Many businesses buy AdWords traffic at least partially successfully.

They then often do a poor job of the website conversions, if they’re even bothering to track them or understand their financial value.

No Tracking

And sometimes they fail completely to earn any profit in the transaction, and risk going broke without even realising it.

I’ve worked with hundreds of small and medium businesses and AdWords Agencies the world over since 2005, and during that time have learned what works in making AdWords campaigns profitable and successful.

So I built the “Clicks, Customers, Cashflow™” System to help AdWords advertisers earn more than they spend.

This is the first post in a three-part series, and in it I’ll talk about Clicks – why they matter, how to optimize for them, and all the considerations you need to take along the way. (Stay tuned for the upcoming Customers and Cashflow pieces…combine the three, and you’re on your way to a profitable AdWords campaign regardless of your business.)

Let’s get started.

“Follow the Money”

Computers

Back in 1997, I was fresh into my new Corporate role as European IT Manager

when my boss Roger asked me “What’s your IT budget for next year, David”.

My honest answer was “Sorry Roger, I don’t know that.”

His reply motivated me to figure it out – “Well, if you don’t find out in time for the next Strategic Plan, someone else will have to make that decision for you.”

Since we planned to treble our employee headcount, and grow from 4 sites to 12, and I was going to recruit a Support Team, I needed to know what I had to spend to achieve it. Fast.

So I had to figure out how to “Follow the Money” by instinctively creating (I learned what it was called later by accident) a Zero-Based Budget, involving significant stakeholders like my new best friend – the Finance Manager.

It turned out to be $1.5m, and I got my money. Along the way I slashed our UK Telecom spend by 40%, our mobile spend by 25%, hired 4 support staff, and opened our European IT Support Center.

“We’re all in it for the Click”

Fast forward to today, and in web marketing in general, and AdWords specifically, nothing can happen without the click.

As a website owner, you want the click.

Google wants the click, and has become the best “click-prediction” engine on the Planet.

But clearly, not all clicks are created equal – some you want, some you don’t.

Send the Right Message

To get the right click, you have to send the right message – and that starts by choosing the right keyword trigger.

Some keywords are commercial, buying-intent keywords. Others are just research.

Often there’s a huge difference in intent even between singulars and plurals – controllable at the Campaign level with Close Variants.

Variants

Most advertisers are well aware now of all the keyword match types, which ones to use, and which to avoid to prevent Google extracting their “stupid tax”.

The introduction of +Broad +Match +Modifier was a welcome advance to offset the reduced impressions that stricter match types give you, against the delinquency of Google’s expansion algorithm.

Now I only ever use BMM – never Broad Match – along with “phrase” and [exact].

BMM with Phrase

Negative keywords remain an important way to suppress undesirable “click opportunities” (Impressions) from wasting your precious budget. You should be harvesting these regularly from your Search Query reports.

keywords

(Note: It used to be thought that spelling mistakes and large quantities of “long tail” keywords (4, 5, 6 words or more) were better, more cost-effective ways to reach the right audience, but Google doesn’t even serve your ads for “low search volume” keywords, so don’t waste time with those.)

Another important metric that Google introduced some years ago, but fairly recently made much more usable, is Search Funnels (you can add these columns into various views)

Customize Columns

Back in 2006 I unintentionally wrecked a campaign that was very successful by deleting all the keywords that weren’t recording conversions (you couldn’t pause keywords back in 2006).

I was only trying to save money, but it all went horribly wrong; it turned out that these keywords, while not responsible for last-click conversions, were important in moving the buyer through the conversion funnel. Without them, conversions plummeted.

After the shock had worn off, I reinstated them via a screen scrape and a spreadsheet and recovered the campaign. I was surprised to see their history was preserved.

It took me years to realise the importance of keyword attribution this way. Now, I have found that in some cases, with a minimum click threshold of say, 100 clicks, you can safely pause or remove all keywords with zero “assist” metrics. Use a filter to find them:

Filter

This can drastically reduce your keyword inventory, and associated wasted impressions and clicks, to only those that actually matter. It saves money too.

Keyword inventory

Increasingly, shorter tail, more general keywords are the only ones that will get you decent search volumes and conversion opportunities, and that brings us to the next area.

Find the Right Person

AdWords is purely and simply a Game – of Identity and Numbers.

In fact, it’s increasingly becoming recognised that the entire Google ecosystem itself is an identity-based platform (this is being built out further all the time in Google Plus).

If you go back to its origins in “Project Backrub”, the author citation model (bibliography), PageRank, and then Rel=Author, this is not in the least bit surprising.

Google has always been serious about Authority and Identity. But, not about frivolity and speculation (“Speculation is the Mother of All Evil” – Gordon Gecko, Wall Street 2).

To get the right person to click your ad, you want to both disqualify the wrong click and qualify the right one.

By appealing to the right identity (the profile of your ideal customer), you stand a higher chance of getting the right click (see part one of this series for more about ad creation).

By creating ad copy tailored to the identity of your ideal customer, you set off a chain reaction in their mind: “That’s ME. That’s FOR ME. I WANT THAT”.

With Identity comes Harmony, and with Harmony, comes Flow. With Flow, things can happen.

Line up your ad text and your landing page

Ideally, your landing page copy will reinforce the promise you made in the ad – otherwise you risk confusing or disappointing your visitors and losing them. Your ad is the Ambassador for your landing page, so set and deliver the right expectation.

But you can certainly test ad messages first and then build more closely tailored landing pages later based on strong ad CTR and strong demographic messaging.

Try different ways of standing out

I'm Feeling LuckyOn page 304 of “I’m Feeling Lucky”, Google Employee Number 59 Douglas Edwards recounts how a single, simple engineering change to make keywords bold in ads increased click through rates by Four Hundred Percent.

So, most times you will want your keyword in or throughout your ad to get it bold and standing out. But not always, and this should be tested. Sometimes your ad will stand out better because nothing is bolded. Points of difference are important.

Use Ad Extensions

Google also gives you an ever-increasing and sometimes bewildering array of Ad Extensions to help you appeal to that crucial User Identity (including the just-announced Review Extensions). We’re only going to see more of these over time.

Ad Extensions

 

Ad Extentions, 2

Don’t Force the Wrong Ad

By the way – don’t force Google to show the wrong ad, to the wrong person, at the wrong time.

Since the introduction of AdWords, every new campaign, has, by default, Ad Rotation set to “Optimize for Clicks”.

This is correct.

Optimize for Clicks

Remember, we all want the click – right?

Google runs an ad auction for every search, and these happen every 0.2 of a second or so. Google has always been obsessed with speed.

During the ad auction, a large number of factors are all compared in real time between competing advertisers, including

  • daily budget
  • ctr
  • cpc bid
  • bidding strategy
  • ad rotation
  • ad delivery
  • quality score
  • kewyord
  • match type
  • close variants
  • negatives
  • user ip address
  • location targeting
  • schedule
  • user network
  • user browser setting
  • user device
  • and so on …

The computational power behind all these calculations, in these volumes and speeds, is truly mind-boggling.

For many years, like everyone else, I believed in “split testing” two ads, choosing a control, and trying to beat it.

Then, in 2010, I was running a lead generation campaign in the UK (see part 1 in this series), which was creating 500,000 – 1M ad impressions per day, just on Search. We were getting up to 1,000 lead conversions per month, at $1.50 CPA average.

The demographic of this audience was both wide and deep, and the Search traffic was enormous.

I started experimenting and deliberately breaking all the “rules” to see what happened. I ended up with some key insights into how Google’s search platform really works.

In one ad group (amongst many), I had over 30 unique ads all generating conversions to our target Cost per Acquisition (see part 1 of this series).

In this campaign environment, I realised Google’s automation was the best way to run the show, so now I let it (this was the subject of my 2010 Maui AdWords Elite presentation).

Not just for bid management (I was using Conversion Optimizer), but for ad delivery too.

My realisation back in 2010 was that the simple default setting of “optimize for clicks” has allowed Google to compile the most accurate “click prediction crystal ball” in human history.

It’s this crystal ball that powers all their Flexible Bid Strategies, including

  • Enhanced CPC
  • Conversion Optimizer (Target and the stricter Max)
  • The recently introduced ROAS (Return on Ad Spend) [you need Dynamic Conversion Tracking if your product sales values vary e.g. in ecommerce]

Bid Strategies

 

Track Transaction-specific Values

Zero in on the Right Place

As mentioned, Google knows everything that’s important to know about user searches.

Locations

IP targeting (although we know it’s not 100% accurate) allows the selection of a large variety of physical locations, like:

  • Countries
  • States
  • Metros
  • Cities
  • Towns and suburbs
  • Radius

Locations

User searches, clickthrough rates, and conversions will vary widely by location, to the extreme of your local Pizza Parlour and a lunchtime coupon (think Offer Extensions redeemed and tracked on your mobile phone with Google Wallet).

Wallet

Google is also getting involved with local physical delivery and fulfilment via the Google Express program. Look out, Amazon …

Google Shopping Express

Use the Right Networks

It’s long been realised that the Search and Display Networks are two very different environments, targeting users in very different stages of interest.

The Google Display Network (GDN) is commonly the most appropriate to use when attempting to build awareness early on in the life-cycle of your product or service – particularly when nobody has heard about it, and is therefore not even searching for it.

People spend far more of their time looking at websites than they do on the Google search results pages, so this can be an extremely effective way to reach a very large audience.

The Google Search Partner network has a very variable value – sometimes it can be quite useless and should be turned off at the campaign level.

Search Partner Network

Sometimes it can perform as well as Google search. And sometimes, it can be surprisingly useful.

In my 2010 lead generation campaign, I was finding that the Google Search Partner network was bringing us significantly more traffic and signups than Google search.

I did a test to try and exploit this further by writing ad copy in a very different format to what we normally do as sophisticated marketers: I started writing deliberately ugly ads to see how they would do, and surprisingly some of them became my best performers.

You can’t target the Partner Network on its own, and Google does not publish a definitive list of their Search Partner syndication sites, for various reasons, including:

  • Confidentiality
  • any web publisher can become a Search Partner destination, so Google probably does not know who they all are

However, Amazon.com, and all Google properties like Gmail, image search, Google maps, are Search Partner sites.

And Google’s Crystal Ball knows where to find the most likely click, wherever and whenever it is.

I have a client in Italy who used to regularly let his budgets run out, then top them up again a few days later. He would frequently have just a few cents left in his account for several days.

One day I noticed $0.19c left, and kept an eye on it, watching for his top up. Couple of days later, the $0.19c was gone – Google had spent it!

Why? Because they can. They are that good at what they do…

Understand the “Context” of Different Devices

With the introduction of enhanced campaigns, Google began to significantly stake its future on the role of mobile computing, including tablets and smartphones.

They have a significant investment here with the Android operating system, along with their increasing reach into hardware with the Nexus devices, and strategic partnerships or acquisitions (for example, Motorola).

Industry observers claimed this was a way to artificially hike the prices of mobile CPCs, which are historically lower than PC CPCs, and are increasing in volume, thus diluting Google’s earning power.

Recent data doesn’t seem to support this though (yet).

Much has been said already about enhanced campaigns, so I won’t repeat it, but there are still interesting areas to see how this plays out, not least in cross-device conversion tracking, which Google seems to be devising an entirely new approach to address.

Given that Google has the data to prove that our usage patterns are really going this way, such a method of cross-device tracking becomes crucial.

Cookies don’t follow devices around (nor are they likely to), but Google Chrome already supports cross-device synchronisation. And Chrome is becoming a significant player in the browser industry, to the detriment of Firefox and Internet Explorer.

My own interpretation is that Google Chrome, Google Now, Google Plus, and the increasing utility and desirability of a Google account, along with an AdWords account, and associated Android and Chrome operating systems hold the future to this.

e-Commerce Companies Need to Invest in Product Listing Ads

In October 2008, the top 100 European Agencies were invited to the “Above and Beyond” conference at Google’s European HQ in Dublin, Ireland.

Above and Beyond

We were shown the reinvention of Froogle (originally Google Base) as Merchant Center, and the PlusBox with images and product feed data.

Nobody had seen anything remotely like it before (and we weren’t allowed to speak of it, by NDA).

Although the Shopping Results that followed were initially free clicks, those days were numbered. Free often has little value.

Now it’s much more straightforward: you’re a Merchant, you’re selling stuff, the world’s a marketplace, you have to know what you’re doing, what it costs, and what you earn – or you’re going broke.

Initially there was so much junk showing up in Shopping Results, Google had to hit Merchants where it hurts – in the wallet.

The integration of the AdWords billing platform with the Merchant Center database was a stroke of genius, and now, Google Shopping dominates the middle of the page with Product Listing Ads.

Organic links are being pushed further down the page all the time.

Organic Posts

This isn’t a hobby anymore; this is serious, commercial stuff. Google isn’t taking any prisoners, including Amazon, and ultimately even the Comparison Shopping Engines (CSEs).

We haven’t even seen the start of this yet …

Comparison Ads Model

 

Financial Decisions

Now, it’s vital that ecommerce merchants understand how to use Merchant Center, data feeds, feed management and optimization, and associated Social signals like seller ratings and Google Plus.

Watch Ad Positions Closely

Here is where the understanding of your audience demographic, and/or your brute bidding power, really come into play.

Your mission is to get a significantly stronger click through rate than your competitors.

If your marketplace has a wide variety of demographic identities, they may be perfectly willing to scrutinize every ad and every link, not just on the first page of search results, but on the second or subsequent as well.

It all depends on what they’re looking for and how well it is being served by the advertisers in that space.

In most commercial markets these days, and particularly with e-commerce and the rise of image-based Google shopping Product Listing Ad campaigns, the top and middle of the first page of results are going to get nearly every buyer’s click.

Only in lead generation campaigns with very hungry searchers, whose needs are just not being met by pretty much everybody advertising (or they all look and offer the same), are you likely to get any clicks from low ad positions or page 2 results.

If you are lower than ad position six at the side of the search results, you are likely to be hidden below the fold where no one scrolls down to – so, although you triggered an ad impression, you are hidden in plain sight and will not get the click you need in many cases.

Google claims to normalise your Quality Scores for lower click through rates in the lower side ad positions, so you will not necessarily feel detrimental campaign performance in your wallet, due to low CTR and higher CPC.

But, having a low ad position has been proven very definitively to drastically reduce your click volume, and hence your conversion opportunities.

The segmentation you can see in the top versus other report has been shown to reveal 10X, 20X, even 30X click through rates in the top three ad positions.

Ad Positions

And, with the ever-increasing array of Ad Extensions allowed to show just in the top three positions (eg Sitelinks, Enhanced Sitelinks, enhanced headlines, and the just announced Review Extensions) Google is incentivising all advertisers to bid their positions up, to get sales volumes up.

Unfortunately, in the high ad positions, if your click prices are too high, and your Conversion Rates too low, your Cost per Sale (CPA) is going to be high enough that you may only be breaking even (that’s actually no bad thing, in some circumstances) or be losing money on your first sale (but if you have repeat purchases, again that might be OK).

All advertisers need to know their basic numbers, as never before, to stand a chance at being (and staying) profitable on their AdWords spend.

Budget Considerations

Limited daily budgets

Your daily budgets are a key indicator of where you are in the life-cycle of your campaigns. If your daily budgets are conservative and your campaign status shows limited by budget and you are not prepared to increase it, then you are running your campaigns as a Cost Centre.

“Limited by budget” means that your ads are not being shown as often as they might be during the day, and you are limiting your audience exposure and your potential conversion opportunities.

When your campaigns are running as a profit centre, then your daily budgets become Unlimited because you want to buy every click you can.

Limited by budget

Loss of impression share

Search Impression share is the impressions that you’ve received on the Search Network divided by the estimated number of impressions that you were eligible to receive.

So if your budget is limited, you will not be showing your ads as often as you could be. If your conversion costs are acceptable, you could get more of them simply by increasing your daily budget.

If you are not able to bid aggressively for the top ad positions, you will also lose impression share due to rank. To fix this you will need to increase your keyword quality score, and/or your ad click through rate.

CTR

Standard or Accelerated ad delivery

Again, when your campaigns are a cost centre, you will want to display your ads evenly throughout the day to preserve your budget – although this results in loss of impression share.

To have your ads seen as often as possible, when your campaigns are a profit centre, you will want to use accelerated delivery.

Delivery Method

Scheduling

If your customers can get what they want from you online at any time of the day, say a purchase, download, or a form completion, then scheduling is usually not required – unless you can see that specific days of the week or hours of the day are consistently well outside of your desired conversion cost (check the Dimensions tab)

Dimensions

Otherwise, if your business depends on phone calls, or you have a call centre with specific staffing hours that are required to ensure a customer conversion, then you will want to set particular schedules to reflect that.

With enhanced campaigns, schedules can be set at the ad level and at ad group level, even for mobile specific ads for very targeted display times during the day, for example lunchtime or evening meal promotions for local catering businesses.

Advanced Settings Edit ad Schedule

So Am I Going Broke?

The AdWords Cashflow Calculator

My Corporate IT experience helps me to connect things together in the AdWords advertising platform, and how to “follow the money” to earn profit.

For any business looking to do better with AdWords, the first and most important question to ask is: “How much money did I give to Google over the past 30 days – and how much did I get back in return?”

I’ve even built an online calculator to help work it out.

Once you can see where your campaigns are Cost Centers or Profit Centers, you can make informed decisions about what to do next.

Cashflow Calculator

Next Time

Customers – “Clicks are for Show, Conversions are for Dough”

 

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UK-based David Rothwell has worked as an independent AdWords consultant since 2003. He’s a renowned expert on the AdWords Conversion Optimizer and, in 2012, introduced free AdWords management, working with clients on a commission-only basis.