Category: Google AdWords

To use pay per click advertising successfully you really need to know what your cost per acquisition is or rather how much you are willing to spend to get a new customer and still have profit left over. Without knowing your cost per acquisition, you can actually be paying Google AdWords for each new customer sale you make or each new customer your get. Google will work hard to spend your money, but it is your job to make AdWords profitable for you.

So, do you know how much it costs for each customer? How to you figure this out? A lead conversion in Google AdWords does not mean a sale. The formula for each business is different. One of my clients told me that for their business, it takes 10 leads to make a sale. Typically the higher the value or price of your service, the more lead conversions you will need to make a sale.

AdWords will track the lead conversions for you, but you need to track sales generated and each month look at the sales generated, total spent on advertising in all areas and then extrapolate to determine your cost per acquisition. In some cases when clients review this information they find which avenue is a better lead generator for their business or that one is more cost effective to use than another. Without this additional information and careful review, you may be spending more than you should on generating new business.

Once you know your desired or average cost per acquisition, Google AdWords has some excellent tools to help balance your traffic and cost per click to keep you within your profit restraints. The conversion optimizer with a maximum cost per acquisition setting is an excellent tool. You can balance what you want to spend with what Google recommends. Remember however that Google is in the business to serve clicks and you need conversions and sales so make sure that the setting you use does not stretch your margin too tightly.

Chief Economist at Google, Hal Varian, announced recently that what we had thought all along as the Average Rank was not actually the position of the ad on the page, but rather the average position in the keyword auction. That is very big news! If you are selling on Google AdWords further reading on the AdWords blog is definitely in order.

“To begin with, it’s important to understand that there are two interpretations of the phrase “ad position.” The “page position” refers to the location on the page, such as “top ad 2” or “right-hand side ad 1.” The “auction position” is the rank of the ad in the auction that determines the order of the ads on the page. The critical point is that the reported average position metric is based on auction position, not page position.

Who knew? For years we have all thought the metric in the AdWords control panel that said Average Position was the ad position! And truthfully for years, it may have been. It might possibly be that as AdWords has decided to do away with the campaign setting Position Preference, that it decided to change what data is returned in the Average Position metric in the control panel.

What I find interesting in the blog post called “Understanding the Average Position metric” is that Google finally reveals several very important things that they have previously not clarified. They are as follows:

1. Position one for your ad is the first position in the colored box at the top above search results. That means that position three or four may actually be the very top ad on the right rail depending on the number of ads in the top colored box.
2. You can force Google to show your ad in a top colored box by bidding more if there was no colored box before.
3. By now knowing that your Average Position is really your Keyword Auction position you know have an inkling of what the bids are by keywords and so you may actually be able to effectively decrease your bid with this information.

Hal Varian also revealed additional information that Google has found out about conversions and ad position.

“Some advertisers have asked how clicks from different positions tend to convert. In general, we’ve found that conversion rates don’t vary much with the position of the ad on the page. An ad in a more prominent position on the page will tend to get both more clicks and more conversions than an ad in a lower position, but the conversion rate (conversions/clicks) will tend to be about the same for the two positions.”

It is a good plan to structure your AdWords account using themes with a different theme or service in each ad group, but make sure that when you are structuring your account that you plan to grow in an effective way.

I have seen in the last couple of weeks a few accounts that simply got carried away with the idea of creating new ad groups. One account had over 20 ad groups with several competing between themselves, another account did not group products together and had 50 ad groups with some that had only one or two keywords in the ad group. Another I reviews, had so many campaigns that the budget for some campaigns was so ridiculously low that it was no wonder that they had no impressions for the entire month.

If you self manage your AdWords account, you have the opportunity to create as many ad groups as you want, but when you have 15 to 20 ad groups and you want a professional such as myself to manage the program for you, you will pay your account manager to open each ad group and manage each program. It typically takes us three hours of our time per month to work on a program with 10 ad groups and that is on a once a week schedule. That’s after the account is really performing. If you have a program that is not performing, double that time for management – that’s six hours. You can just get carried away creating ad groups that you really don’t need that will bloat your account, parse your budget too many ways, and compete against each other.

When we create ad groups we definitely want themes, but also keep an eye on the budget and the time it will take to manage your program. We want your full AdWords program including management to be an investment in your success not to be an expense.