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Google AdWords and Ad Performance

One of our client's asked us this week all about how they can achieve a better position within the sponsored search results for Google AdWords. We put together some rather lengthy advice and then thought it may be useful for some of our other customers as well, so here it is (with some made up names and places thrown in for good measure to keep our client's identity anonymous)…

How does Google AdWords work?

The way Google AdWords works in summary… "You select how much you want to spend per day (your daily budget) and how much you're willing to pay for every click on your ad… Google displays your ad so that it gets the most money out of you that it can (legitimately)."

With that in mind… here are some factors that you should consider when comparing your position to your competitors.

Google takes into consideration "Ad Performance"

What does this mean? Well from Google's perspective, it's a case of "how much money does it earn them?" but from the advertiser's perspective it means "how many clicks does your ad get?".

Let's go through an example (ignoring the position of the ad for a moment), if you're willing to pay £1 per click, and your competitor (let's call them "Al's Toy Store" are willing to pay £0.50 per click, you get 10 clicks a day, but Al's Toy Store gets 10 times more clicks than you do, then Google would make £10 from you, but they would make £50 from Al's Toy Store. Google would assess this, and (now back to position) would position Al's Toy Store higher in the sponsored results because they still earn Google more money.

My budget is being used up

When you increase the amount you're willing to pay per click, you're also speeding up how quickly your budget is used up. In addition, if you advertise to a bigger area, you're allowing more people to click your ad, and again allowing your daily budget to be used up quicker.

Why else am I not in the No. 1 spot?

Again, as Google is looking at ways it can make the most money out of everyone, it will also consider the areas that you're advertising to. If your competitor (Al's Toy Store) is only advertising to say St. Helens, but you're advertising to Liverpool, Manchester, Warrington, Widnes etc. then Google will consider (based on Ad Performance) whether putting you in the No. 1 spot in an area where there's lots of competition earned them the most money, or whether they could allow you to be in the number 1 spot for other areas (such as Warrington, Widnes etc.) and allow Al's Toy Store to be in the No. 1 spot for St. Helens and make more money.

It is also worth bearing in mind that the position changes with every search. Google records what you as a user are doing… what appears as No. 1 for you, may not appear as No. 1 for someone else. In addition, if an ad fails to grab your attention the first time, it may not grab your attention the second time, so Google will automatically change the position trying another ad in the number 1 spot.

Here is an example search for Widgets St. Helens (first time) – completely made up (there are no Widgets in St. Helens!):

Here it is a second time, notice one of the ad's has disappeared:


A third time – take a peek disappeared this time:


Sometimes they will also change order. There is no way to control this as Google's search engine constantly takes all factors into consideration to work out how it is most likely to make the most money from a person's search.

Will I always have to pay this much?

That's difficult to tell. As before… Google considers Ad Performance… so if you increase your budget temporarily, you may be able to show that your ad can perform when ranked higher. Once Google has built up enough history of good performance, you may be able to reduce the amount that you pay and still remain in the No. 1 position.

The cost of No. 1 position

You may also want to consider that an ad can cost £0.20 per click to get you on the first page of advertising (right hand side included). It may cost you £0.50 per click to get into the yellow box on the first page, but then it could cost you up £10.00 to get you into first position consistently.

Take the Google Traffic Estimator below for the search term "Widgets" (again made up example based on our client's real key words). The point marked with a spot is estimated to have an average position of 1.1 (meaning it's 1st position most of the time). This point would cost £12 per click and due to its position on the page would likely result in 15 clicks per day – that's £180 per day on just 1 search term!


In the second chart (same chart but with a different point highlighted) the average position is 1.9 (meaning that occasionally you'll appear in the number 1 spot, but most of the time you'll appear in the No. 2 spot. This point would cost only £0.31 per click, and due to its position is estimated as 11 clicks per day. That's £3.41 on just 1 search term!


So as you can see, as the maximum cost per click (Max CPC) goes up, the position of your ad, and the resulting number of clicks that you'll get don't continue to go up in proportion.

When you consider that for some businesses these terms are highly sought after meaning that the range £3 - £12 could be more like £5 - £50, you should also consider is paying over 50x more for your advertising really worth 30% more clicks to your business? As the charts demonstrate, the ads that show in 2nd place, get 67% of those that clicked on the  1st place ad.

Posted: 07/11/2012 12:41:57 by Kurt Farrar | with 0 comments
Filed under: Advertising

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