Google AdWords Changes Cause Sweeping Impact in Cost Per Clicks

In the second week of September, Google AdWords rolled out some big changes. Some of the impacts of these changes are just now beginning to be felt by many advertiser accounts.

First, what Google did was to do just a few important tweaks to their highly profitable ad delivery system called AdWords. Here the changes are in a nutshell.

1. Keywords are no longer marked “inactive for search” – Google now allows all words to be shown in the search index and will deliver clicks based on quality score, bid price, and daily budget.

2. Quality Score is now more accurate – Google has stated that they will evaluate the quality score as the search query is entered.

3. “First page bid estimates” replace “minimum bids” – Google also said that they would start showing information to help advertisers know how much to bid for certain hot property keywords to appear on the first page of the search results.

What has happened in accounts, as of this change, has been broad and sweeping. The change has particularly affected advertisers in major market such as Los Angeles, Washington DC, New York City, and San Francisco, just to name a few. The change has been pretty striking in regards to increasing the cost per click, as much as a 35% and sometimes even more to have specific hot property word appear on the first page of Google search results. This impact has been felt particularly on “Poor” quality score rated keywords, but even keywords with an “Ok” rating.

What I have seen just a few days after the AdWords rollout was a striking drop in average ad position across the board on many accounts in many diverse business sectors in major metropolitan markets. Typically we like our client’s average ad position to be from 2 to about 6; depending on the client’s daily budget, the importance of the keyword, and the price to be competitive with the market competition. We saw many accounts which had been operating at this level suddenly have an average ad position drop to an average position of six to nine or lower. We have needed to adjust the maximum cost per click in many of these accounts; fattening Google’s pocketbook and stretching the client’s budget to the limit.

Many smaller markets such as Cincinnati, Ohio; Louisville, Kentucky, and other similar markets have not really been impacted by this recent change. However, the major metropolitan areas have been hit hard. What I found even shocking, as a professional account manager, was some of the notes on what Google recommended that the advertiser pay to appear on the first page of Google search results. Just one example is for family dental care (for the Washington DC metro area) the bid was $57! I do want to make sure to caution clients, who self manage their Google AdWords accounts, to be careful on upping the ante to these recommended figures. Remember, Google is in this to make a profit, this tactic may be considered “up-selling.” This is also a good time to evaluate the quality score of a keyword and to pause or delete those keywords that may be sapping your program’s health.

What I found interesting was that for many of the keywords where Google suggested a huge increase such as $15 to $26 PER CLICK to be on the first page of search results, the monthly figures showed that the keyword already had an average position of 2 or so at a figure of around $6.50 per click and in some cases have a quality score of “Ok” and a decent click through rate. In one specific case, the maximum cost per click was set at $12.00 but the actual cost that Google billed was $2.02. Remember, the client whose ad appears in the number one position is definitely being charged $12.00 per click by Google as they are the price leader.

Here are my recommendations from about two weeks worth of careful review of many Google AdWords accounts.

1. If your budget is under $500 for clicks per 30 day period translating into an figure under $16.67 per day, you really must consider increasing your click spend in order to get in the game. If you really cannot increase your spending level then you should only run one or two ad groups in your account. You can identify if you have fallen out of the competitor mix by reviewing your ad spend. If Google has not been able to spend your monthly budget for clicks, then your cost per click setting is too low and you will not garner the impressions needed to make your AdWords advertising program successful.

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