AdWords Tips: All About Keywords

By: Ryan Cole

As you probably know, Google AdWords is a pay-per-click marketing system, which is a great way to get traffic to your site. But if you don’t know the ins and outs, it can end up costing you a lot of money and not making you any.

So, what’s the key to success with AdWords? Well, I wish I could tell you there were one or two simple tricks, but the fact is, the best way to ensure success with AdWords is to be familiar with every aspect of the system. This will likely take weeks or months of research, plus a few bucks spent testing out a real AdWords account. However, you can greatly increase your chances by following this bit of advice: don’t skimp on the keyword research!

Maybe you had it in your head that you could go through your site, grab 20 or 30 words or phrases, load them into an ad group, and you’d be watching the traffic and sales pour in. This is simply not the case. Keyword research should be the most time-consuming part of setting up any campaign; not only that, but you should be doing it all the time. That’s right – never stop building your keyword list. Okay, now let me explain a few things:

First, you need to understand how Google uses your keywords to show your ads. You place a bid that determines your maximum cost per click (CPC) for each keyword. This can be different for every single keyword, if you wish. This bid does not represent the amount you’ll pay for each click (like on Overture); this is just the maximum you’ll ever pay for any single click. For example, if you have a max CPC of $0.50 set for a keyword, you’ll only have to pay the full amount if someone else bids $0.49. If that person decides to lower his bid to $0.30, you’ll only pay $0.31. This is because Google’s bid discounter only charges you one cent more than the next highest bidder, no matter what your max CPC is. Theoretically, then, you could bid $10 or even $100 and still only pay $0.31 for a click.

But that’s not all! As you start getting impressions (i.e., your ad shows up in the search results) and clicks, you’ll have a click-through rate (CTR). This represents the number of clicks you receive per 100 impressions. Here’s the really beautiful thing about AdWords: the higher your CTR, the lower your click cost. Because Google values relevance, you’ll receive a bonus for having a relevant ad, and CTR is the primary indicator of how relevant your ad is. So, let’s say you’re competing with someone for ad position No. 3 on the search results page for a particular keyword. Your max bid is $0.50 and his is $1. He should be way above you, right? Not necessarily. Suppose you have a CTR of 5%, and his is only 1%. Google factors in CTR when calculating ad positions, so you end up with this: max CPC