Google’s main source of their incredible revenue is the AdWords advertising system. I have talked about AdWords in a previous blog entry, but didn’t go into the nuts and bolts about how the system works, and more importantly, how you pay for ads.
strongWhen you set up an AdWords Account the main things you do is:/strong
I. Write your advertisement and then,
II. Select key words or phrases that, when entered by someone using Google, will bring up your ad.
A keyword phrase is two or more keywords that a person could use to find a particular product or service online. For example, if you were looking to buy Blue Suede Shoes, the keyword phrase you could use is “Blue Suede Shoes.”
As an advertiser on Google AdWords, you would use keyword phrases to draw people to specific pages on your site. For example, if you sold blue suede shoes, you would use the phrase “Blue Suede Shoes” as one of your nominated keyword phrases.
People would use keyword phrases, as opposed to single keywords, if they were trying to attract a specific audience to a certain product/service, as the keyword phrase is a lot more targeted and specific.
So, you have written your ad and you’re happy with it. You have selected your key words and you’re happy with them, too. So how do you go about paying for the advertising?
AdWords offers different pricing methods for its ads to choose from when you set up your advertisement. AdWords offers pay-per-click (PPC) advertising, cost-per-thousand (CPM) advertising.
Pay Per Click or PPC means that each time someone clicks on the link in your ad you pay Google a fee. Pay Per Click is a very important mechanism as it allows advertisers and marketers to gather data on where their advertisements are being most effective and generating more clicks.
A CPC (cost per click) bid in your AdWords account is how much you are willing to spend, at the most, for a click on one of your Ads. This can be determined at a campaign level or alternatively for individual keywords.
Cost Per Thousand or CPM means that each time someone views your ad you pay Google a fee. As searches can generate plenty of views, these amounts are usually expressed in terms of thousands. The M refers to the Latin word, mille, meaning one thousand.
Each campaign in Google AdWords is assigned, by you, a maximum daily budget. This budget will determine how long your Ads get displayed online for. For example, if your budget has been set too low and your costs per click are high, you will exhaust your daily budget a lot quicker in a day, thus your ad won’t get displayed again until the following day where the daily budget is still available.
Bidding actually plays a part in determining what position your ad is going to appear on in the Sponsored Links Ad search results (your CPC bid multiplied by your quality score determines your average position), so effective bidding strategy can affect your ROI and your profits. We will get into how Google determines your Quality Score and ways to improve your score in later blogs.
You can improve your position and your visibility by increasing your maximum CPC bid. However, as there is more than one contributing factor, this may not always be the best option for you.
If you are running through your budget too quickly and not getting a strong Return on Investment, you may want to look at optimising your ad so that the budget lasts longer (an optimised account is going to have a lower CPC, so you won’t use your entire budget up as fast).
Having an appropriate daily budget is going to help you capture more of the available traffic and maximize your ad exposure, translating to a strong ROI.