How Much Money is Google Making?

Any business who has ever run a Google AdWords campaign to drive traffic to their website for a minimum of 3-6 months will have experienced a rise in the cost of traffic at a rate greater than inflation.

We have experienced this first hand - in June 2009 some of our Google Ads were costing around $5.25 per click. Nine months later these same keywords are bordering on $18 per click - not per enquiry, but per click! However, in this article we share with you some useful strategies for keeping your click costs to a minimum with Google's powerful advertising tool.

Why such a sharp increase in click costs?

With Google AdWords being a real-time bidding machine the click costs are largely driven by supply and demand. There is a limited supply of top or first page positions on Google, therefore those that want to be there have to pay a premium.

Click costs in certain industries have plateaued due to profit margins being eroded - e.g. the average cost per click in the florist industry is unlikely to go beyond $5 because if it takes an average of 10 clicks to get a sale, it is costing $50 to obtain the customer - on tight margins this is prohibitively expensive.

Does this mean my website is correspondingly more valuable?
Yes! If you have a website that generates organic/free search engine traffic, this traffic has a worth that can be equated to what you would otherwise have to pay Google in click costs.

Example:
If your website was generating just 20 'free' visitors a day as a result of its organic search engine rankings and your industry average cost per click is say $3, your website could be valued at - 20 visits x $3 per click x 365 days = $21,900 per year!

This is what a competitor new to the industry might have to pay direct to Google to generate the same amount of traffic. With this in mind you can see that apart from the business a website can generate, the potential worth of a well optimised website in considerable for any business.

How does Google establish the cost per click?

Interestingly, the bid or click price is not necessarily the most important factor in Google's AdWords ranking algorithm.

Other factors aside from 'price' which can have a major effect on the click costs include -

1. Age of your Google AdWords Account - Google gives preference to businesses that have been advertising for a longer period of time. Like most businesses, they look after their long term customers and are wary of doing business with new customers with whom they have no trading history. We have seen some click costs drop by 50% in the 2nd and 3rd month of being active yet top positions were maintained.
2. Your Keyword Quality Score - in every AdWords account next to each keyword is a tool that provides an arbitrary 'quality score' out of 10. This is measured by calculating the correlation between the chosen keyword, the ad that gets displayed when a searcher looks for that keyword, and the landing page of the website the visitor is taken to. If there is a good correlation (e.g. the keyword, the ad and the landing page all mention 'discount widgets') Google will assign that keyword a higher quality score and give it a corresponding increase in its ranking position.
3. Click Thru Rate (CTR) - this is a measure of the percentage of searchers that click on the ad when the given keyword is searched for. E.g. a CTR of 3% means 3 in every 100 searchers click on your ad. A high click through rate is good news - searchers like clicking on your ad. Correspondingly, Google gives your ad a boost in the rankings because it may be making more money from your ad than your competitors because it is worded more attractively.

How do I combat rising click costs?

Many businesses lack the knowledge of Google's ranking algorithm for AdWords and as a result continuously increase their keyword bids in order to maintain their top positions. This is great for Google, but not for your hip pocket.

Here are 5 quick and easy ways to ensure you aren't paying a premium for your clicks:

1. Link to the most relevant page on your website - this will improve your Quality Score for the given keyword
2. Split your keywords into logical campaign groupings rather than one large campaign - this will also improve your Quality Score due to increased relevancy
3. Ensure your ad is attractively worded - use digits in your ad, give pricing indications, and even include your telephone number - the digits will attract searchers eyes and result in more clicks
4. Create ad variations that include the keywords you are targeting - if 'eco rainforest tours' is a keyword ensure 'eco rainforest tours' is mentioned in your ad
5. Build a website specific to the campaign you have created - we did this for our websites that target specific strategic locations and noticed a 20-40% reduction in click costs!

PositionMEonline is a Google AdWords Qualified Company and has managed millions of dollars worth of spend with Google. We have an intricate understanding of how to get the best out of pay-per-click advertising based on our own experience and that of our clients.

For a free 30 minute analysis of your Google AdWords campaign contact our office on (08) 9313 2699 and we will schedule a video/web conference to review your account in more detail - obligation free.