PPC Management - Google Changing Adwords Again

This Google Adwords news is brought to you by the fine people at Google who are sick of the phone calls asking what kind of pot they have been smoking the last few weeks....


Hello from the Google AdWords Team:

You asked, and we listened. In the coming weeks, we'll simplify our keyword status system and introduce quality-based minimum bids, giving you more control to run on keywords that you find important. We believe these changes will result in higher quality ads.

What's changing
Simplified account management: Your keywords will be active or inactive — instead of normal, in trial, on hold, and disabled. In addition, accounts will no longer be slowed. Currently, accounts are slowed when they don't meet our performance requirements and your ads appear rarely for your keywords.

Quality-based minimum bids: Soon, each keyword will be assigned a minimum bid based on its Quality Score. Keywords with a higher Quality Score will be given lower minimum bids to stay active and trigger ads. Keywords with a lower Quality Score (including those that are currently on hold) will have the opportunity to run if your keyword or Ad Group's maximum cost-per-click (CPC) meets the minimum bid.

The Quality Score is determined by your keyword's clickthrough rate (CTR), relevance of your ad text, historical keyword performance, and other relevancy factors.
Ad Rank, or the position of your ad, will continue to be based on the maximum CPC and quality (now called the Quality Score).

What you should do
Here are some suggestions for what you should do before and after we implement the changes described above:

Before implementation: If you're happy with your current keyword list, there's no need to make any changes. However, if you have any on hold keywords that you don't want to trigger ads, we suggest you delete them from your account. This is because any keywords with a high enough Quality Score and maximum CPC could be activated and accrue ad clicks. You can use our Find and Edit Keywords tool, available in your account's Tools page, to quickly search for and delete any keywords in your account.

After implementation: We'll email you after we implement these changes. You should then log in to your account and monitor your keyword performance under these new guidelines. Any disabled keywords at the time of implementation will remain labeled as disabled in your account. Several weeks later, we'll delete them. This period of time is meant to give you an opportunity to review your disabled keywords and activate them.

No word on the Cannibus however.....

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.

More on Google Adwords Algorithm Change

Judging by the mail I am getting I will attempt to explain the entire Google Adwords Algorithm change many of you may be noticing.

Some time between June 14th & June 27th I started to notice distinct changes in many Adwords accounts. Keyword buckets that were inherently stable concerning their respective spend and CTR were now performing at entirely different levels in each category. As a whole, differerent Adwords accounts have seen either a very noticible increase or decrease in CTR and Ad Spend.

The second fact that I noticed is that ads were not appearing in the position they were supposed to be in. Sometimes they were in higher spots, sometimes lower. I have noticed ads drop from 3rd position to 31st position, and from 8th position to 1st position without any change to bids or ad content.

Today I called Google and spoke to an account rep. I mentioned the strange statistics and rankings I was tracking and asked for clarification as to what they have done to Adwords algorithm. After much wrangling I finally got the answer I was after.

The answer is that Google has instituted a local search parameter into Adwords. Different regions of the country will see Google Adwords ads in different positions. So while you may be bidding for 3rd position for the term "widget", its placement in each region will be based on its historical performance in that region.

So let's say you sell surfboards. Historically you have bid for 3rd position for the term "surfboard" and you have an average position of 3.4 (as we all know ranking fluctuate depending on CTR and BID so it is rare your average position is exactly the bid position you try to attain). Now let's assume that historically you have a 8.0% click through rate in the "California" region (Google hasn't released the boundries or number of different regions), but only a 2% click through rate in the "Iowa" region. Google's new Adwords algorithm may place your "surfboard" ad #1 in California region searches , but #10 in Iowa region searches.

This wouldn't be so bad, but since we do not know the regions, the only way to know how your Adwords ads are being placed is to gather sample search results from across many regions. This is going to be tremendously difficult for a small business that has no regional or national staff or offices.

Google believes that this new parameter will result in better search results for the end user. However this comes at a steep price for the control of a Google Adwords account has been made exponentially more difficult. I fail to see why Google did this to the PPC engine. If this was applied to natural search rankings it wouldn't be nearly as bad. But Google has decided to bite the hand that feeds it, taking away control from the businesses that pay to use the Adwords service. Businesses are now at the mercy of where Google believes their products will sell best, instead of where the business believes it will sell best. If I was bidding for 3rd position and my sales didn't warrant the ROI, I have myself to blame. With this new change, most businesses will have Google to blame because businesses will not be able to control the placement of their ads.

This also bring to light many potential hazards:
1) The sparking of a bidding war to try to reclaim ranks.
2) Increased spend on terms that were known to be marginal and bid to low positions now appearing in high positions.
3) The loss of revenue from previously high ranked, high revenue terms that have now been dropped out of major markets.

Google claims that they believe that this will result in higher CTR and Conversions for most businesses. Of course higher CTR rates means higher ad spends for everyone, and this benefits one business more than any other...

I knew I should have bought more of that Google stock.

Google Adwords Algorithmic Change

Google has made an algorithmic change to Adwords. No longer will you be guaranteed the position at which you bid for keywords. Instead Google has instituted a local parameter to the Adwords formula. Basically different regions see different sets of PPC listings. So a term you used to be #3 for everywhere could now be #3 in NY, #17 in TX, and #1 in PA. They base these new positions on how your keywords have performed historically in each region. So in regions where you had high CTR on "Bandana" you would still be #3 or higher, but in places you have done poorly historically, your #3 bid could be dropped as low as 30th or lower. There is also no way to see each regions listings unless you are in a region. Hence Adwords has removed a lot of control from businesses and keyword bidding is going to be exponentially more difficult and confusing. This is yet another reason for an analytics package so that you may see what regions leads and revenues are coming from and help untangle the new messy Adwords web. I estimate that this change took place in the 3rd week of June so you may notice keywords that you are spending a lot more or less on the past two weeks even though you didn’t change a bid or the content of a Google ad.

I confirmed all this with a Google account rep today on the phone once I noticed something seemed amiss. Over the next few days I am going to try to work up a new Adwords strategy that works with their new algorithm. I just thought I would give you a heads up as you would know better than I at this point if you saw any unusual changes in cost or ROI in Adwords keywords the past 2 weeks.