As explained in my last blog post about search engine optimization (SEO), 70% of people click on an organic search result, and 30% of people click on a paid link. These are differentiated on Google by where each result is displayed. The results at the top of the screen, and to the right of the page are usually ads, and are denoted by a small “Ad” indicator (as shown below), or an orange “Ad” button to the right of each ad’s title. In the picture above, the advertised results are highlighted in red. I’ve noticed that the way the ads are denoted have changed over the years, but if you Google “Shoes” right now, you will see the orange “Ad” button.
Let’s pretend you are a business that wants to have an ad on Google’s search results pages. First, you would need to get a Google Adwords account, and determine a budget for the campaign. Google will let you set a max amount of money you want to spend on your campaign, and ensure they don’t charge you more than that. Adwords uses a Pay-Per-Click (PPC) model, which means your ad could show a million times and let’s say that only one person clicked on it. That means you are only paying for that single click. How much are you paying? That depends on how much you bid for each keyword.
For each keyword that a user wants to have their ad shown on, Adwords users can bid a certain amount of money for the top, center spot. Let’s say the top bidder bids $5 per click. The other bidders bid $2.50, $2.20, $1.80, and $1.25. Now, the person who bid the least amount ($1.25) receives the least coveted ad spot- the lowest on the right hand column for the amount they bid ($1.25). The rest of the bidders get charged less than they bid per click, at an incremental dollar value higher than the lowest bidder. Let’s say that incremental value is $0.25. The five bidders in order would be charged $1.25, $1.50, $1.75, $2.00, and $2.25. The highest bidder bid $2.50 and will be charged $2.25 per click based on the demand of the keyword chose.
The placement of your ad does not depend only on the amount a user bids. It also depends on the quality score of your ad. Quality scores are based on how relevant your ad is to the keyword, the quality of the landing page, and whether people click on your ad when they search for a keyword. or example, if I searched for the keyword, “hotel” an ad for shoes would most likely not show up. Google wants to create a fantastic user experience, and wants the ads they show to be relevant to what their users are searching for. Google is monetarily incentiveized for user to click on ads they show. In a PPC model, they only generate revenue when someone clicks on an ad, and users are much more likely to click when it is a relevant ad. According to the Adwords Fundamentals Binder, “You’ll always pay the lowest amount possible for the best position you can get given your Quality Score and bid” so think of your bid as the maximum amount you want to pay per click, and focus on creating the best ad and keywords possible.
One company, Powerenz, has had success using SEM to increase their online retail sales. As a startup, it is hard to get your name out there, and to reach the first page of the organic search results. Using SEM, Powerenz was able to become known to potential consumers, and increased their rank on organic search results.
Remember how 70% of users click on the organic search results, and only 30% click on the sponsored ads? It is important to remember this, and employ a combination of search engine optimization (SEO) and search engine marketing (SEM) in your marketing mix. Organic search results (which are effected by SEO) vary day-by-day, and are hard to control. One day, a site could be the number one result when a certain keyword is searched, and the next it could be below the fold…. Or worse, on page two of the search results! Using SEM will cover this situation, and ensure that your site is linked somewhere on the first page, even if it does show up as an ad.
The best times, will be when your page is number one of the organic search results, and on the page as an ad as well. This increases visibility, increases click-through, and increases conversions.
The worst times, will be when a competitor is show two times on the first search results page, and you are nowhere to be seen. Avoid these bad times by using both SEM and SEO strategies, and the best of times will be right around the corner.