Every Click’s A Killer…

Or How to Fail Using Google Adwords Pay Per Click

Without a shadow of doubt the best thing that ever happened to advertising in the history of the marketing medium was the arrival on the scene in October 2000 of Google Adwords also known as Google Pay Per Click or PPC for short.

Almost entirely on the back of Google Adwords the Google company has made spectacular profits. Take a look at this extract from a press release in February 2008…

“Google delivered a 13% surge in fourth-quarter profits to $1.2bn (ie Oct – Dec 2007), with the number of "paid clicks" on advertisements up by 30% year on year. For the whole of 2007, its profits were up 40% to $4.2bn.”

This profit was made from millions of people and organizations just like you and me and in many cases by vacuuming out wallets... which they still do!

If you’re reading this then you probably know about Google Adwords so I am going straight to the matter I want to discuss. The title of this piece is “Every Click’s A Killer” and by this I mean that the more clicks it takes to get to a sale using Google Adwords the costlier it will be to make a sale and in all likelihood if the clicks exceed 2 then the Google Adwords campaign will almost certainly run at a loss.

Let’s take a look at this in more detail using a hypothetical example of a website selling hotel accommodation in Cape Town... the keyword is "Cape Town Hotels". I actually participate in this market using Google Adwords so I am drawing upon real experience. I might also add that I cannot make this keyword work so I don't bid on it. I know I would just waste money. I'm pretty sure that all the other bidders for "Cape Town Hotels" don't make money either or at least not for a once off sale.

The first thing I want to mention is that the internet accommodation market especially in Cape Town is a market in which the cost of a click (CPC) is high. When click costs are high it means there are lots of advertisers competing on Google to get in the top 11 spots on Google search

Where does the number 11 come from?

If you look carefully at the sponsored links results on a Google search you will see there are a maximum of 11 ads on the front page. In the case of a market like "Cape Town Hotels" the first 3 will be on the left hand side and have a yellow background. These are the highest priced ad positions (this may not be quite true but for the sake of this paper it is assumed that all ads rank from top to bottom based purely on the price bid for that position). Up to 8 ads will appear in a ladder format on the right hand side of the page.

If you’re serious about wanting to compete for the keyword "Cape Town Hotels" then it’s vital that you ad appears on page one… ie one of the top 11 ad spots since very few real searchers will go to page 2 or 3.

Click Number 1… You Just Have to Get This Right Otherwise You’re Almost Guaranteed to Fail

When a search for "Cape Town Hotels" is made (ie one impression) and if your ad appeals to a searcher then it might get clicked… here’s the general principle: Position 1 ad will probably get up to 10 times as many clicks as an ad in position 9 or 10.

At this time a click for "Cape Town Hotels" will cost at least R10 if you’re in the top 3 spots.

This first click of course takes you to your own website…

Now lets say this click goes to your home page and not a page specific to Cape Town Hotels. Then the first thing that happens is that a large percentage of the clickers will leave your site and go and do another search.

You’ve wasted that click.

Let’s say out of 100 clickers 10 persevere and click to a more appropriate page about Cape Town Hotels. To get these 10 clickers to the right landing page page has cost you R1000 ( 100 x R10 per click) or R100 per “real” click. Google has already started to vacuum your wallet.

By sending the clicker to the home page instead of the more targeted landing page specific to Cape Town Hotels you have started the process of killing your best efforts and enriching Google.

Of the 10 who clicked to a deeper level in the site very few (maybe 10%... probably less) will actually go to the trouble of going to the "More Information" or "Book Now" page. This means you have spent R1000 to get 1 clicker to the “booking” page.

Now it’s a fact of life that of the people who get to this stage a very high proportion leave to start the process again. Let’s say 20% persevere and make the actual booking. This means for R1000 paid to Google you made 0.2 sales or bookings

To break even you need to make R5000 (R1000/0.2) from that single booking. This is almost impossible to achieve.

The first and immediate conclusion is this … you will kill your Adwords campaign efforts if you do not send the clickers to the highly relevant page specific to the search query on your own site. In the case of our example this means at the very least the URL clicked must go to a page about Cape Town Hotels and not a page about South African hotels in general.

Based upon my experience it is futile for the average Adwords advertiser to try to compete for such competitive broad terms as Cape Town Hotels.

More Clicks Bigger Losses...

Hopefully this discussion has shown that every time a click has to be made to reach the final buying point the negative impact upon PPC profitability is enormous.

A successful campaign will minimise clicks right through to the end of the buying process and it will be designed to maximise the actual final click through rate to make a conversion.

The majority of well managed Google Adwords campaigns tend to miss this last point. Most campaign management focuses on maximising impressions, maximising click through rates and minimizing cost per click. If the final sale conversion click through rate is low then despite the actual Adwords campaign being well managed it is probable that the campaign will lose money.

Setting up and starting a Google Adwords campaign is simple. The whole concept of Pay Per Click is simple. However the implementation to ensure the advertising makes a profit is complex.

To summarize… it is vital to minimise the number of clicks to get to the final sale. One extra click at any stage will play havoc with profitability.

profitable Google Adword campaigns have to be managed right down to the individual keyword and individual ads themselves. It is not a matter of looking at averages.

The bidding value and positioning variables have to be controlled within tight parameters that give optimal results. This control is not just as a once off process. Google Adwords is extremely dynamic. Management of Adwords has to be equally dynamic otherwise a losing campaign is almost a foregone conclusion.

Don’t Start a Campaign Unless You have a Very Good Idea That you Can Afford It…

This is what you need to estimate before you start and then control these variables rigorously in practice… down to individual keywords and individual ads.

• Likely cost per click (and likely position in ads table)
• Likely click through rate from the search results… Click 1)
• Likely click through rate to intermediate pages (eg if you are an affiliate or do not create individual customized landing pages)… Click 2
• Likely conversion ratio… Click 3
• Profit margin on a single sale

Examples of calculations... you can get this Excel calculator by clicking here.

If the profit margin exceeds the cost of all Google clicks to make the single sale then the campaign is profitable. If the campaign is profitable then further optimisation involves maximising impressions and further reducing cost per click while slowly climbing the ad table without paying more per click.

If this profit margin is negative (remember at keyword level) then you need to rethink your bidding and advertising strategy. You may even need to close down the actual keywords that lose you money. This is not an abnormal situation even for experienced Adwords practitioners.

Don’t get me wrong Google Adwords works fantastically well...

You just have to remain in control, and not let Google vacuum your wallet.

It is quite possible to make a profit from Google Adwords in virtually all markets but to achieve this takes dedicated effort on an ongoing basis and a deep understanding of how to productively manage the multitude of variables that make a profitable campaign hang together.

If you do nothing else don’t let that first click kill you. Get your landing pages sorted out. Do this and you’ve leapt over the first major hurdle.

AFFILIATES IMPORTANT!!!

If you're an affiliate you might want to read this affiliate article where I go into depth about clicks and conversions

What Do You Think? I Would Appreciate Your Feedback

I used to run SEO workshops publicly and privately until about 2 years ago when I became too busy doing other things. It also became true that what worked well in terms of SEO up to 2 or 3 years ago started to become considerably less effective and as such the customer value I could create diminished to the point where I didn't want to continue. Since then I have focused my efforts strongly on running PPC campaigns for my own ecommerce sites and affiliate sites as well as managing campaigns for 3rd parties in a wide variety of markets from accommodation to education. There is no doubt that in future for commercially orientated traffic the PPC route will be the only truly effective means of competing online.

I am considering putting together the following workshop in February next year and would like to receive your feedback on whether you think it would be valuable to yourself or company ... size in this case does not matter since Google Adwords allows the one man organisation to compete effectively with the larger corporations.

For Any Serious PPC Participant: The Planned February 2009 Workshop in Broad Outline...

1. The common denominators to succeeding on the internet... get these wrong and most of your efforts will fail no matter what else you do
2. Important basic SEO requirements and check list for any website ... absolutely essential ingredients for any website yet very easily implemented within a day and why you don't need an SEO expert like myself.
3. How to set up and manage successful Google Adwords campaigns for local, international, multinational, ecommerce, affiliate and lead generation strategies... it is believed over 99% of Google Adword campaigns are set up the wrong way much to the advantage of Google. Do it the right way and dramatically improve profitability... get the CTR's up, reduce the CPC's and increase the impressions.
4. How to dramatically increase the effectiveness of any PPC campaign by increasing the conversion to sales ratio. Do this and you will turn a losing campaign into a winning one.
5. Affiliate marketing opportunities and pitfalls for both merchants and affiliates
6. How to create highly targeted large dynamic or basic HTML websites in less than a day, in house, for little cost and with no programming experience necessary. Yes it's true. All you need is basic spreadsheet skills.
7. How to track everything of importance, present it in easy to understand format and thus increase profitability and cut out waste.
8. How to discover the strategies of your online competitors and then beat them at their own game
9. Effective list building for future profits
10. Creating ecommerce sites... easier and cheaper than you think.

I envisage the full day workshop using real life examples will be R5,000 per person which will include a personal 1 hour session with me after the workshop to ensure you benefit quickly and significantly.

During the workshop I will share the tools I use, how to use them and where to get them. This information alone is worth far more than the cost of the workshop.

At the end of the workshop you will be in a position to profit from search traffic in the short, medium and long term. You will know more about succeeding on the web than the vast majority of website owners anywhere in the world and especially in South Africa.

If you think you might be interested (no obligation at this stage) please ring me (Tony Roocroft 011-454-0105) or send me a brief email to gads(at)seoza.com Please include your name and contact details and I will keep you in touch.