12 July 2006

What should you pay for an AdWord?

I saw a post by an American colleague the other day which said - "never, ever, pay more than 5 cents for an AdWord". I can understand why people make these rules for themselves and indeed why they offer these rules as advice to others. The reality is that the cost of any AdWord needs to be factored into the cost of sale and if the cost of sale is too high then something needs to be adjusted. An expensive AdWord can make economic sense if the cost of sale is acceptable and the conversion rate means that the offer makes economic sense.

Lawyers who are bidding for expensive cancer-related keywords costing $50 per click need to do their maths carefully, but why should the analysis be more careful than someone who puts in a 5 cent bid for a high volume keyword which doesn't produce any lifetime income? The grim truth is that many of the people who are losing their shirts on AdWords, are doing so on relatively low cost keywords and they are buying volume because they have convinced themselves that some of that volume will convert into buyers.

Everything about an eCommerce campaign needs to be tested: the AdWord language, syntax and structure; the quality of the landing page; the quality of the offer; the primary sales process and the secondary sales process. Many people don't do enough testing and they fail to make the sales that they need to cover their costs.

As the AdWord market matures we can expect click prices to increase as more companies make use of the flexibility and speed of response of an AdWords campaign - where will my colleague be then?

"In times of change, learners will inherit the earth, while intellectuals will own a world which no longer exists"


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