Google Adwords Pay-Per-Click Basics

Navigate: Back to Main Traffic Page | Go to Step-by-Step Campaign Help

In the past few years, Google has changed the way people find and receive information on the internet. For savvy online business owners, Google has also changed the way people advertise their business.

Google Adwords is an advertising system which allows the user to advertise their business, product or services on Google’s search results pages. When you conduct a search on Google (for example for "shop online" as shown before), the ads appear at the top and the right side of the search results. The top ads look something like this:

..and are marked as "Sponsor Ads" as are the ads that appear to the right and look much like what you see to the right side of this page.

When you sign up for a Google Adwords account (it's free and when you sign up as an Internet Based Family client, you receive a $50 advertising credit).

While Google does offer a variety of advertising (content-targeted on various websites, audio advertising, newspaper adveritsing and more), they are most famous for their pay-per-click option which is what you see when you conduct a search on the search and is the focus of this quick tutorial.

Comparing Adwords to Traditional Methods

Unlike many traditional advertising methods, a user does not pay for Adwords until a visitor clicks on their ad. This means you're only paying for Google users that are actually interested in your offer.

With the pay-click-system, you choose exactly who can see your ad and when it will appear based on the keywords you choose.

The Adwords system is also is designed to reward the best-performing ads, which makes it quite unique from many other advertising methods.

Ads are displayed on the search page according to a formula based on a few criteria:

1. Highest Bid: Bidding more than other advertisers can help ensure a higher placement for your ad; however, that doesn't mean that just because you bid the most, you'll always be on top. In fact, you might not want to be right on top as many users report better results by appearing between the 2nd to 5th positions.

2. Top Performers: Ads are also positioned according to their performance (something Google calls "Quality Score"). Google rewards advertisers who write ads that are clicked on more frequently. This is a win-win situation for everyone as users get to see ads that are most interesting to them, you get to move up higher without necessarily paying more than the advertisers below you and Google gets paid for more clicks.

The formula is: "Ad Rank = CPC bid × Quality Score". For more information on how Adwords ranks their ads, read the ranking FAQ. 

Adwords Helps Make Your Advertising Cost-Effective

Google has several built-in tools available to make this type of advertising very economical and cost effective for their advertisers.

1. Set up a Budget: You can set up a budget for your daily advertising limit for each campaign. You can adjust your budget anytime.

2. Location Targeting: You can have your ads appear only in certain countries or in a very specific city or area. If you sell a product to only certain locations, you won't waste money advertising to people outside that area.

3. Ability to Use Negative Keywords: Negative keywords are word(s) you specify in your campaign which keep your ads from appearing when those word(s) are used in a user search. For example, if your advertising is seeking out customers for your "model sailboats", you might choose the negative keyword of  "free" to eliminate people searching for freebies.

4. Ability to Test Different Ads for Performance: You can test different headlines, ad text, etc. to find your best performing ads. You can also use a tracking code in each ad to determine not only which ads get clicked the most, but are most likely to convert into paying customers. You can use Google's conversion tracking system to do this.

5. Website Optimizer: In addition tracking your ad performance, Adwords includes tools that allow you to test different versions of your landing pages (the page on your website that users end up on when they click your ad).

Tips for Making Your Adwords Campaign a Success

1. Calculate your profit on the items you are advertising. If you only make a dollar or two per sale, it may not be cost-effective to start a pay-per-click campaign. Products with a higher profit margin are easier to market with Adwords, but a high-converting offer on a product with a lower profit margin might just do very well.

2. Make or use special landing pages for your campaigns. If you have an online vitamin supplement shop with a variety of items and you are bidding on "Calcium Supplement for Women", don't send them to your home page. Send them to a page that offers a calcium supplement for women and use the "Website Optimizer" tool to tweak your landing page so it performs the best it can.

3. Write specific ads for specific keywords. Take the time to craft ads that incorporate the keyword phrase and are specifically related to the keyword search. Put yourself in the mind of the searcher and avoid generic ads that won't get attention when a user is looking for something specific.

4. Try different versions of each ad. As mentioned, Adwords allows you to create up to three ads per ad  group...use them to find the best performing ads. You can test headlines, the body text and display URL of your ad. Just test one element at a time or it will be difficult to determine why certain ads are performing better.

5. Breaking even is rarely a bad thing. Now, you definitely don't want to keep running a campaign that is losing money and not bringing in any new customers, but realize each customers has a Customer Lifetime Value. In other words, if your average customer spends $867 doing business with you over time, acquiring a new customer through Adwords doesn't have to convert to a profit on the initial sale.

6. Use phrase match and exact match, where possible. Google AdWords allows you to ensure that your ads appear only when you want them to. You can specify if you only want your ad to appear when the exact phrase is entered without any extra words (exact match) or the exact phrase with extra words allowed (phrase match).

Put quotation marks:

" "

around the phrases you want phrase match for.

Put brackets:

[ ]

around the phrase you want exact phrase match for.

Get Started with Your Campaign

On the next page, you'll find step-by-step help for starting your first keyword-targeted Adwords campaign.