". All you have to do is have a little imagination to create several ads and then let the system do the work.
This is my advice for getting the most out of Google AdWords for SOHOs/SMBs, considering that you have more time than money.
- Work hard and stay smart. Work keyword by keyword.
- Choose your keyword and create several variants of your ad for each keyword.
A technique called "Ad Splitting" allows you to constantly manage 2 variants for each ad and only keep the best one to then re-split it into 2 and change something else (a word, a capital letter, a plural word, etc.). This is an excellent method to use later on.
In the beginning, you're going to be lost in a blur of confusion. It's best to start out by using 3 or 4 very different variants to "see" which one really works the best. - Consider that a statistics sample is valid if you've received 30 to 50 clicks. The results won't really mean anything if you've only gotten 2 or 3 clicks. (To get 50 clicks with a CTR of 2%, Google needs to display your ad 2,500 times, which starts to be a meaningful number).
If it's in your means (while staying reasonable), you may decide to bid a little higher at the beginning to be in 2nd or 3rd position in the list of paying ads. This will give Google the opportunity to display your ad a little more often and allow visitors to click on your ad a little more.
You can see this like a "starting push" that you give to a child who's learning to ride a bike. Quickly put the brakes on spending as soon as you get to 50 clicks. Lower your spending by 5p increments as your CTR increases.
As you can see, Google AdWords really does reward effort and relevance. It's the only system that works this way (even though the word is going around that other competitors are going to do the same) and it's a big advantage for SOHOs and SMBs. Big companies often spend very large sums of money, but don't optimize their ads very well, which is going to make you more relevant when you're up against them with an infinitely smaller budget.
In the next post, we'll address keyword choice and their connection to your site.
Till next time,
Marc
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