AdWords explained

To understand an advertising campaign using Google AdWords one must know some terminology (4).
Impressions: The number of times an ad is shown.
Click: When a user clicks on a displayed ad.
Click-through Rate (CTR): The rate at which a user clicks on an ad, calculated by the number of impressions divided by the number of clicks.
Conversion: This definition is different depending on the business but usually it refers to the number of purchases after a user has click on the ad.
Conversion Rate (CR): This is the rate at which a user makes a conversion, found by the number of conversions divided by the number of clicks.

Choosing appropriate keywords is essential for a successful AdWords campaign as the different keywords below indicate (1.P27).
Broad match: Google uses this as the default for keywords and “automatically runs your ads on all variations of your keywords” (2.P190). This tends to show more ads and will generate a high volume of traffic. However, although you maximise the click-through rate, the number of conversions could be few in comparison, as the results are much less targeted (1.P31).
Exact match: This is the opposite end of the spectrum as exact match keywords ensure that an ad is shown only when searchers use the exact words, in the same order with no extra words (1.P31). This option will have less traffic but tends to maximise the conversion rate as you only receive searchers specifically related to your site (2.P190).
Phrase match: This is somewhere in-between the first two as ads are only shown when the phrase of keywords are searched for in the same order, although the search can include other words (1.P31).
Negative keywords: These allow you to limit searches by not advertising when a specific words is used, even if the search includes keywords.

Deciding the bid price of a keyword is an important decision because it affects what position the ad is shown. Sometimes the price from first position to third may vary greatly but the click-through rate may be similar and it would be unnecessary to pay the higher bid price (5.P744).

Ad rank is the position in which your advert is placed (4). The top three ranked ads appear at the top of a search engine results page, where as any ranked lower will appear on the side of the page.

ad rank = bid price × quality score

The bid price can be worked out using the formula: target cost per action (CPA) × conversion rate

Cost per action is the cost of all the clicks on an advert, divided by the number of conversions. The formula gives an approximation for the bid price as when multiplying CPA by the conversion rate on average you would expect to break even.

The quality score considers point such as:
Percentage click-through rate: This is the percentage of people who clicked on an ad, compared with how many times it was shown.
Landing page quality: The landing page is the webpage which first appears once the ad is clicked. The quality of the landing page is a score based on the transparency of the website, if the content is logically organised and has a quick loading time the score will be higher. Pops up / redirects are bad for the score.
Relevancy: This is how relevant the ad is compared to the keywords.
Trustworthiness: A site such as the BBC or a University website considered very trustworthy as they are well-known and respected sites.

If two companies are bidding for the same keyword and have the same quality score the company which places the highest bid will be ranked higher.

To make a PPC campaign effective, companies spend a lot of time identifying the best keywords and trying to control the cost per click (CPC). Auctions are done daily and it is possible to look back to determine the cost of first place ranking with that of second or third place rankings. Companies need to continuously check this information and there are a number of websites which companies use to do this (5.P738).

Google provides a website called Google Analytics that provides information about an AdWords campaign (4). You can see keywords you are bidding on, their CTR, price and conversions etc. This allows a company to keep track of how each keyword is performing, whether they should keep it, raise or lower their bid price or change the type of keyword e.g. phrase match. You can also see what people have typed into the search bar to activate the appearance of your ad.

For example, if you had a keyword of ‘Wi-Fi’ and you could see from the data that your ad was showing and being clicked on when a lot of people were typing in ‘free Wi-Fi’ but your Wi-Fi isn’t free. This means your company is losing money and this data highlights this, enabling you to set up a negative keyword ‘free’.

1. B. Mordkovich, E. Mordkovich, Pay-Per-Click search engine marketing handbook: low cost strategies for attracting new customers using Google, MSN, Yahoo and other search engines, New York Mordcomm, 2007.

2. D. Viney, Get to the top on Google: Tips and Techniques to Get Your Site to the Top of the Search Engine Rankings – and Stay There, Nicholas Brealey Publishing, 2008.

4. Personal contact.

5. K. Kennedy, B.B. Kennedy, A small company’s dilemma: using search engines effectively for corporate sales, Management Research News [online], 2008, Vol.31 No.10, pp737-745. [Accessed 16 November 2012].

6. A. Mehta, A. Saberi, U. Vazirani, V. Vazirani, AdWords and Generalized Online Matching, Journal of the ACM [online], 2007, Vol.54 No.5, Article 22. [Accessed 16 November 2012].

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