What is Google Adwords?
Adwords is Googles version of the pay-per-click advertising model. It allows you to display ads which link directly to your website when searches are done for your chosen keywords or keyphrases. These ads are located to the right of the results which Google gives you for a search and they're also displayed on Googles many partner sites which include AOL, Earthlink, HowStuffWorks and blogger. Recently with the launch of Googles Adsense program your ads could also be displayed on websites related to your keywords.
When you create an Adwords ad, you choose keywords for which your ad will appear and specify the maximum amount you're willing to pay for each click. Remember Googles Adwords program uses a PPC model so you only pay when someone actually clicks on your ad and hence visits your website.
Adwords enables you to save money as its program Discounter automatically reduces the actual cost per click you pay to the lowest cost needed ($0.01 above competition) to maintain your ads position on the results page.
Google is competing well in this arena, in fact they now dominate the market, pulling more advertisers and revenue than former industry leader Overture.com does. I don't know how long this will last though as Yahoo INC! has just bought Overture. What has Yahoo got up its sleeve?
Advantages of the Adwords program
Just as the popularity of Googles search engine is derived from its strong technologically advanced features and results so too is its advertising program Adwords. Adwords has many advantages over similar programs such as Overture.com and Findwhat.com.
One of these has been mentioned already, it's the Adwords Discounter feature which will lower your cost per click price to one cent above your nearest competitor to allow to stay ahead of his or her ad. This means that you don't have to be constantly checking if your competitors have lowered their bids in order for you to minimize your price, Google does this for you.
The way Adwords positions your ads is also another great advantage of the program. In Adwords the position of a certain ad is determined by multiplying your CPC (cost per click) by your CTR (click through rate) and not simply by CPC alone as this would allow the big fish to win all the time.
Googles stipulation that your ads must have a CTR of at least .05% means that a company with deep pockets simply can't outbid the competition. They also have to outwit them by using good ad copy and appropriate keywords. Even if your competition is willing to pay sky high prices for clicks this still won't save them, as if they can't write good pulling ads they will be dropped from the program, leaving you to move up a position.
Other advantages which Googles program has over similar ones include setup time and specific country / language targeting. With Adwords your ads can be live on Google within five minutes of creating them so you can potentially begin to see results immediately, ads on Overture usually go live after a three to five day waiting period. Adwords allows you to choose who should see your ads from among 250+ countries and 14 languages, this means you have more control over your ads so you can be sure they're only shown to a highly targeted audience which means your more likely to be successful.
How to profit with Google Adwords
Now you know why Adwords is such a good thing, let's move onto how to actually use it in order for your business to make profit. First things first, you should determine how much you can afford to pay for a click. Doing this is important as it enables you to better understand the amount of money you can bid on keywords in Adwords while still remaining profitable. To do this your conversion ratio is needed, calculate your conversion ratio by dividing your monthly unique visitors by your monthly sales, then convert your answer into a percentage by multiplying by 100.
Imagine in a month you get 20000 visitors and sell 500 products each with a gross profit for you of $50. Your conversion ratio simply put is (500/20000)*100 = 2.5%. This means that for every 100 people who visit your site 2.5 buy your product.
Your gross profit per 100 visitors is calculated by multiply the gross profit on your product by your conversion ratio, to continue with the previous example - $50 x 2.5 = $125. Divide your gross profit per 100 visitors figure by 100 to determine how much you can bid in Adwords.
In this case you could afford to pay up to $1.25 for a visitor and still break even. Rarely will you have to pay this much for a click, remember that the minimum CPC on Google Adwords is only 5 cent so play your cards right and you can have high profits.
Choosing your Google Adwords keywords
One of the most important tips I can give you regarding Adwords is regarding your keyword selection, so pay particular attention to the tips in the next paragraph or so. These are the words which when searched for will trigger the appearance of your ad next to the search results. Choosing the right keywords is imperative to the success of your campaign. A good approach to choosing the right words is to imagine what you'd search for if you were looking to buy a product similar to your own.
Remember as with Overture, the more popular a word or phrase is the higher CPC you'll have to pay and generally clicks from general words convert to sales far less often than clicks from specific terms so it's always better to have a few highly focused keyphrases that get clicks than to be number one for the most general word or phrase in your industry. In Googles own words:
"General or broad keywords will generate many impressions with few results."
Do you want "few results"? You certainly don't so avoid the expensive popular words and stick with the less popular but more profitable keywords. Finding such specific keyphrases can be time consuming, but it's worth it as research has shown that although much cheaper using specific phrases helps get more highly targeted people to your site and hence helps you get more sales.
On Googles Adwords website they recommend using spelling variations and plural versions of your keywords to reach everyone in your target audience. I think this is a good approach as not everyone of your potential customers will search a keyword in the same way, some will use plural versions and others will use singular versions. Similarly some may use American English rather than traditional English, this of course only applies to certain words whereby Americans use different spelling than British, Irish and other English speaking people would.
Adwords keyword matching options allow you to refine further when your ads are shown by allowing you to choose whether your ads are shown for certain types of searches on your keywords. There are four types of keyword matching options available, these are broad, exact, phrase and negative. Assume your keyphrase is 'marketing course'.
With broad matching your ad shows when users search on the keywords 'marketing' and 'course', regardless of other search terms used or of the order in which they are entered. Broad matching is the default, you don't have to do anything extra to use it.
Exact matching requires you to place square brackets around your keywords, like the following: [marketing course]
Your ad will show when users search only on the phrase 'marketing course' and will not show if other words are included or the words are entered in a different order.
The third matching option is the phrase option, this is similar to exact search in the sense that the keywords must all be present and in the right order however your ad will still show even if other words are present in the search. To use phrase matching you must include your keywords in quotes, for example "marketing course".
Negative matching is the fourth option available. It allows you to block your ad being shown if a certain word is present in the search query. If your keyword is 'marketing course' but your marketing course is to do with offline marketing and not internet marketing then by using negative matching you can choose not to have your ad shown for 'internet marketing course' as people searching for this are looking for something different than what you offer. In this case 'internet' is your negative keyword. You simply place a dash before your negative keyword to use this option (ie '-internet marketing course'). Now if a user searches for 'marketing course' on Google your ad will be shown, it will not however be shown when the term 'internet marketing course' is entered as the query.
Using exact, phrase or negative keyword matching gives you more control over who sees your ads so you won't pay for clicks that are unlikely to produce well-targeted results so always try and use these options, doing so could result in lower CPC, higher CTR and higher ROI. To demonstrate this fact I conducted a dummy ad to find the prices using broad, exact and phrase keyword matching options for the term 'internet marketing'. The currency I used was the Euro, I left the maximum CPC at the default of €5. The results are as follows:
internet marketing 11.0 €2.65 - Default broad search cost €2.65 a click and expected clicks is only 11.
"internet marketing" 30.0 €0.74 - With phrase matching expected clicks per day was 30 and cost €.74.
[internet marketing] 37.0 €2.41 - Exact matching cost €2.41 a click and expected clicks was 37 a day.
You can see from above that using both exact and phrase matching options resulted in a lower cost per click rate than simply using the default broad match option. I highly recommend using keyword matching options.
As mentioned earlier Google Adwords allows you to block your ads showing for searches conducted by people from certain countries and people who speak a certain language. There's no point in letting your ad be seen by people who won't understand it. Likewise if your product is only sold to a specific country than that country's residents should be the only people who get to see your ad, as if your company only sells products within America then any other nationals clicking on your ad are simply costing you money for nothing.