Paid search tools have come a long way since the mid 90's, when all you could do was create a simple text ad on your favorite search engine and get basic click through and cost per click data.
Nowadays, Google's AdWords center offers a whole host of analytics tools that any business, serious about maximising online marketing spend, should be using. If you don't already have an AdWords account then sign up here and start making use of the tools, even if you don't start spending money straightaway.
I have summarized the most important tools below, which can be found under the 'opportunities' tab within Google AdWords:
1. Keyword Tool
A very easy way to find out how many times a keyword or phrase is searched for on a monthly basis. It's useful because you can gauge the current interest level in keywords related to your existing or proposed business. It also shows how much 'competition' there is for that search term (in other words how expensive a buy it might be relative to the number of other advertisers bidding on it). You can target by country and also see what related keywords and phrases are popular.
Entering 'razor blades' for example, returns 110,000 monthly searches in the USA and moderate competition (surprising).
2. Traffic Estimator
Closely related to the keyword tool is Google's traffic estimator. This will tell you how many clicks you are likely to get every day for a specific keyword or phrase, based on how much you are willing to spend on a click through (your cost per click or CPC rate) and your maximum daily budget.
Using the 'razor blades' example again, with a maximum CPC of $1 and a maximum daily budget of $100, the estimator told me that I would get 25 daily clicks at an average CPC of $0.71. It estimated my ad position to be 2, but writing good quality copy could improve that and therefore drive up the click through rate.
3. Placement Tool
A relatively new addition to the tool suite, this will offer you a range of websites and feeds that you can specifically target your advert on. The razor blade example doesn't work too well here - it threw up a load of random and frankly dodgy looking websites, but for ideas on targeting your product/service to specific sites in Google's ad network, this is a fun and useful tool to use.
4. Google Insights for Search
Still in beta, Google insights for Search offers a way of assessing the relative interest in a keyword/product/service over time and by country or regions. It provides a rudimentary trend line showing interest over time and related searches. Worth keeping an eye on as there will undoubtedly be improvements coming soon.
5. Conversion Analysis
Whilst the first four tools discussed above help at the top of the funnel - deciding on keyword campaigns, volumes, trends, competition etc, this conversion tool is critical to measure the return on your keyword buy investment.
It enables you to track at both campaign and keyword level, the profitability of your paid search marketing. By adding a piece of code to your 'action' page, whether that action be a product sale or an information enquiry, you can see which keywords are generating business for you. Adding metrics such as average sale value will then help you determine campaign profitability.
It's fairly simple to set up but will require tweaking and a few validation cycles before you can rely on it solely to manage your online profitability.
Conclusions
Google has built a multi-billion dollar business on the back of keyword advertising, so it's great that it provides some really useful tools for businesses to manage their campaigns effectively. What scares me most is that so many businesses are either not using the tools at all or not using them properly. Experience has shown me that many digital marketing departments manage their paid search spend to an overall CPA (cost per acquisition), which is not necessarily the most profitable way of doing it.
Take our razor blades example again. Let's say you sell razor blades online and you know that your average sale is $30 and you make $20 profit on each sale. You tell your marketing person (or agency) that you are prepared to spend $10 of that profit to get a new sale and that you need 1,000 new weekly sales. Typically what happens is that a number of keyword campaigns are set up, some of which drive new sales at $15 and some of which drive new sales at $5. Your marketing expert manages the campaign to hit your target sign ups and your target CPA. In isolation and with good analytics, you have to question the spend that is unprofitable. Doesn't cutting it out altogether and being more realistic about your sales targets make more sense from a profitability standpoint? Sure, you can argue that those customer acquired at unprofitable levels have a brand exposure value etc, but it comes at a price.
I'll get contentious here - what if your marketing agency is getting a cut of your overall spend? They can manage to your overall CPA budget but they are interested in volume spend, not profitable spend. Take a step back and think about your agency relationship - you might want to rethink it.
No matter how large your paid search budget, managing it for profit makes business sense and the tools are there to make it happen, so if you are not already using them, get cracking!
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