Rhea: What is AdWords
AdWords, no easy answer
Should I be using it?
In the field of online marketing, Google AdWords has become almost synonymous with paid search advertising. AdWords is essentially an advertising platform developed by Google that allows a business to post its ads in the search results page, search partner pages, and any websites that form a part of the Google display network. Once a business has set up an account, it can run a number of advertising campaigns that will lead customers to its page.
The AdWords system has become increasingly sophisticated since its original launch in 2000, and contributes a whopping 95% to Google’s revenues. The AdWords network includes an estimated 1.2 million businesses (1), with the Google Ad Display Network including an additional 1 million websites.
Now why would this be interesting to an online marketeer?
Well for one thing, AdWords creates a fair competitive environment for share of voice online. When it comes to organic search rankings, small and medium enterprises with limited marketing budgets can hardly compete with large corporations that hog all the prime positions on organic search results listings. AdWords levels the playing field, by allowing any businesses to appear at the top of the search engine results pages, depending on the keywords they bid for.
To better understand how AdWords works, it’s best to look at it from a top down approach.
How AdWords Works:
AdWords accounts have different levels, and understanding these is key to success on the platform. The AdWords hierarchy begins at the campaign level, under which fall the various ad groups. These, in turn, are comprised of different ads, that target different keywords.
- Adwords Account: In order to start setting up online advertising campaigns, you have to first set up an AdWords account. This account will allow you to customize your billing preferences, user access, and other basic settings.
- Campaigns: At the campaign level, the two main factors you begin to look at are your budgeting, or how much you would like to spend per campaign, and targeting, which identifies what kind of demographic you would like your ads to be served to.
- Ad Groups: With the number of keywords that might be relevant to your target audience, it may be difficult to pinpoint them all. Ad Groups help to bundle these into sub-categories, which then makes it convenient to bid for groups of related keywords.
- Ads: Your actual ads, which comprise of a headline, a few lines of text, and a target link, are triggered by keywords which lie within the ad group. This means that the actual text within the ad should contain keywords that are relevant to your targeted audience.
- Keywords: Keywords are phrases or words that relate to your product or service, which consumers search for online. Based on the keywords that you bid for, ads are served up to your consumers when an exact match, or a close match is identified by the AdWords platform.
Having understood the mechanical components of the AdWords system, it now becomes easier to understand how the platform works. Essentially, AdWords is an auction style platform on which advertisers bid for keywords that are relevant to their product. Depending on your bid, and the amount of competition for the same keywords, your ad will be served on the top of the search engine results page when a consumer searches for something related to your product.
One of the most widely used terminologies in the bidding process is Cost-per-click, or CPC. This refers to the maximum amount that an advertiser is willing to pay each time their ad is clicked. It is one of the main metrics used by the AdWords platform when deciding which ad to serve on the top of the search results.
This all sounds great in paper, but how does it work out in practice?
Paid Search : Getting the Bang for Your Buck
Statistics have shown that the average click-through rate for a Google Ad is 3.6%. This means that for every 100 people who see your ad, around 4 people will click on it. This figure increases to 8% when your ad is the first result on the search engine results page. (2)
These may seem like small numbers, at first glance. However, the same statistics show that such ads are 54% successful at generating leads for businesses, a consideration that cannot be ignored by companies looking for a quick return on marketing investment. Traditional media like TV advertising are much less effective, coming in at a 1% lead conversion rate.
Finally, Google’s Economic Impact Report showed that businesses, on average, earned revenues of $2 for every $1 spent on AdWords (3). With figures like these, it is hard to ignore the power of paid search.
However, paid search advertising is not every business’ sure-fire way to success. As with every form of online customer acquisition, AdWords has also come under criticism for several reasons.
Why Google AdWords is not the end-all solution
For one, though AdWords may result in a higher number of clicks on your ads, it does not necessarily translate into increased business for your company or product. At the same time, you pay per click, which means that your costs of advertising may be increasing, while your business growth remains stagnant.
Another major criticism of the AdWords platform is that though it is positioned to give smaller companies the opportunity to grab a share of voice online, it is hard to compete with large multinationals, whose marketing budgets permit them to bid higher for keywords on the platform, though they may not need it.
And last but not the least, the biggest criticism of AdWords comes from the proponents of organic search marketing, or search engine optimization, which is the non-paid method of getting “to the top of Google”. Organic search results, as they are called, have been proved over and over again to be more effective in capturing clicks from online audiences. This is largely because organic search results are thrown up on the basis of relevance to search keywords, and not due to interference on the part of advertisers.
Of course, this comes at a price, since the algorithm developed by search engines to decide which pages get ranked higher than others is complex, and requires a lot of thought on the behalf of marketers. To know more about SEO and how it can be used to build your brand online, you can read this article.
How to make the most of your AdWords account
In conclusion, it is ideal for a company to devote all available marketing resources to a healthy mix of paid and unpaid media. Though the AdWords platform is constantly evolving to make it easier for marketers to leverage the power of paid search, most companies and brands would agree that it is also important to complement your online advertising with strong and relevant content, in order for visitors to convert into customers.
With online ad spending in the United States increasing at a compounding annual growth rate of 13% year over year, the future certainly looks bright for AdWords. (4) For many businesses looking to break into the world of online advertising, the platform is definitely a good place to start. However, as with anything that involves money, don’t lose sight of the limitations of AdWords. As long as you step lightly and learn as much as you can about the platform, you might just find that you’ve made a good investment after all.