Larry Kim is the Founder/CTO of WordStream, provider of the AdWords Grader and the 20 Minute PPC Work Week. (You can follow him on Google+ and Twitter.) I reached out to interview Larry on what stood out to him:

Google stock took a nose dive when their financials were released. A lot of coverage mentioned decreasing CPCs. Does the decrease in CPC concern you?

Larry Kim:  Google’s revenue growth has historically leaned a great deal on rising cost per clicks. The challenge with that approach is that it’s not a sustainable long term strategy.

Take for example something like domain name registration. How the heck can you justify paying $10+ per click for something that costs 5 bucks?  Moreover, where the conversion rate from click to sale is in the single digits? (Answer: You can’t.)

I work with small and medium-sized businesses with limited search marketing budgets, commonly in the range of $1-25k / month. Rising CPC’s often force smaller businesses to respond by adopting increasingly narrow ad targeting parameters, and sometimes even result in them dropping paid search all together.

The reversal of this trend as a win-win for both AdWords advertisers and Google. A larger available inventory of impressions, combined with lower average CPC, means that PPC advertisers are now literally able to get more customers for less money. And Google shareholders should be happy, too – it opens up Search Engine Marketing to more advertisers, including perhaps advertisers for whom the economics of search might not have previously worked out at higher average costs per click.

I recognize that CPC’s aren’t fully controlled by Google per se – that an advertiser’s actual cost per click is a reflection of an ad auction that takes into consideration advertiser competition for a keyword, as well as an advertiser’s historical performance track record (Quality Score).

But overall I’m very supportive of a model for Google advertising revenue growth that that emphasizes growth in ad inventory, and innovations that drive and/or reward high click-through rates and conversion rates as opposed to just relying on higher CPC’s every quarter.

This approach deliver more ROI to advertisers in the long run and makes paid search a much more sustainable and attractive venue for ad dollars, especially in comparison to other advertising venues.

How do you feel mobile search is playing into these statistics?

Larry Kim:  Wall Street analysts are placing the blame for slowing ad revenue growth rates squarely on mobile search. The conventional wisdom says that mobile ad engagement is lower in comparison to ads on the desktop, which intuitively makes sense –when you’re doing a Google search on your iPhone, you’re probably on the go, and therefore less likely to be tempted to click on ads that aren’t absolutely critical to what you’re looking for at that moment.

There’s also considerably less space for ads. These issues impact Google revenue growth as mobile searches account for an increasingly larger share of searches – mobile search volume is expected to exceed desktop searches in 2014. I think the conventional wisdom is true but would argue that there’s another factor playing into the statistics here.

Despite 2012 being yet another “Year of Mobile Search,” I’m finding that advertisers are quite slow to adopt mobile advertising best practices. In AdWords, all advertisers are automatically opted into mobile search – it’s the default setting when creating a new ad campaign. But the vast majority of advertisers aren’t creating unique or compelling advertising experiences for mobile searches.

For example, I’m seeing anemic adoption rates of new mobile ad formats, like click-to-call ad extensions, or call reporting, and very few advertisers take the time to create mobile landing pages, or customized ad text and offers that would be more compelling for the average mobile searcher.

The challenge is that it takes more time and effort to do the work – and I’ve also seen cases where advertisers have taken the time to optimize their mobile ad experiences but are having challenges measuring the ROI from phone calls, and therefore having trouble getting buy-in from key stakeholders.

In summary, the net impact of all of the above is that the typical mobile search currently monetizes at roughly half the value of a desktop search. But I expect that to change in the near future. For example, I anticipate seeing a lot more ads on Google Maps, and for Google to charge for Google business listings, etc.

Do you feel the CPCs in some verticals prices SMBs out of the PPC game (i.e. Finance)?

Larry Kim:  In my study, the finance category included businesses doing credit & lending, financial planning & management, insurance, investing, etc. These tend to be high-margin businesses with long average customer lifetimes, for example a 30-year mortgage or life insurance policy.

Furthermore, the average conversion rates for the finance industry were very high – 6.12% for Google Search and 5.12% for Google Display Network – probably because a lot of people do comparison shopping for these types of products on Google,  so I think it’s still a pretty effective advertising venue, despite the high average cost per click.

The industry verticals that are under the most pressure at the moment are those that have a combination of high average cost per click and low conversion rates (meaning, a high cost per action) in combination with tight profit margins and/or shorter customer lifetime values.

Since I don’t know exactly what the profit margins and average customer lifetimes are for each industry, I’ll just post the average cost per action data that I calculated, and let the readers decide if they’re too high or too low to make sense for their business.

In my 10+ years of experience working with over a thousand small businesses, I’ve found that almost any kind of business can make PPC work for them – it’s mainly a matter of finding the more narrow set of targeted, relevant, high-intent keywords that drive affordable leads and sales.

What is the best way for an SMB to use this data now?

Larry Kim:  There’s a ton of data here, and way too many insights to list them all out, so here are my top 3 ideas:

1. What can I expect to get from search marketing?  This is the first question that every advertiser who is new to search asks me. While individual results always vary, by looking at my industry benchmarks for your industry, you can get a general sense for what you might expect to achieve should you invest in search engine marketing.
2. How am I doing in search? This is the first question that every existing AdWords advertiser asks me. That they know how they’re doing in that they see the metrics in their own account, but don’t have a way to gauge if those numbers are any good or not, relative to the competition. Again, by looking at my research, you figure out if you should be patting yourself on the back or working harder on optimizing your account.
3. Try out Google Search and Google Display Network. My study found that there was a huge increase in clicks and a decrease in average cost per clicks. I also found that performance on the Google Display Network to be quite very compelling. If you’ve tried them in the past and stopped for whatever reason, I think it’s worth taking a second look.

Finally, a neat way to make all of this data all of this insight is to run a free AdWords Grader report. It’s a free, instant audit of you’re the key metrics in your AdWords account – highlighting areas of strength and areas to improve.

The neat thing about this free tool is that it compares your results to other advertisers who are in the same industry as you and have a similar ad budget as you, so overall it’s a pretty compelling benchmark. Plus it’s completely free.

Where do you feel SMBs still have a PPC advantage over larger advertisers?

Larry Kim:  With such huge increases in available clicks and impressions, it’s no longer possible for larger advertisers to buy out the entire available impression share – this which opens up tremendous of opportunities for smaller advertisers to outmaneuver larger advertisers.

Don’t assume that all larger advertisers are doing great. I’ve seen plenty of large advertisers that do very poorly and are doing a terrible job at managing their accounts. And it’s not that they’re incompetent (though, that is sometimes the case) – it’s most often the case that there are legitimate challenges in operating a PPC advertising account at scale, like managing thousands of products, and inventories, and changing prices, etc., which are challenges that smaller advertisers generally don’t have to deal with.

Furthermore, necessity is the mother of invention. Sometimes, I see that it’s the cash strapped small and medium sized businesses that are running the best campaigns because the money is so critical for them, that it forces them to be more effective. Overall, it varies.

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Market Via Your Own Website

For the inventor who wants to keep as much of the profits as possible, selling direct is the way to go. However, selling on your own website can be hard. Here is a sample of all the things you’ll encounter:

• Setting up the site – This involves buying a URL, getting a hosting package, installing a CMS like WordPress yourself or hiring a web designer to set up the site for you.
• Writing the content – Once you have a site, you’ve still got to write all the content that goes on the pages. And you’ll probably want a good content marketing strategy to keep your blog relevant to users and search engines alike.
• Conversion – Before people arrive at your site you’ll need to prepare how you’ll “convert” them. If you have an email newsletter, you’ll need to have a place for people to signup. If you’re selling your product you need a shopping cart and payment method. Take care of conversion early and make the most of your traffic.
• Search engine optimization (SEO) – SEO should be laced through this entire process from site setup to content writing to linkbuilding, but you need to have a focus with your on-page and off-page SEO so that you start ranking on terms that drive business.
• Pay-Per-Click (PPC) advertising – If you don’t want to wait for your SEO rankings, you can get traffic quickly using a PPC platform. Obviously Google AdWords is the biggest, but Microsoft adCenter, Facebook, LinkedIn and others can provide great sources of targeted traffic.
• Email marketing – Whether they’ve just signed up for a newsletter or if they’ve purchased a product, email marketing is how you further your relationship. Staying top of mind is important and leads to repeat customers and upsells.
• Social media – You can’t escape the reach of Facebook, Twitter, Pinterest and the many other social media sites. While you won’t need a presence on every platform, you want to be on the right ones and you want to be actively participating. A deserted social media account can hurt your credibility.

As you can see, this can be a bit overwhelming. However, there are ways to simplify the process.

Sell Through A Platform

There are a lot of different platforms out there and they vary in how they work and the level of control you have. Craigslist and eBay are very simple ways to list a product and make sales. If you want more of a “store” you can go with a site like Etsy or Cafepress that gives you control over the layout and styling. Whichever platform you choose you can usually avoid the hassle of setting up your own website and they will usually have a built-in payment system.

The downside to these options is that you still need to drive traffic to your listings or store. If you’re not particularly marketing minded, this can still seem overwhelming. So what’s even easier?

License Your Invention

The easiest way to get your invention to market is to license it to an existing company. They’ll handle production, sales and fulfillment and give you a percentage of each sale. While licensing deals can be structured many ways, the inventor usually keeps the patents and rights to the invention. So how does one get a licensing deal? There are a few methods:

• Cold-calling – This is the hardest way to get in and it requires a lot of effort, but sometimes dogged persistence can be the key to success.
• Personal network – As the saying goes “It’s not what you know, but who you know.” Having a personal connection within the licensing company will give you a champion inside, but even if you can get an introduction through a common connection you’ll be ahead of the game.
• Invention Contests – Many companies run contests searching for inventions to license and sell. One example I came across was the Big Ideas Worldwide Invention Contest. They are accepting applications through March 1st and will have 10 finalists present 3 weeks later to pick the winners.

Invention Photo via Shutterstock

The post Getting Your Invention To Market appeared first on Small Business Trends.

In short, yes, they probably are. This tactic has been around for a few years and is commonly referred to as retargeting or remarketing.

How Does Remarketing Work?

In March 2012, I’m going to be speaking at Conversion Conference in San Fransisco so I’ve visited the Conversion Conference site several times to review the agenda, register and make travel arrangements. Today, I noticed the following advertisement upon my visit here to Small Business Trends:

This ad is targeted to me because I’ve been to the site and have the cookie on my browser. Here is the technical explanation:

• The site owner places a snippet of code on their website.
• Site visitors have a cookie placed on their browser when they visit the website.
• The advertiser creates ads and targets all users with the cookie on their browser.
• Any site using Google to serve ads can then show targeted ads when the cookie is detected.

How Can This Help Your SMB?

According to a post by Inc.com last year, a 50% bounce rate is average. That means half of your visitors leave after viewing only one page. They say you only get one chance to make a first impression and a high bounce rate may indicate you’re not making the best impression. However, utilizing remarketing allows you to make it up to them. Offer them a discount, remind them of your free offers, or emphasize different benefits.

Don’t Be Creepy

When creating your ads, be careful not to be creepy. While you may want to remind them that they were on your site, the average user doesn’t understand how remarketing works. They just see your ads in places they might not expect it. And don’t overdo the frequency. Most platforms, Google included, allow you to set a frequency cap so they only see your ad a certain number of times/day. This helps decrease the creepiness a lot.

In the end, this is a chance to bring back some of the lost sheep that you worked so hard to get in the first place – even if it does require you to follow them around.

The post Are PPC Ads Following You? appeared first on Small Business Trends.

“If I already rank #1, why would I do PPC for my brand name?”

It’s a common enough question.  I recently came across an article about advertising on your brand name and felt like small businesses needed to understand the pros and cons.

The Cons of Advertising on Your Brand Name

• You spend money to get a click you might have gotten anyway – nobody wants to spend money. Especially small businesses where every penny has to work harder.
• Brand terms perform significantly better than my other PPC terms and will skew my data.

The Pros of Advertising on Your Brand Name

• You take up more space on the search engine results:  By having your PPC ad show up you increase the amount of real estate you occupy, thus increasing the likelihood that a search user ends up on your site.
• You control what your listing says:  Organic results are great but the search engine controls what your listing says. PPC ads are 100% under your control, so you can ensure you’re putting your best foot forward.
• You pick the landing page:  When a user clicks your PPC ad they go where you feel is best. That might be a current promotion or it might be the homepage. The point is that you choose, not the search engine.
• You “box out” the competition:  If you don’t advertise on your brand name, a competitor might. Advertising on your brand name allows you to push them down.
• You can get more clicks:  Having your ad and organic listing on the same page can actually increase your total response when done correctly. I won’t dive into it here, but Search Engine Land has an article titled, “Brand Ad Cannibalism: A Tale of Two Tests.”

In Summary

In my experience the pros outweigh the cons. If you’re still on the fence, consider the following arguments:

• First:  You may indeed have to pay for a few clicks you would have gotten anyway, but you’ll be able to control the message and direct them to exactly the right page in exchange.
• Second:  If you put brand terms in a separate campaign in your PPC accounts you’ll be able to track them separately from your other campaigns, thus keeping your data clean.

Just like all PPC efforts, as you test and monitor performance you’ll soon determine if the effort is profitable and ensure your PPC dollars are pulling their weight.

Surfing Photo via Shutterstock

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However, I think perhaps the most mystifying part of the process is how the “auction” works.

What Is the Auction?

The Google AdWords auction determines three things:

1. Which ads are shown on a particular search results page (whether your ad even gets displayed)
2. How the ads will be ranked (how high up on the page your ad appears)
3. How much each advertiser will pay for that click (what you pay whenever someone clicks on your ad)

Let’s look at each of these areas in more detail.

Which Ads Are Shown

This is the most straightforward part of the auction. First Google will look for all eligible advertisers based on keywords (match type is important here) and other targeting settings such as geographic location and time of day. Each search engine results page has as many as 15 ad spaces available. There can be up to three placed in a shaded box above the organic results, as many as 10 results on the right side and, in a recent development, as many as two more search results at the bottom of the page.

But in what order will they be shown?

How Ads Are Ranked

In the past, Google would just rank advertisers by bid. If you bid higher, your ad showed up higher.  Want to get your ad to show up even higher? All you had to do was outbid another advertiser.

It was a pure auction.

However, in their efforts to improve things for searchers, Google introduced something called Ad Rank. Ad Rank is calculated by multiplying the advertiser’s maximum bid by their Quality Score (QS). Google then ranks the ads from highest to lowest based on Ad Rank.

The following image from Wordstream shows how this would work:

What Each Advertiser Pays

Looking at the image above, you’ll also see how much each advertiser would have to pay for a click. Your Ad Rank is divided by your quality score and you will pay just $0.01 more than the max bid of the next advertiser. Thus you will often pay less than your maximum bid.

Notice in the above example that the advertiser with the best quality score pays the least amount.  And as the fine point notes, the advertiser with a better quality score can actually pay less than other advertisers and have its ad appear higher up on the page.

Is Google AdWords Really an Auction?

The short answer: Not really.  Being successful with Google AdWords is more than simply raising your bid higher and higher.

While increasing your bid will usually help improve your position, quality score plays a large part in who shows up and where. This means that as a small business, you can improve your Google ad position and lower your costs by improving your quality score.  I will deal with quality score in a future post.  For now, just know that quality score is largely about making sure your ad and the page where you direct visitors, matches up to whatever searchers are looking for.

For more information about how AdWords works, check out the entire infographic.

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My Sad Story

A while back I was approached by a client that was looking to improve their online marketing. They had been doing a lot of PPC advertising and weren’t getting the results they wanted. Therefore, they had been getting quotes from numerous Internet marketing agencies for PPC with SEO and social media bundled together. During the process I was told that another agency made the following claim:

“We can get you the same number of conversions on half the spend.”

The reason I learned this was because the client preferred my company, but they wanted to get that half of their spend back. And here is where pride enters the scene.

The Deadliest Sin

In most accounts of the seven deadly sins, pride is the original sin and the most deadly.

Usually, I do not make such bold statements. Perhaps it is my naturally conservative nature or a desire to overdeliver, but I would not have made this type of claim myself. However, I looked at past performance and saw how the other agency had arrived at their claim (there was a lot of spend and a lot of keywords that were not performing). I took the deal without adjusting this expectation.

What Happened?

As you might have guessed from the blog title, I wasn’t able to deliver on the expectation. I did what a good PPC manager should do and plucked out all the best-performing keywords and put them in a shiny new campaign. I used the best ad copy as a baseline and tested new ad copy against it. In theory, it should have worked, but it didn’t.

The client beat me over the head with the expectation over and over. I told them everything I was doing to remedy the problem. I spent hours trying to fix the problem. In the end, I was buried in the grave of unfulfilled expectations.

Setting Proper Expectations

A famous research study by Walter Mischel, a professor of psychology at Stanford, showed that a simple test of delayed gratification was a better predictor of future academic performance than IQ tests. The test? A child was given one marshmallow and told that if he or she could wait until the researcher returned (15 minutes), he or she could have two marshmallows. If they ate the first marshmallow or rang a bell to bring the researcher back early, no second marshmallow.

Expectations are the same way. They may seem like they’re only a small part of the process, but they are powerful predictors of the relationship’s future. Expectations are at the foundation of the relationship. They’re the measuring stick.

What Did I Learn?

Here are a few takeaways I can offer you:

• Know Yourself and Stick to What You Know – If you’re uncomfortable with the initial expectation you’re probably going to be uncomfortable trying to meet it. Save yourself a lot of pain by not letting pride get into the mix.
• Proper Expectations Make Happy Clients/Customers - When people get what they expect, they’re satisfied. If you exceed expectations, they’re ecstatic. Those are the clients that recommend you.
• Own Up to Your Mistakes – If you’ve set expectations too high, reset them as soon as possible. The further along you get, the more trust is lost and the more hard feelings develop. It may cost you the sale, but you have to pay the piper eventually.

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Distract!

When you’re advertising on search results, you know at least some of the user intent based on the search query. If someone typed “organic lettuce in Dallas” you have a good idea of what they want. However, in the Display Network, you’re trying to get clicks from users who are occupied with something else. They might be reading an article about how to build a treehouse. They might be playing an online game. Your ads need to pull them away from what they’re currently doing to get a click.

For example, let’s say you sell widgets. Your widgets are unique because they are yellow and 100 percent stainless steel. For search, your ad might read something like this:

“Premium Yellow Widgets. 100% Stainless Steel + Free Shipping!”

That would be great if someone searched “yellow widgets.” But what if you customer is a college basketball fanatic?

Right now he’s wrapped up in March Madness and isn’t searching for widgets, even though he wants one. How do you get this guy’s interest? What about an ad that reads:

“March Madness Special. Get your widget in time for the Tournament! Free shipping.”

This will relate to your potential customer and draw his attention.

Location, Location, Location!

Just like in real estate, the location of your ads is vital to success. There are two ways to target your ads in the Google Display Network:

• Keywords - Similar to search, but you need to think more about the content your ad will appear next to. For our sports guy, you’ll want to choose keywords like “college basketball,” “March Madness” or “bracketology.” These words don’t describe your product at all, but content talking about these keywords is where you want your ads to show up.
• Placements - These come in two flavors: automatic and managed. Automatic refers to the sites that Google feels are relevant. Managed placements are specific URLs you choose, like a specific forum or blog (running AdSense, of course) that you know potential customers read.

In a Nutshell

Black holes seem scary, but physicists theorize that if you properly harness the power of a black hole, you can travel into the future. The Display Network is similarly scary, but potentially powerful. To succeed you need a different approach than regular search. You need to distract the user so they’ll pay attention to your ad, and you need to put your ad on pages that attract potential customers. Do this and you may find a very attractive future ahead of you.

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But in the 10 years since its launch, has Google AdWords become too complicated for SMBs?

It Wasn’t Always This Complicated

I’ve worked with AdWords accounts for over six years now. My first foray into PPC was a group project in my Internet marketing class. My team was handed a shiny American Express gift card worth $500 and told to create an AdWords campaign for a local company. We did some keyword research, wrote a few ads and unleashed our creation into the wild. To this day I don’t know if the project had a positive ROI for the company, but at that point in time, using AdWords was so easy five college kids with no experience could do it.

After graduating from college I started working for a software company that marketed almost exclusively online. I was in charge of an AdWords budget of several thousand dollars a month and got much better at using it. My keyword lists became more refined, my ad copy had laser-like focus on getting the click, and I was landing users on the exact page that would deliver on their intent. With the robust reporting, all I had to do was focus on the numbers and let them direct where I put in my efforts. AdWords was so easy a new college grad could do it.

Eventually I moved on to work for an Internet marketing agency where I was the one-man PPC department. I was now managing multiple accounts and tens of thousands of dollars in clicks. Sounds like a big deal, but the basic principles were still the same. Pick good keywords and write good ads to keep Google happy with your high click-through rate (CTR). Send people to landing pages that convert to keep the client happy. AdWords was so easy that one guy could run a whole agency’s PPC portfolio.

The changes were almost imperceptible to me because I was working on multiple accounts every day and reading numerous industry blogs. But to the SMB owner, Google AdWords was evolving faster than a virus in a sci-fi movie.

The Interface

AdWords started beta testing a new interface in November 2008. They expanded the beta during the first part of 2009, and on July 30, 2009 they said “Bye, bye, beta.” Personally I didn’t mind the new interface, but for someone unfamiliar with AdWords, I can see how it had an intimidating appearance. Here is a screenshot from early 2009:

Look at how many options you have from this one screen:

• 6 top-level tabs, 4 of which have drop-down menus
• 6 more tabs inside the main campaign area of the page
• 2 scrolling menus in the left sidebar
• Other links scattered around the page

That’s a lot of options, and that was in 2009. Looking at the interface for one of my clients today, there can be as many as 10 tabs in the main campaign area, and many basic functions (like reporting and the keyword tool) have been moved in the last year or so. Not very friendly to the novice user.

New Features

If you visit the Official Google AdWords Blog you’ll notice that virtually every post is about something “new” or “improved.” Here’s a short list of new features AdWords has launched in past few months:

• Search Funnels
• Ad Extension
• Seller Ratings
• AdWords Campaign Experiments
• Remarketing
• AdWords Automated Rules
• Enhanced CPC
• Broad Match Modifier
• Call Tracking
• AdWords API

Each one of these features is powerful, but at a rate of nearly one major feature added per month, how is the SMB owner supposed to keep up?

Quality Score

Quality Score (QS) isn’t new in AdWords. It’s been around for years. However, the factors affecting QS change frequently, and even the best PPC managers in the industry struggle to decipher what exactly goes into the QS algorithm, how much weight each factor receives and how QS differs based on placement (since QS is calculated differently for search vs. display). Since this seemingly magical number influences if/where your ad will be displayed and how much you’ll pay for a click, you can’t just ignore it. But can SMB owners really invest the money/time necessary to hit a constantly moving target?

K.I.S.S

No matter how complicated AdWords gets, success will always depend on the basics.

1. What pain do your customers have? – Choose keywords related to this pain.
2. How can you fix their pain? – Write ad copy that offers a potential solution.
3. What do they do next? – Send users to a page that clearly explains how you’ll solve their pain and what they need to do (Buy Now, Sign Up, etc.).

While simple, this approach should guide all your AdWords efforts. Put yourself in the customer’s shoes by imagining that you have a problem and typed it into Google. You see multiple ads and search results. Which ones stand out? Is there an angle not being utilized? Go to your landing page and see how well it matches up with the search term and ad copy. Once you’ve mastered this basic process you can augment your efforts with new features, but keeping it simple will help your business benefit from Google AdWords.

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