Dynamic Keyword Insertion Blog Posts

Google's Christmas Bonus

Thursday, December 6th, 2007

Advert Text, Bidding, Content Network, Dynamic Keyword Insertion, Google Adwords, PPC Campaigns

What does Christmas mean to you? Carol singing? Eating too much? Morecambe and Wise repeats? GIving people nice presents, and getting socks in return? If your online business sells the sort of things people buy at Christmas, and you have a PPC campaign, it means high bids and high traffic volumes. There are a lot of people out there desperate to buy things, and a lot of retailers trying to cash in. So what should you be looking to do? Leave your bids alone, and slip down the rankings, but keep your profit per sale the same? Or increase your bids, and grab as many sales as you can, albeit with a smaller profit from each one? In short, what happens to your sweet spot if your competitors all increase their bids? And what happens if only one competitor does? I’ve put together three different situations, with different bids, conversion rates and profits per conversion. Then I looked at the correct strategy if

  1. All of the competitors increase their bids by 50%
  2. The competitor immediately below you increases his bid sharply, to move top.

The first thing to bear in mind is that the number of impressions has no bearing at all of the sweet-spot. If each position gets the same percentage of the clicks, then it makes no difference. In effect, if you double the number of impressions, you’ll double the number of clicks, the number of conversions, the cost and hence the profit, in every position. I’ve assumed that everyone has the same Quality Score here – it’s unlikely to make a major difference to the So, for the sake of simplicity, I’ve left the traffic volumes where they are. They’ll impact the total profit that you make, but not the most profitable strategy. Here’s the first scenario. Each conversion makes a profit of £100, the conversion rates are fairly healthy, and the cost per clicks are quite high.

Bid Position Impressions CTR Clicks CPC Cost Conv. Rate Conversions Cost Per Conv. Profit
£5.00 1 100000 8.0% 8000 £4.01 £32,080 4.0% 320 £100 -£80
£4.00 2 100000 7.0% 7000 £3.31 £23,170 4.3% 298 £78 £6,580
£3.30 3 100000 6.0% 6000 £2.81 £16,860 4.5% 270 £62 £10,140
£2.80 4 100000 5.5% 5500 £2.41 £13,255 4.8% 261 £51 £12,870
£2.10 6 100000 4.5% 4500 £1.86 £8,370 5.0% 225 £37 £14,130
£1.85 7 95000 4.0% 3800 £1.66 £6,308 5.0% 190 £33 £12,692
£1.65 8 90000 3.5% 3150 £1.51 £4,757 5.0% 158 £30 £10,994
£1.50 9 75000 3.0% 2250 £1.41 £3,173 5.0% 113 £28 £8,078
£1.40 10 60000 2.5% 1500 £1.26 £1,890 5.0% 75 £25 £5,610

This is the data for a typical month. The most profitable position is 5th, with a cost per click of £2.11, though 6th position is only marginally less profitable. What happens if everybody increases their bids by 50% for Christmas?

Bid Position Impressions CTR Clicks CPC Cost Conv. Rate Conversions Cost Per Conv. Profit
£7.50 1 100000 8.0% 8000 £6.01 £48,080 4.0% 320 £150 -£16,080
£6.00 2 100000 7.0% 7000 £4.96 £34,720 4.3% 298 £117 -£4,970
£4.95 3 100000 6.0% 6000 £4.21 £25,260 4.5% 270 £94 £1,740
£4.20 4 100000 5.5% 5500 £3.61 £19,855 4.8% 261 £76 £6,270
£3.60 5 100000 5.0% 5000 £3.16 £15,800 5.0% 250 £63 £9,200
£2.78 7 95000 4.0% 3800 £2.49 £9,443 5.0% 190 £50 £9,557
£2.48 8 90000 3.5% 3150 £2.26 £7,119 5.0% 158 £45 £8,631
£2.25 9 75000 3.0% 2250 £2.11 £4,748 5.0% 113 £42 £6,503
£2.10 10 60000 2.5% 1500 £1.89 £2,835 5.0% 75 £38 £4,665

Should you drop down the results page, or increase your bids? In this case, a bit of both. Your CPC has increased from £2.11 to £2.79, and you’ve dropped a position in the search results. Here, the higher cost of staying in 5th has more than outweighed the additional conversions that you’d get there, compared to 6th. On the other hand, leaving the CPC at £2.11 would have cut your conversions by more than half (compared to staying in 5th), which would cost you more in lost profits than it would save you in terms of cheaper clicks. Note that the profit appears to have fallen here, but that’s because I didn’t increase the traffic volumes. If the traffic doubled over Christmas, your profit in 6th position would be just under £20,000. One final note here – in this instance, if the bids increased by more than 15%, the correct position to appear in changes to 6th. To make it drop to seventh, the bids need to increase by a massive 70%. Interesting, but hardly conclusive. This is just one scenario, so let’s try another one. Here, the profit per conversion is lower – £60 – and the cost per clicks and conversion rates are also much lower:

Bid Position Impressions CTR Clicks CPC Cost Conv. Rate Conversions Cost Per Conv. Profit
£0.50 1 100000 8.0% 8000 £0.41 £3,280 1.2% 96 £34 £2,480
£0.40 2 100000 7.0% 7000 £0.36 £2,520 1.3% 91 £28 £2,940
£0.35 3 100000 6.0% 6000 £0.31 £1,860 1.4% 84 £22 £3,180
£0.26 5 100000 5.0% 5000 £0.23 £1,150 1.5% 75 £15 £3,350
£0.22 6 100000 4.5% 4500 £0.20 £900 1.5% 68 £13 £3,150
£0.19 7 95000 4.0% 3800 £0.17 £646 1.5% 57 £11 £2,774
£0.16 8 90000 3.5% 3150 £0.15 £473 1.5% 47 £10 £2,363
£0.14 9 75000 3.0% 2250 £0.13 £293 1.5% 34 £9 £1,733
£0.12 10 60000 2.5% 1500 £0.11 £162 1.5% 23 £7 £1,188

Here’s the scenario for a typical month. The optimum position is 4th, though 2nd – 6th is very flat. So it seems plausible that the impact of a big increase in bids would be greater. Again, increasing the bids by 50% for Christmas…

Bid Position Impressions CTR Clicks CPC Cost Conv. Rate Conversions Cost Per Conv. Profit
£0.75 1 100000 8.0% 8000 £0.61 £4,880 1.2% 96 £51 £880
£0.60 2 100000 7.0% 7000 £0.54 £3,745 1.3% 91 £41 £1,715
£0.53 3 100000 6.0% 6000 £0.46 £2,760 1.4% 84 £33 £2,280
£0.45 4 100000 5.5% 5500 £0.40 £2,200 1.5% 83 £27 £2,750
£0.33 6 100000 4.5% 4500 £0.30 £1,328 1.5% 68 £20 £2,723
£0.29 7 95000 4.0% 3800 £0.25 £950 1.5% 57 £17 £2,470
£0.24 8 90000 3.5% 3150 £0.22 £693 1.5% 47 £15 £2,142
£0.21 9 75000 3.0% 2250 £0.19 £428 1.5% 34 £13 £1,598
£0.18 10 60000 2.5% 1500 £0.16 £243 1.5% 23 £11 £1,107

The results are similar to the ones in the first scenario – you increase the bid, but not enough to retain 4th position in the results. To make 5th the optimum position here, the bids need to increase by a factor of 35% – 82%. Here’s one more scenario – in this case, the profit per conversion is low – £15, the conversion rates are very high and the bids are moderate.

Bid Position Impressions CTR Clicks CPC Cost Conv. Rate Conversions Cost Per Conv. Profit
£1.00 1 100000 8.0% 8000 £0.81 £6,480 10.0% 800 £8 £5,520
£0.80 2 100000 7.0% 7000 £0.61 £4,270 11.0% 770 £6 £7,280
£0.60 3 100000 6.0% 6000 £0.51 £3,060 12.0% 720 £4 £7,740
£0.40 5 100000 5.0% 5000 £0.31 £1,550 13.0% 650 £2 £8,200
£0.30 6 100000 4.5% 4500 £0.26 £1,170 13.0% 585 £2 £7,605
£0.25 7 95000 4.0% 3800 £0.21 £798 13.0% 494 £2 £6,612
£0.20 8 90000 3.5% 3150 £0.16 £504 13.0% 410 £1 £5,639
£0.15 9 75000 3.0% 2250 £0.13 £293 13.0% 293 £1 £4,095
£0.12 10 60000 2.5% 1500 £0.11 £162 13.0% 195 £1 £2,763

Again, in this example, 4th is the optimum position (I’m not suggesting that this is always the case – it’s just convenient when comparing the results from different scenarios). Once more, here’s what you get when you increase the bids by 50%.

Bid Position Impressions CTR Clicks CPC Cost Conv. Rate Conversions Cost Per Conv. Profit
£1.50 1 100000 8.0% 8000 £1.21 £9,680 10.0% 800 £12 £2,320
£1.20 2 100000 7.0% 7000 £0.91 £6,370 11.0% 770 £8 £5,180
£0.90 3 100000 6.0% 6000 £0.76 £4,560 12.0% 720 £6 £6,240
£0.75 4 100000 5.5% 5500 £0.61 £3,355 13.0% 715 £5 £7,370
£0.45 6 100000 4.5% 4500 £0.39 £1,733 13.0% 585 £3 £7,043
£0.38 7 95000 4.0% 3800 £0.31 £1,178 13.0% 494 £2 £6,232
£0.30 8 90000 3.5% 3150 £0.24 £740 13.0% 410 £2 £5,402
£0.23 9 75000 3.0% 2250 £0.19 £428 13.0% 293 £1 £3,960
£0.18 10 60000 2.5% 1500 £0.16 £243 13.0% 195 £1 £2,682

Once more, the conclusion is a kind of half-way house. You increase your bids, but not by enough to maintain 4th position. In this case, the range of bid increases for which the 5th spot is the optimum is 38% – 159%. So what are the conclusions here? In all of these cases, an increase in bids of 50% led to the sweet spot dropping by one position. But this isn’t the whole story – an increase in bids of 30% would have resulted in the sweet spots in the last two scenarios remaining in the same place. And an increase of 100% would have led to the first two sweet spots dropping by two places. So, to a certain extent at least, the impact on your optimum bid depends on your particular circumstances. However, there are two conclusions that are true in every scenario I could think of:

  1. You should never reduce your bids.
  2. You should never move further up the search results.

So your new bid is bounded by two values, the amount required to retain your old position, and your old bid. At what point between these two values you should set your bid depends on individual circumstances. One further point here – if you see the conversion rate increasing in the run up to Christmas, then there is clearly scope to increase your bids, and possibly your position within the search rankings, as the value of a click increases. Similarly, if your average order value increases, then your clicks become more valuable, in which case you may find your sweet-spot moving up. At the start of this blog, I asked two questions. All of the work so far has been based around a scenario where everyone increases their bids. But what happens if only one competitor does. If their increase doesn’t affect your position (they were above you before they increased their bid, or below you even after increasing their bid) then it makes no difference at all. Your sweet spot will not change at all, barring very unusual circumstances. If they move above you, then there are two possibilities – you can either increase your bids to retain your old position, or you can leave your bids alone, and drop one place in the search results. No other option makes any sense, if you think about it. Regrettably, there is no absolute answer to this one. However, in the vast majority of cases (including the three from earlier) the correct decision is to leave your bids where they are, and drop down one position in the search results. The company that has made this decision has made their campaign less profitable, as well as a number of other people’s campaigns. All of which leads to the conclusion hinted at in the title of this blog. Whenever competition on keywords rises, and people start a bidding war, Google makes more money from PPC. But then, Christmas is all about giving, and not receiving…

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The Sixteen Most Common Adwords Questions

Wednesday, December 5th, 2007

Advert Text, Dynamic Keyword Insertion, Google Adwords

I regularly post on PPC forums, particularly Digital Point. And the same questions seem to crop up time and time again. Now, for the first time, the answers to all these questions can be found in the same place.

1. My minimum bid is too high! Why?

Simply put, your minimum bid is high, because your Minimum Bid Quality Score is low. This is Google’s measure of how relevant your advert and site are to the person searching on Google for your keyword. Google lists the following as being the inputs into this calculation:

  • Clickthrough Rate
  • Relevance Of Keyword To Advert Text
  • Landing Page Quality
  • Other Relevancy Factors

A low clickthrough rate indicates that your advert doesn’t appeal to the searcher. They are seeing your advert, but not clicking on it, because

  • They aren’t reading it – it blends into the other adverts
  • It doesn’t give them a good reason to click on it – why should they visit YOUR site?
  • It doesn’t relate to what they’re searching for – do you have what they want?

Your advert text should relate to your keyword. Ideally, you should have the keyword in the title of the advert – this is especially important for new campaigns, as Google has no clickthrough rate data to judge your advert, so it has to guess how popular it’ll be. Google go into great detail explaining what they are looking for on a landing page. Click here for full details. In summary, there are three main points

  • Relevant And Original Content
  • Transparency
  • Navigability

Can the user find what they were searching for easily? Are your advert claims backed up? Is there unique content on your website, or is it just links and copied information? Do you provide important information about your business, like contact details, your privacy policy and your business address? Are you running an above-board, honest business? Can users easily find their way around your site? In summary, if you’re running an honest business, and your advert is clear about what you do, and relates to the search term, then you should get a low minimum bid.

2. Why Are My Keywords Inactive?

Your keywords are inactive if your minimum bid is higher than your actual bid. I’d suggest that on the page with the keywords on it, you customise your columns and show your minimum bids (and Quality Score). If your Quality Score isn’t ‘Great’ read the answer to Question 1.

3. Why Can’t I See My Advert?

There are a number of reasons that you may not see your advert. The main ones are:

  • Your Keyword Is Inactive (see Question 2)
  • Your advert has been rejected
  • Your keyword has been rejected
  • Your advert is running, but you aren’t seeing it.

There are rules about what you can and can’t say in an advert. The full Editorial Guidelines can be found here. The most common problems seem to be breach of trademark, use of superlatives without backing them up on the site and banned content. The policy on keywords is quite similar (though superlatives are allowed) – bidding on other companies’ brand names is very hit-and-miss. Are you getting results, but not seeing your advert when you search for it? Five major reasons there are.

  • Your advert is not on page one.
  • Your advert is targeted to a region, and you aren’t in it.
  • Your daily budget has run out – remember that there’s a delay on your results.
  • You are only targeting certain times of the day.
  • You’ve seen your advert too often, so Google thinks it’s not relevant and doesn’t show it to you.

If your average position is below about 8, click onto the second page of results. Your advert may simply be getting shown outside the top ten… If your advert is targeted to a region, use www.google.co.uk/adpreview to check that it’s working. If your daily budget has run out, you’re bidding too much. Reduce your bids and try again tomorrow. If your advert is shown at certain times, search then. Failing all of these, use Adpreview (see link above). Google mixes up the results a bit if you see your advert a lot without clicking on it.

4. Are There Any Cheap Keywords Left?

If you’ve read this through, you should already know that any keyword can be cheap – all you need is a good Minimum Bid Quality Score. Of course, bidding your minimum bid won’t get you very far up the search results…

5. How Many Keywords Should I Bid On?

There’s no answer to this one. If a keyword’s generating profit, why wouldn’t you want to bid on it. If a keyword isn’t generating profit, then why would you want to? Ideally, you’ll bid on all of the profitable keywords and none of the unprofitable ones. And since, by adjusting your bids, any keyword that generates conversions can be profitable, you should bid on any keyword that you think will lead people to visit your site, and convert. The only caveat I would put in here would be if you’ve got a very limited budget. In this case, you may not have the funds to bid the most profitable amount on all of the profitable keywords – in which case, you should focus on the most profitable ones (it’s hardly rocket science, is it!) Just bear in mind if you do this that your lack of budget is costing you profit.

6. How Much Will It Cost Me To Appear Top?

If you understand how Google uses the Quality Score with your bid to place your advert, you already know the answer to this one. If not, read this. Consider the following example. I’m currently top, with a Ranking Quality Score of 2.0 and a maximum bid of £1.50. How much do you have to pay to appear above me? If your RQS is 1.5, you need to pay £2.01. If your RQS is 1.0, you need to pay £3.01 If your RQS is 0.5, you need to pay £6.01 If your RQS is 0.1, you need to pay £30.01 So the answer depends on your competitors’ bids, their RQS’s and your RQS.

7. What’s The Best Position To Appear In?

I have a real problem with asking me this question. It’s unreasonable, I know. Newbies are just trying to set up a campaign, and bid roughly the right amount… But the answer is pretty obvious! You should appear in the position that makes you the most money! The further up the page your advert appears, the more clicks (and hence conversions) it’ll get. The further down the page it appears, the less you pay for each click (and hence conversion). So bounce your advert around a number of positions, work out how many conversions you get, and how much they cost, in each position, work out your profit, and Bob’s your uncle. I’d suggest that starting in about 3rd – 5th is a good idea, if you’ve got the budget to appear there all day. This is because the top couple of positions are often taken by people who are more interested in appearing top than in making money – not always, but in my experience, more often than not. If you appear much lower than this, your adverts may start dropping down to page 2 from time to time, which can make your figures far more complicated. If you’re advertising in an area where your competitors are very clued up on PPC, you may find that there’s very little difference in profit between appearing 2nd and 8th (for example) – this is not surprising, if their campaigns have been optimised to the same extent as yours, and they make similar amounts of profit from each click, then they will all have a similar optimum bid.

8. How Much Budget Do I Need?

It’s not really all that surprising that there’s no clear answer to this. You should be able to generate profitable sales no matter how low your budget, though it may take longer to optimise your campaign. Ideally, you’d want enough budget to put all relevant keywords in their most profitable positions, all the time. This would generate the maximum levels of profit for you, if you can afford to. A more meaningful question would be “How Much Budget Do I Need In Order To Make My Campaign Profitable?” This is a much more difficult question to answer – you certainly don’t want to blow a fortune while you learn your way around Adwords. If this is your first attempt with Adwords, then limit yourself to a fairly small budget, and gradually build it up as you gain more confidence (and better results).

9. I Have A Low Clickthrough Rate – What Should I Do?

There are a number of reasons that you have a low clickthrough rate. Here are the most likely:

  • You don’t really have what they are searching for.
  • You have what they are searching for, but they think you may not.
  • You have what they are searching for, but they don’t see your advert.
  • You have what they are searching for, but they don’t trust you.
  • You have what they are searching for, but somebody else persuades them to click onto their site.

The first one is a problem with your keyword. You should only bid on a keyword if most or all of the people searching for it are looking for something you have. The others are problems with your advert. It needs to stand out, be clear about what you do, be honest (more or less) and be compelling. Here’s a more complete guide to writing an advert that people will click on.

10. What’s Dynamic Keyword Insertion, And How Should I Use It?

Dynamic Keyword Insertion allows you to insert any one of your keywords into your advert text. This sounds great, but there are a few problems with it… To use DKI, you need to use the following syntax in your advert. {KeyWord:default term} Where the default term is what Adwords uses when the keyword isn’t allowed to be inserted (e.g. if it makes the line too long). Note that Adwords adds in your keyword, not necessarily the search term. If you’re using Broad Match, the advert may not be all that relevant. Also, be careful around singulars and plurals. If you’ve got “toaster” and “toasters” in your Adgroup, the advert: Buy {Keyword:Toasters} Now looks great with Toasters in there, but with Toaster in there, it reads: Buy Toaster Now which is terrible. People will immediately recognise that you’ve just put their search term in the advert, and won’t click on it. E-bay does this all the time… Finally, be aware that this doesn’t improve your Quality Score. The default term is used to determine your QS, so using DKI as an alternative to grouping your keywords appropriately is not really a very good idea.

11. Why Can’t I Bid On Brand Names

If a company has a word with Google, they’ll stop anyone from bidding on that brand name. So if you want an exception (e.g. you sell Blackberries), you need to talk to the company in question, and get them to tell Google that you’re allowed. Similarly, if people are bidding on your name, have a word with Google, and they’ll generally sort it out…

12. Should I Use The Content Network And/Or The Search Network

As a general rule of thumb, the content network produces cheaper clicks than the search network, but they are of poorer quality. How much cheaper, and how much poorer understandably varies from campaign to campaign. If you’ve got the budget, you should do everything that makes money. So try them both, see which are profitable, and do that.

13. I’m High In Natural Search – Do I Need PPC?

Is PPC a waste of money, or does two results mean twice as many clicks? There are no absolute answers on this one – everyone’s got an opinion on it, and mine is that it’s generally worthwhile on everything except your brand name. With your brand name, you may not benefit from PPC unless there are other people advertising using your name and you can’t stop them. If you’re the only advertiser, it doesn’t make much difference, since your minimum bid will be very low (and hence so will your cost per click). My reasoning is that people don’t look at the whole page, then decide which company to click on – they see an advert that appeals, and click. If this is the case, then more adverts equals more clicks, and your PPC won’t cannibalise your natural results to any great extent. So, I’d say to go for it. If you disagree, feel free to reply…

14. When Does The Quality Score Get Updated?

Nobody knows. It just happens from time to time. I suppose if Google told people, they could change their landing pages just beforehand to improve their QS, then change them back to break all the rules and get away with it.

15. Can I Have Overlapping Campaigns?

For example, if you have a nationwide campaign, can you target another one with the same keywords just on one city in the country? Yes, you can, though it may not work as well as you’d like! Google allows you to have the same keyword in multiple campaigns – but it shows the one with the higher Quality Score – so there’s no guarantee that your locally targeted campaign will ever be seen! That said, if you have locally targeted advert text, you’ll probably get a better clickthrough rate, and with a local landing page, your Quality Score should be better, so you’ll probably be fine.

16. How Do You Maintain Your Youthful Good Looks?

Photoshop. Hope that helps, Steve

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Why Making Money On Competitive Terms Is No Harder Than On Uncompetitive Terms

Wednesday, July 18th, 2007

Advert Text, Bidding, Dynamic Keyword Insertion, Google Adwords

Seriously, if you are using the ‘sweet-spot’ approach to decide what position your advert should appear in, the amount that everyone else is bidding makes no difference to whether your campaign makes money. It does, however, affect how much money you can make. Not convinced? Look at the following example. Take the following two search terms. The profit from a sale, and the total traffic is the same on both. So are the clickthrough rates in different positions and the conversion rate. The only thing that’s different is the cost per click of appearing in each position.

Position Cost/Click Clickthru Rate Conv. Rate Impressions Clicks Conversions Profit
1 £1.00 15% 6% 1500 225 14 £45.00
2 £0.90 12% 5% 1200 144 7 £14.40
3 £0.80 10% 5% 1000 100 5 £20.00
4 £0.70 9% 5% 900 81 4 £24.30
5 £0.60 8% 5% 800 64 3 £25.60
6 £0.55 7% 5% 700 49 2 £22.05
7 £0.50 6% 5% 600 36 2 £18.00
8 £0.45 5% 5% 500 25 1 £13.75
9 £0.40 4% 5% 400 16 1 £9.60
10 £0.35 3% 5% 300 9 0 £5.85
Position Cost/Click Clickthru Rate Conv. Rate Impressions Clicks Conversions Profit
1 £2.00 15% 6% 1500 225 14 -£225
2 £1.80 12% 5% 1200 144 7 -£115
3 £1.60 10% 5% 1000 100 5 -£60
4 £1.40 9% 5% 900 81 4 -£32
5 £1.20 8% 5% 800 64 3 -£13
6 £1.00 7% 5% 700 49 2 £0
7 £0.80 6% 5% 600 36 2 £7
8 £0.60 5% 5% 500 25 1 £10
9 £0.50 4% 5% 400 16 1 £8
10 £0.40 3% 5% 300 9 0 £5

In the first case, the sweet spot is in fifth place (profit = £26), and in the second case, it’s eighth (profit = £10). But in both cases, the Cost Per Click is the same. This is because the optimal cost per click has nothing whatsoever to do with the number of clicks or conversions that you get – it’s purely dependent on the conversion rate, cost per click and the profit (exc. the ad cost) you make on a sale. And these things are totally independent of where your advert appears in the search results. It’s not that surprising really, if you think about it. If your cost per conversion is lower that your profit per conversion, you make money – otherwise you don’t. And cost per conversion can be expressed as cpc/conversion rate. Since the conversion rate is (usually) unaffected by result position, then a cpc will be profitable or not irrespective of your position in the results. One interesting implication of this is that it answers the question – “what should I do if somebody jumps above me in the search results?”. The answer is of course (!) that you should do nothing, and accept the reduced profit (my blog on the numpties makes a lot of sense, doesn’t it!). In summary, ignore what everyone else is doing – work out the right bid for you, and stick to it.

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