AdWords is the first step in reaching new sources of search traffic. It has the most immediate response and it is fairly easy to track results. Although the open market bidding makes margins on AdWords spending thin, it is a great tool that gathers valuable information for all kinds of marketing efforts.
Increasing Click-Thru-Rate (CTR)
AdWords allows us to split test ads in order to increase our CTR. Increased CTRs lead to getting more traffic for less money.
Google does some tricky math to maximize their AdWords profit. If I am running an add with a 1% CTR and a cost per click (CPC) of $1 than Google is making $1 on my ad for every 100 times it displays. If my competition has a 2% CTR they would only have to pay 51 cents per click for Google to make more money on the competition's ad than they do on mine. Because of this an ads ranking is based on both the CPC paid AND the CTR.
As our CTR goes up our spend increases because we are getting more clicks. Once the CTR levels off our spend will go down as our 'discount' for the better CTR starts to kick in. This takes a while because the 'discount' Google gives is based on CTR over time.
Most AdWords accounts will start out spending more on clicks than they are creating in sales. The key is to track this number so that we can test different ideas for improving it.
Increasing Conversion
The other side to profitable AdWords is increasing the percentage of clicks that turn into conversions.
The following is from my website www.ZenAndTheArtOfSEO.com:
A great web site is like any great product – it will be used because customers like what it offers.
If you want a good Google position, make Google happy. And, in Google’s own words, “[We] return the results we believe are the relevant to the user. Relevancy is determined by over 200 factors… [Google] understands exactly what you [the web surfer] mean and gives you back exactly what you want.”
”… our technology analyzes the full content of a page and factors in fonts, subdivisions and the precise location of each word. We also analyze the content of neighboring (linked) web pages...”
Split Testing
We can test the same factors for conversion that Google analyzes (content, font sizes, headlines, subheads, content location, etc.) to find out what combinations give our users, and Google, what they want. If we make a change that increases our conversion rates I think we can assume we are giving the users what they want. And I think we can assume that if we give our users what they want that Google will reward us with higher rankings and more traffic.
