The Web Authority

Are you spending more than you should on Google AdWords? You may be doing just that. Since September I have seen around a 20 to 30% increase in the cost per click on Google AdWords.

I have just finished doing 25 account optimizations for dentists and doctors for one of my clients. What I found was that by dropping the cost per click and moving the advertiser to an average setting of 4 to 7, we were able to nearly double the number of clicks and nearly triple the number of impressions.

Everyone wants more clicks, but are you willing to trade a bit of page placement to get them. Ego can force many advertisers to overpay Google AdWords in the effort to own the top spot on the results page. What I have found is that conversions are not typically ad position sensitive on AdWords. This is not the case on Yahoo where position does seem to impact conversions.

It is very important to note that on all of the optimizations we did for the doctors and dentists not every account reacted favorably to the changes, but over one half of the accounts and more likely closer to two thirds did experience improved results.

So don’t leave cash on the table for Google to take and pocket, make a careful and thoughtful review of your account and then review again periodically. Advertiser come and go on AdWords so the price that you pay is dynamic and will change over time and based on the season.

I would not have believed this if I did not manage so many accounts, but in week three of June, that is 6/15 to 6/21, nearly all businesses (nearly 40 AdWords accounts) crashed in regards to the number of impressions on Google AdWords. In fact, the problem has impacted so many accounts in such a big way that June is sure to be considered a poor month when tracking results in the long run.

When reviewing the statistical data of a conglomeration of accounts, impressions and also clicks dropped from a whooping 75% on some accounts to 15% on others with an average decrease expected by month end of around 20% to 33%. Google will really have to serve ads strongly this next week in order to pocket their full 30 day click budget.

As a result we have started to see some accounts be served way, way, over their daily budget, even more than the stated and authorized 10% over per day by Google to make up for the third week’s loss. One account we manage with a $9 a day click budget yesterday had a $20 spend. According to Google’s policies, they can only spend 10% more than the daily budget in a period of several days, but with really bad results in traffic this last week, I am sure that we will see particularly strong impression and click activity to help Google end the month back on schedule.

This does not let Google raise prices for advertisers. Google does not set the prices manually for ads; rather, advertisers themselves determine prices through an ongoing competitive auction. We have found over years of research that an auction is by far the most efficient way to price search advertising and have no intention of changing that.

Just how is Google making so much money from Google AdWords? Well based on the comment taken from this Google blog post speaking about Google now showing ads on the Yahoo network, it is the advertisers who are soaking themselves not Google.

Yes that’s right, but escalating prices in your own industry in an effort to own the number one spot for your ad by price and not by quality advertisers are jacking up the prices on themselves. According to this quote by Google, we have no one to blame but ourselves!

If you understand the supply and demand curve, this is economics in action. If people decide to pay less, prices will decrease due to a lower demand and the cost per click will drop. What I have found is that in some cases dropping the cost per click will actually generate more impressions and clicks and not significantly hurt the page position in the Google AdWords advertising results. This tactic has crashed some accounts in very competitive large metro markets, but is a workable approach for many. So take a stand and decide to pay less for Google AdWords, what you pay now impacts what Google charges. They didn’t make billions last quarter for nothing!

I see this too frequently to think of it as a fluke; clients using extremely general keywords for programs and then spending their whole budget on a term like gas or American sound. Wow, Google is really getting rich at the expense of some clients who are tickled to death at the volume of totally untargeted clicks they are getting.

I have now seen two clients in less than seven days who were spending $100 to $175 per day and did not have website statistics or AdWords conversion tracking set up! If you are going to spend serious money on AdWords, you must make Google accountable by having metrics to determine the program’s success in place. You should be using Urchin or at the minimum Google Analytics - AWStats doesn’t cut it! You should have conversion tracking installed and a scripted contact form that has a thank you page (not a return to the same form page) so that you can install the AdWords script in the code of the thank you page to be able to track micro-conversions or completions of your lead form.

Google AdWords can really work for some businesses, but you need to be a smart consumer or Google will allow you to spend and spend and spend and spend without any conscience of your real success or lack thereof.

Since September 2007, I have been watching the cost per click escalate in Google AdWords. I have seen nearly a 20% increase in this period in the cost per click to achieve the same position on the page. Part of the increase in click cost is due to the number of advertisers moving into Google AdWords and part is due to the philosophy that many business owners have that they want to own the number one spot in sponsored search. Both have created a market where for some white collar business sectors we have seen clicks move from $6.50 to over $10.00.

As the cost per click increases, the budget needs to increase or the number of clicks per day and month shrinks. For many of the accounts we work on, the budget cannot be increased, so what can you do? I have found that by dropping the cost per click and lowering the expectation of ad position on the page we can double or triple the number of impressions and in many, but not all cases, we can increase the number of clicks from 10 to 30%. For many businesses this increase in activity can generate more selling opportunities, micro conversions, and be a very savvy strategy, but it requires owner buy-in and careful account monitoring.

Most people will agree that more clicks are better than less clicks in the top positions. Not always do ads higher on the page in Google convert better than those lower on the page. For some businesses, it is all a numbers game, more clicks means more sales. But I have found from experience that this strategy does not fly on Yahoo and is not valid for every business, every client, and every market sector.

If you are tired of escalating click cost, now is the time to take a careful look and test dropping your CPC to see if you can squeeze out more activity for your program.