Pulling out of the Adwords Campaign Death Spiral

I've been on Google's case about this Adwords Algorithm change, but let's face it, us moaning about it isn't helping any of us deal with the situation.

Here are my initial thoughts on how to "manage" Adwords since the region parameter was added. Please remember the statistical pool of data since the change is not large enough to make definitive conclusions, but I believe you can do some things right now to try to protect yourself.

1. Network: Blogs & Forums are great tools for networking so take advantage of them! If you can make one contact in each time zone (you and 3 others here in the US), as a group you can all report on the top 25 keywords for each campaign. This means you looking up 75 keywords for you network each week and reporting their position in your area, but it means you will get information back on your top 25 keywords from 3 other regions. If you are saavy enough to get contacts in your key cities/states, even better.

2. Get a Solid Analytics program: Information is going to be your best weapon and defense in dealing with the new Adwords. With the Adwords algorithm change you are going to have keywords getting higher CTR and clicks, which may be good or bad, but only an analytics programs can tell you exactly how much revenue was created and how much adspend it took to create the revenue. More clicks may mean more sales but it may also mean more adspend per sale. Having a good handle on ROI down to the keyword level is going to be invaluable information when it comes to managing Adwords in the new system. You don't have to spend $1000's a month on the cadillac of Analytic Software (although if your revenues support it by all means get Omniture or Core Metrics), a program like Urchin for $200/month will give you the type of information you need to collect at a very reasonable price.

3) Re-examine your Maximum Bids: Almost everyone has a higher maximum bid price set than the average CPC you are charged. For example, you may max bid $1.00 for term "X" and your average CPC traditionally has been something like $0.66 for position 2.9 and you sat in position 3 most times. However if Google decides to place your Ad #1 in a region, you still have room between your average CPC and your Max Bid. If there is enough room there for you to afford position #1 in a new region, your average CPC will start to rise, AND your total number of clicks will also rise since you are now in the #1 position. So in this instance let's say tradionally you did 200 clicks per week at your AVG CPC of $0.66, so your weekly spend was about $132. Now with the #1 region placement, you can expect an increase of probably 25% in clicks and 25% in AVG CPC (these 25% rises are probably on the conservative side as costs between 1st position and 3rd position can be +100% or more in some cases). The 25% increase in clicks makes 250 clicks, while the 25% increase in AVG CPC, makes each click now cost around $0.82. So your new adspend has become $205, an increase of 65%!

I would consider reviewing max bids and perhaps pulling them down a bit to keep adspend costs from getting out of control due to a keyword(s) appearing in a hot region in the #1 or #2 position if they have not been bid to that height in the past. If you were bidding for #1 or #2 then the change is not going to be as drastic in the adspend area, but in the loss of traffic due to being positioned below your previous rankings. To deal with that problem......

4) Formulate an SEO Plan: Currently you do have some control over your ability to affect change in natural rankings. While SEO projects can be costly in the short run, their long run costs are far lower than a PPC campaign. Make sure you work with or bring in someone who has SEO experience. My mom can claim to be an SEO Specialist, and she can't attach a picture to an email, because there currently is no formal educational training for SEO. Quite simply, the people who are the best at it are people who have or do work for companies with successful SEO campaigns. Outsourcing SEO can run $125/hr for top SEO Companies, so bringing in a talented SEO Specialist for $60,000-$80,000 year ends up being a bargain. The third option is to look for or hire SEO Specialists that work for Companies to do your SEO work as Freelance Workers. Typically they can be hired for $40-$75/hour and know as much or more than some of the big companies, so they make an excellent alternative. The sooner you get a successful SEO project in place the less reliance you will have on the PPC engines and you can actually decrease adspend. Typically the savings in adspend can pay for the SEO Specialist and leave extra money that is now pure profit.

Since the change is fairly new, we don't want to do anything drastic by panicking. But it never hurts to take a few defensive measures to protect your business from a sudden change in adspend. As I mentioned above, your best weapon is information, so get on that networking and get that analytics program installed or upgraded. Err on the side of caution with your max bids and look into SEO initiatives to decrease dependence on PPC campaigns. Take a moment, analyze your data, and determine the maximum value of your keywords and you will be back flying the friendly skies, albeit a bit bumpy, of Google Adwords.