The Profit Maximising Approach to AdWords
Google AdWords and other search engine marketing (SEM) platforms afford advertisers a great degree of control over the cost of their media placements.
By being able to control the maximum cost-per-click for every keyword, this puts advertisers in a position where they are able to monitor the profitability of every keyword they are targeting.
Search engine ads are one of the most trackable marketing activities available, and if you’re running some sort of eCommerce environment then you have the potential to track the exact return on investment (ROI) each keyword is bringing.
However, this degree of reporting can lead to misinterpretation of what is a “good” keyword and what is a poor keyword.
At the basic level, a decent Analytics setup will allow you to determine that for every $1 you put into AdWords, you are getting $X back. Clever operators will have this set up for each individual keyword.
However, relying just on ROI can be a big mistake. Let’s take the following example.
Keyword #1 – “widgets brisbane”
- ROI = $4.50
- Monthly Spend = $300
Keyword #2 – “widgets sydney”
- ROI = $2.80
- Monthly Spend = $700
From the above example, we can see that “widgets brisbane” is a better performing keyword. Therefore, if you only had $1000 in total monthly budget, you would spend all of it on Brisbane (presuming of course there’s enough traffic to use that much). However, if your budgets are flexible and you can spend more if you want, then would you turn off the Sydney keyword?
The answer is no. ROI is just one factor you need to consider. The other is profit. The Brisbane keyword makes $1,050 profit per month (300 x 4.50 – 300) while the Sydney keyword makes $1,260 profit (700 x 2.8 – 700).
Turning off the Sydney keyword would make your business worse off. Obviously you should also consider the profit-margin on the actual widget itself when calculating these figures.
Now most people when faced with the above scenario, would obviously choose to leave both keywords turned on, but for some reason when this scenario is expanded to hundreds of keywords, rational profit-maximising thinking tends to go out the window.
Let’s say an AdWords’ advertiser is spending $1000 per month across hundreds of keywords, and is getting about $5000 back (a $5 ROI). Based on this good performance, the advertiser decides to increase their budget to $2000 per month, which in turn lifts the revenue to about $9000 (a $4.50 ROI).
Looking purely at the ROI figures would lead an advertiser to incorrectly assume the increase in budget has not worked, and they might drop it back. However, looking at the profit figure clearly shows monthly profit rising from $4000 to $7000.
One of the questions we are commonly asked is “why does my ROI drop when I increase my budget?”
The reason behind this is actually tied to the economic principle of the low-hanging-fruit. The low-hanging-fruit principle basically explains that in business, there are some sales that are easier to get than others, like the low hanging fruit on a fruit tree is easier to reach.
In an AdWords context, a low-hanging-fruit keyword would be something like “buy online widgets now.” If a user types this into Google, it’s likely that they already have their credit card out of their wallet and are ready to purchase. These longer, more specific keywords are also often cheaper to bid on than generic terms.
By contrast, a user searching “widgets” is not a low-hanging-fruit. This term is highly generic and it’s going to take a good salesperson (in this case a website) to convince this person that now is the right time to buy.
Essentially, this is why ROI drops when you increase your budget. The AdWords’ algorithm has a built in “low-hanging-fruit” factor that shows higher performing keywords more often, meaning when you increase your budget, you’re starting to reach for the fruit higher up on the tree.
The lesson here is that the way to assess how your AdWords’ campaigns are performing is to find the point (budget amount) where total profit is maximised, not where ROI is maximised. This simple mistake could be costing your business thousands in lost sales.
Popularity: 13%
Read MoreBidding on Your Own Company Name in AdWords
One PPC strategy that often causes some trepidation amongst advertisers is the decision about whether or not to bid on their own company name and other related brand terms. It is a common argument that if a user is typing in a specific company name, then they will already be able to find this business at the top of the organic search results.
So why do you need to advertise on these terms as well?
Consider this – What if by relying solely on your organic search listing, you may in fact be turning some of your potential customers away?
Below are our top 8 reasons why bidding on your company name is an effective search engine marketing strategy that can help increase conversions, ROI and your brand presence on the web.
1. Attention, Interest, Desire, AdWords
It is important to remember that Google AdWords clickers are different to Google Organic Search Result clickers as they are generally at a different stage of the consumer decision making process. We have found that, in many cases, users who click on the organic search results are more likely to be in the research or ‘interest’ stage of the buying process, whereas users who click on sponsored links (like Google AdWords), are more likely to be purchase ready customers. If you don’t have an active ad catching these purchase ready consumers, your competitors may be winning customers who are in fact searching for you!
2. Because Your Competitors Are
Under most circumstances, your competitors are allowed to bid on your branded keywords. You can submit a copyright infringement request to Google for some more specific brand terms but there is no guarantee this will go through. Depending upon local advertising regulations, competitors are generally allowed to use your brand name in their ads (through ‘comparative advertising’) so it is important that you compete in this advertising space if your competitors already are. Do a Google search now and check if there is anyone else advertising on your brand terms!
3. It’s Cheap
A common misconception is that bidding on your company name is a waste of your PPC advertising budget because your website is already in the organic search results for free. This is simply not true. Using your company name as a keyword is actually a cost effective method to ensure you maintain a very high click through rate at a very low cost per click. Brand terms are generally much cheaper than other keywords in your industry vertical (depending on how competitive your industry and how specific your brand terms are). The benefits of running a brand terms campaign often outweigh the extremely small costs involved in doing so.
4. Increases Campaign Quality Score
The high click through rate that advertising on your brand terms receives will help boost the position of your ads in your other ad groups by increasing the overall click through rate of your account and, therefore, increasing your overall quality score.
5. Control Your Message
AdWords ads offer personality for your brand where you can feature your latest products, promotions or brand messages. The personalised ad text gives you the opportunity to control the message so you can communicate directly with your customer. This engages the customer by offering more relevant information and landing pages. Your ads may even attract more clicks than your organic results. For example, if you are an ice cream store running an offline advertising campaign that promotes a free ice cream for all customers who download a special online coupon in the month of June, an integrated AdWords strategy would allow you to capture users searching on your brand terms and send them directly to your coupon landing page or micro-site whilst reinforcing the offline advertising messages in the AdWords ads themselves.
6. Website Relevance
AdWords can boost sales for your business by capturing the market segment in ‘buying mode’ and ensuring these users are quickly directed to the most relevant page in your website, bypassing your home or other irrelevant pages that may frustrate or confuse buyers.
7. Misspelling Your Company Name
If your business name is not well known or difficult to spell, bidding on likely misspellings ensures your company name, and the users intended search, is listed.
8. Increase Your Online Branding and Search Engine Real Estate
If your business has an organic search listing (or listings) and an AdWords ad when a user types in your company name, then your business occupies more physical space on the Google search page. The more physical space you occupy, the more visible your website.
All these factors are why we generally recommend bidding on your own company name in AdWords.
Popularity: 100%
Read MoreGoogle TV: A New Frontier in Television Advertising?
A couple of days ago at the 2010 Google I/O conference, Google announced the impending launch of Google TV. This (possibly) game changing platform will work to bring the web and traditional TV closer together than they have ever been before.
Google TV – Watch The Overview
There are a multitude of topics and issues that could be discussed in relation to the announcement of Google TV. As a keen Google advertiser myself, however, I would like to concentrate on just one – the shift in thinking that may occur amongst advertisers if Google’s ambition to combine the internet with traditional television is successful.
Although many other companies have attempted to marry these two beasts in the past (Apple TV, Boxee, TiVo etc), none have yet achieved the ‘Holy Grail’ result – widespread adoption of and acceptance of tv/internet integration. Although to most advertisers, this integration has always been the obvious next step in television advertising, until now, there hasn’t really been a platform on offer that smoothly integrates the television and internet into one, seamless media experience.
Enter Google into the equation and the traditional television advertising landscape begins to look a little different. Google, who already have a wildly successful online advertising platform in Google AdWords, will no doubt be looking at integrating their AdWords system into Google TV. Even at this point in time, Google already have a Google TV interface within their AdWords console which allows advertisers to upload TV ads to be viewed by current Google TV owners.
But consider some other future possibilities for a moment…
If Google TV is a success, we may see a new generation of direct response advertising in traditional TV ads.
Imagine a Domino’s TV ad which allows you to click on an AdWords coupon that then takes you to a HD ordering page designed specifically for TVs.
Or an ad for a new song or movie that takes the user directly to a website where they can buy and download that media onto their television.
What is most exciting about this fundamental shift in the way television advertising may soon be provided is that it will now allow a once passive medium to become an extremely active, engaging and (even more) powerful advertising tool.
Only time will tell if Google’s new television platform will gain widespread acceptance but, for now, as a Google Advertiser, I can only sit and think giddily about the future possibilities for online advertising through television.
What do you think about Google TV and the future of TV advertising? Feel free to comment and discuss!
Popularity: 27%
Read MoreGoogle Takes on PayPal – Google Checkout
If there’s one web company out there that can strike fear into the hearts of all the others, then Google is definitely it.
For quite some time, the online payment world has been dominated by PayPal, as its raft of features and ease of use for almost anyone has made it a logical choice for most online businesses. That was, however, until Google Checkout came along.
Google has taken their typical approach of making the use of its system totally free and easy to use. For a start, Google takes a flat 2% of any sale through Google Checkout (plus a 20c transaction fee) making Google Checkout competitive, if not cheaper than PayPal for most users.
But that’s not where its big benefit is. Google also offers free transactions on the dollar value of up to ten times your Google AdWords spend. That means if you’re a business advertising on AdWords spending $1000 per month, the first $10,000 you make in the month is all yours (with no commission for Google).
Since most businesses that have a checkout system probably use AdWords anyway, this is a massive advantage to using Google Checkout over PayPal.
But that’s not where the benefits stop. AdWords advertisers are also able to use the ‘Google Checkout Badge’ underneath their ads in the search engines and Google claims this badge improves both click-through and conversion rates (the percentage of people who buy) quite substantially.
However, Google Checkout is not just a threat to PayPal, but also to a legion of web designers who charge thousands of dollars to build custom shopping cart or e-commerce modules for their clients.
Users who sign up to Google Checkout are able to design their own shopping cart module using the built-in tools, and then simply cut and paste the HTML code straight into their site. Web development agencies who specialise in building website shopping carts are going to have to adapt and come up with new and exciting ways to build shopping carts or cut their prices drastically.
The big question that remains however, is when will Google Checkout come to Australia? Google Checkout currently supports buyers from around the world, but only supports sellers in the US and UK. Google’s information pages states that they are working to “make Google Checkout available in more locations” but can’t give specific dates.
Personally, I believe that Google Checkout will dramatically change the way online businesses are established in Australia as many website owners are crying out for a viable alternative to PayPal.
The ability to control all their purchases from one login is also a massive benefit for buyers.
Google is on the move again…
Popularity: 26%
Read MoreSEM Tip – Target Your Customers Location with AdWords
SEM Tip #2
The internet is a big place, so making sure your online advertising dollars effectively reach your target market is one of the biggest challenges for managers.
When it comes to most marketing activities, whether it be a newspaper advertisement, television commercial or internet campaign, managers are always striving to choose marketing mediums that attract the most number of potential customers for their dollar.
This is where search engine marketing has a huge benefit over its more traditional rivals. SEM can obviously be targeted to the exact keywords you want, which gives you a great level of control over who your advertisements reach. By targeting the phrase “neon lighting brisbane” you can be fairly well assured that your ads are going to be displayed to those who want to buy neon lights in Brisbane.
However, not everyone includes the location when searching, meaning that someone from Perth can search “neon lighting” and click on your ad, costing you money without ever really having any intention of purchasing from you.
One way to get around this dilemma is to use what’s called ‘location targeting.’ Location targeting in programs such as Google AdWords allows your business to specify to what geographic regions you want your ad displayed.
For instance, you might want to target the whole of Australia, so you select that option. Alternatively, you can narrow down your region even further to a particular state or city.
An even better option however, is to use an ad radius, which allows you to set a certain size ring in which you want your ad displayed. For instance, you might set up your campaign so that your ads are displayed within a 50km radius of the Brisbane CBD, and only users within that radius will see your ad.
Obviously this is an extremely useful tool as it enables businesses to really target their potential local customers. One word of warning though, this is not foolproof system, as current ISP setups in Australia mean some users will not see your ads when they should.
Popularity: 4%
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