Google’s AdWords system continues to be a popular
vehicle for small businesses to advertise their offering using targeted
keywords. On the off-chance that you are unfamiliar with AdWords, here it
is in a nut-shell: You “bid” a certain price for certain search
phrases and based on that price, your advertisement shows up in the paid search
area on Google when users type in that search phrase The paid search area
is usually along the top area of the page and a list of ads along the right. For
many businesses, picking the right search phrases to target can drive well
qualified traffic to their website.
AdWords uses an auctioning process to figure out which ads
show up for certain key phrases. Based on the level of competition for
that phrase, and your bid amount, Google determines at what position your ad
should show up. There are other factors that go into the algorithm as
well, such as how “successful” your ad has been at getting users to
“click through”. This should not be surprising as Google has
an incentive to reward ads that have a higher click-through as these are the
ads that make them more money.
There’s a certain psychology that goes into the
bidding process when using AdWords. I’ve seen many people think
along these lines (and have done it myself in the past):
Step 1: Find an attractive search phrase that is
targeted for my business and that will generate great potential leads.
Step 2: Determine the price that I will need to pay to
get into the top spot on Google for that search phrase.
Step 3: Place a bid that will likely increase the
chances of getting into the top slot (or pretty close).
The rationale here is simple: If the search phrase is
highly relevant, and you’re willing to pay a price that is far below the “value”
that you’re going to get, might as well bid high to get the top spot to
drive as much traffic as possible. The theory is that the #1 spot in the
paid listing area will drive much more traffic than the other ones. Though
it is easy to believe this (because this is definitely the case in the natural
search area, it is not necessarily the case for the paid search area.
Jason Miller wrote an article recently titled “
On Top Ad Spot A Waste Of Money?
” in which he cites a recent study involving
measuring click-through rates for paid search. This study concludes that “While
there is some advantage to the number one and number three slots, all positions
in the listings show roughly the same click-through rates.”
If you’re spending any money on AdWords, this should
be of significant interest to you. If the click-through rates are about
the same, you can get away with bidding less than the amount necessary to get
to the top spot. If this weren’t reason enough to bid lower than
what is required to get the #1 spot, there’s an even
There is a chance that the actual
of users that click through for the lower ranked ads
than those that
click on the ad that is in the top spot. Why might this be? Well,
think about it this way. The user that clicks on the #2 or #3 spot on the
paid search area will likely be a bit more
to find what they are looking for. There is a possibility that these
users are more qualified and more likely actually
for what you have to offer. Granted, this
particular argument doesn’t have any evidence to back it up, but that
doesn’t mean it’s not possible.
In short, I’d suggesting thinking about how much you
are bidding for your paid search campaigns and see if you can get away with
lowering your bid (and dropping a couple of spots) and see if that has any
measurable impact on your traffic. If you have already tried this, or
have an opinion on the matter, please leave a comment. Would love to hear
Originally published Feb 3, 2007 2:41:00 PM, updated October 20 2016