Have a unique perspective in this article about the inner workings of Google AdWords.
It came out of an unusual opportunity to compare two very similar Google AdWords accounts. Here’s the story…
There’s a company (we’ll call them “Original Co”) that’s been running Google AdWords campaigns for at least 3-4 years. Then, about a year ago, the founders of Original Co had a difference of opinion and a few of the original partners left.
They immediately founded a new company (we’ll call them “New Co”) that offers the exact same service as Original Co.
During the transition, the New Co team had full access to Original Co’s Google AdWords account. So they knew everything going on in there…
…. how the account and campaigns were structured, the exact keywords responsible for getting the most clicks/conversions, the keyword match types being used, the bid prices, ad copy, landing pages, etc.
That info gave them a huge advantage when the time came for them to launch their own PPC campaigns.
A few key things to note here before we go any further…
… One is that the service these companies offered is in a pretty specialized niche market. So there is a fairly limited number of keywords to bid on.
The 80/20 Rule is definitely in effect in Google AdWords (you’ll often find that 20% of your keywords account for 80% of your results). And that is clearly the case here (though it’s probably closer to 99/1 in this market). In fact, around 10 – 15 keywords account for the lion’s share of the conversions in this niche.
The other important factor here is that the two businesses (Original Co and New Co) were very similar. There was little differentiation between them (or any of the companies in this niche, for that matter). Their pricing, how they operate, what they offer, etc. are all quite similar.
Which carries over to the ad copy in their PPC campaigns. Again, all pretty similar because there’s only so many ways to essentially say the same thing. So the Clickthrough Rates (CTRs) for the 2 companies’ ads (CTR being the biggest factor in Quality Scores in AdWords) are fairly similar.
So that’s the set up… two companies with basically identical offerings, similar ad copy/keywords/Google AdWords accounts going head to head against one another.
Now here’s the interesting part…
… representatives from these two companies still talk to each other because the separation wasn’t particularly messy and there were no hard feelings. So during a recent conversation, the topic of their AdWords account performance came up.
And what came out of that discussion was that New Co’s click costs were about twice what Original Co is paying per click for the exact same keywords. (And the ads in each Google AdWords account are ranking in about the same average position.)
So why is that?
What would one account have be paying TWICE as much for the same keywords?
The Original Co campaigns have been up and running for 3 – 4 years. So they have a long history of split testing ad copy, adding negative keywords, segmenting keywords and ad groups and campaigns to optimize for the most important keywords and much more.
And Google knows this. And they reward this.
Or, maybe more accurately, they “penalize” new campaigns.
When you set up a new campaign in AdWords, you’re essentially put in a sandbox. You have to prove yourself to Google…
… prove that you are willing to spend money, prove that you know how to optimize and grow your campaigns, etc.
And it takes some time to prove your worth.
But, when you do, you can end up paying MUCH less for clicks than your competitors.
A 2x factor in click prices is a very big deal.
It means New Co has to convert twice as many Google AdWords visitors on their site into customers…
… or they’d have to make twice as much money per customer in order to generate the same amount of revenue (from Google AdWords) as Original Co.
Moral of the story here?
Don’t get too upset if your Google AdWords campaigns don’t immediately take off. Time and persistence in AdWords can pay off in spades.