There are two types results that shows up in a Google Search Results Page (SERP): Pay-per-Click (PPC) and Organic Results
Organic search results are not paid. The search results are from Google’s algorithm which is based a set of variables. These variables includes the webpage’s relevant use of the keywords in their meta-tags and description, title, headings and first paragraph. It also depends on the webpage’s history and its Google ranking.
In contrast, PPC are search results that are paid for and top are quite different.
How does PPC work?
To get an ad slot into Google, the advertiser must bid for keywords. The price of the keywords or costs-per-click (CPC) depends on the amount of competition competing for the keyword, the click through rates (CTR), and the “Quality Score” of the ad.
“The Quality Score is an estimate of how relevant your ads, keywords, and landing page are to a person seeing your ad. Having a high Quality Score means that our systems think your ad, keyword, and landing page are all relevant and useful to someone looking at your ad” (Google, 2012).
How to get to the top for PPC?
Getting on top of ad slots require the advertisers to obtain the highest “Adrank”.
The Adrank is calculated as such:
Max CPC (the bid) x The Quality Score = Adrank
The higher the Adrank the higher the ad slots for the advertiser.
Why are the Quailty Scores so important?
Quality scores not only influence the Adrank it also affect the CPC.
CPC is calculated as such: Competitor’s Adrank / Your Quality Score
How to Optimize Campaigns for Google Adwords?
Organize each campaign to find out which is working and which is not. The first thing to do is to set a benchmark or average of your total PPC campaigns. By finding the average we can find out which campaign is under performing and ineffective. This way we will know which campaigns to keep, to scratch, or to adjust.
Take Rate and CPC
The first thing to look at is “take rate” and CPC.
Take rate is calculated as such: CTR x Conversion Rate (CVR)
Organize each of the campaigns into the follow quadrants in the following matrix:
If a campaign has a high CPC and a low take rate, it means that the ad is not effective and would need to be scratched.
If a campaign has a low CPC and a high take rate, it means that the ad is effective and should be kept.
If a campaign has a high CPC and a high take rate, it means that the ad is expensive but effective. Other factor such as return on ad (ROA) would need to be looked at before making a decision.
If a campaign has a low CPC and a low take rate, it means that the ad is low costing but not effective. Other factor such as return on ad (ROA) would need to be looked at before making a decision.
Conversion Rate and Click-Through Rate
Campaigns should also be compared in CVR and CTR. By looking at CVR and CTR, we will not only know which campaigns are effectives but why each campaign is not working.
The campaigns should be organized into the follow quadrants in the following matrix:
If a campaign has a high CVR and a low CTR, it means that people are buying once they click on the ad but not enough people are clicking. This means the ad is not attractive and improvement will need to be made.
If a campaign has a low CVR and a high CTR, it means that the ad is attracting alot of people to click on it but they are not buying anything once they arrive on the page. This means that the product is not selling and the webpage or copy may need work.
If a campaign has a high CVR and a CTR, it means that the ad is working. People are clicking on it and they are buying. It also means nothing needs to be changed in this campaign.
If a campaign has a low CVR and a CTR, it means that the ad is ineffective. The ad is unattractive and people are not buying when they arrived on the page. This could means that the keyword selected is wrong or that the ad is unattractive.
It is suggested that when optimizing the Adwords to always look at the ROA and profitability of each campaign. For example, a campaign can have a low CPC and high take rate but end up costing you money because of a negative ROA.
Below is an infographic from Pulp Media that shows three tips on adword optimization. This includes: creating highly targeted ad groups, doing an A/B split test, and keywords bidding.
Farris, P. W., Bendle, N. T., Pfeifer, P. E., & Reibstein J. (2010). Marketing Metrics. Retrieved April 18, 2012
Google (2012). Adwords Help. Retrieved April 18, 2012, from http://support.google.com/adwords/bin/answer.py?hl=en&answer=2454010