Understanding Adwords - Part II: Ad Position

For most PPC sites, determining the ad position for a particular keyword is pretty straight forward. Like any auction, highest bidder wins! In Overture, for example, you can use the keyword selector tool to show you what position your ad will appear in for a given maximum bid. Keep in mind, though, that you maximum bid is just that: a MAXIMUM bid. You do not necessarily pay this price per click. Rather, you pay one cent higher than the next lower bidder. This sounds like a good deal, until you look and see what the max bids are for some keywords. Are you willing to pay $5 per click for the first position? Some people are! More advanced users and well-established campaigns can afford this hit. Beginners (like most of us), cannot compete in the market. Overture requires a minimum bid of $0.10. Right now, that is about as much as I want to spend. Unfortunately, that puts me in one of the lowest ad positions. I will still get clicks (in most case), but not many.

Google puts a little twist to this deal. Maximum bid price is one deciding factor. The other is Click Through Rate (CTR). CTR is a percentage which is calculated:

CTR = Click Throughs / Impressions

For example, if your ad has 10,000 impressions and it is clicked 100 times, your CTR would be 1%. (1%-10% CTR is considered rather respectable!) Google will then use this number and your bid price to determine your rank:

Ad Position = Maximum Bid Price x CTR

(Of course, it is not a simple equation like this, there are unknown weights and normalizing involved, which we, as the users, do not know!).

So what is the significance of this? It says that the top positions do not necessarily go to the highest bidder. Rather, it goes to best and most established ads. A person with a really high CTR may only have to pay pennies for the top position while a low (or no) CTR ad may pay dollars for the same spot. To some degree, this gives us little people a chance!

Of course, to have a high CTR, you need clicks and to get clicks, you need impressions and a respectable ad position. You have two options here:

1) Patience - Over time, you will get impressions and clicks

2) You can pay for it up front - Raise your bid from the beginning and hope not to get burned.

Either case, you need to have GOOD AD COPY! If people don't notice your ad, they won't click it. Google punishes you for this! As your CTR drops, more money is required to maintain that position. So, for everything good in the world, there always seems to be something bad!

Again, Perry Marshall spends a few chapters on improving ad copy and optimizing your CTR. Check it out!

Understanding Adwords - Part I

Understanding Adwords: That is a tough task. Since there are many different components of Google Adwords, I will be splitting up this blog over the next few days or so. Let's begin with the essentials...

Google Adwords works similiar to many of the other PPC programs. You bid on keywords and you pay only when someone clicks on your ad. You may have a million impressions and no clicks, and it won't cost you a cent. So what is different about Google? Let's go through some of the main differences:

1) Ad position is a function of not only the minimum bid price, but also the history and the effectiveness of this ad to generate clicks.

2) GoogleAds rewards (or punishes) people for bidding on keywords that are relevant to the ad and landing page. Relevant keywords offer lower maximum bids than non-relevant keywords.

3) GoogleAds, generally, does not review ads immediately. (This can be a crucial advantange!)

4) GoogleAds allows for broad match, phase match, exact match keywords. Also plurals. Further, negative keywords can be defined.

5) Google allows for both search engine and content search advertising (discussed briefly in my blog about Adsense: Adsense, Does it Really Make Sense?

6) You are billed after the clicks are made, not before.

I am sure I can think of a few other differences which I will bring up as I think of them. Before I go for today, I really want to emphasize that getting GoogleAds to work effectively takes a bit of time and understanding. You can find yourself spending a LOT of money trying to learn the system through trial and error. I have read a few books and eBooks about GoogleAds and Perry Marshall's Definitive Guide to Google Adwords is one of the best (Click here to learn more...). The forty-some dollars it costs will save you hundreds in the future. Also, the quicker you understand the true details of GoogleAds, the faster you will be making sales. Much of my success occurred after buying this book!

See ya tomorrow!

Pay-Per-Clicks I - Overture Overview

Perhaps the biggest, most unique and effective PPC sites is Google's Adwords. But, of course, for everything good in the world, comes some headache. Adwords is definitely no exception to this rule! So let's focus on the simplier ones first.

Most PPC sites are fairly straight-forward in how they work: It is simple...you write an ad, you choose some keywords and then you bid on this keywords. Position of your ad is based on how much you pay. Best position goes to the highest bidder. This can be good and bad.

The good is that you know exactly where you stand, how your bid effects position, and you can size up your competition quite easily. Yahoo's Overture (http://www.overture.com) is probably the largest PPC site that does this on the web. For any keyword, you can view the current bids by using the keyword selector tools (http://inventory.overture.com/d/searchinventory/suggestion/). This tool will also be useful when using GoogleAds later on.

The bad things about this system is that position is purely based on money, not relevance (more or less...editors can remove your keyword if it is too obscure). This is a disadvantage for a few reasons:

1) Writing good ad copy is not rewarded
2) Poor ad copy degrades the entire quality of the search results
3) Trying to compete in established keywords can be difficult and expensive as a beginner

Adwords works quite differently than this. We'll discuss this more in detail next time.