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Google AdWords Made Easy: The Essential Guide to Using Google Ads

AdWords

Aden Andrus

February 9, 2018

Google AdWords is the king of digital marketing platforms. Don’t believe me? How about a little social proof? Of every $3 spent on online advertising, $1 is spent on Google AdWords.

Why? Well, it’s simple. Businesses grow when they use Google AdWords.

For example, our first client here at Disruptive grew from 25 employees to 250 employees and brought in millions in profit—all thanks to Google AdWords. In fact, their Google AdWords campaigns were so effective that the company had a hard time hiring enough sales people to field all of their leads!

Since then, we’ve helped countless clients use Google ads to transform their businesses. Some clients have seen so much success that they’ve stopped advertising on any other platform while others have received millions in VC funding.

The point is, Google ads work.

If you’re considering trying Google AdWords, this article is for you. We’ll go over everything you need to succeed at Google AdWords advertising (including all the things Google doesn’t tell you). It’ll take some work, but if you follow the recommendations in this article, you should be well on your way to putting the power of Google ads to work for you.

Sound like a plan? Let’s get started!

Why Google AdWords?

Now, you might be asking yourself, “Why is Google AdWords so effective? What makes Google ads better than any other type of online advertising?”

The answer is fairly simple: Google AdWords puts you in front of high-intent, low-funnel traffic.

Unlike most forms of online advertising—like display advertising or social media marketing—people who see your ads on Google are looking for what you have to sell. When someone searches for “sandwich delivery” on Google, you don’t have to convince them that they’re hungry and that they should order a sandwich—you just have to convince them that your sandwich is the sandwich they want to buy.

Ideally, your site would rank well organically for every relevant Google search, but let’s be honest, if you’re not a big company, the SEO odds are not in your favor.

But…with Google AdWords, you don’t have to rank well organically to show up for relevant searches. Google lets you pay to play.

For example, here’s what shows up at the top of the search results when I search for “sandwich delivery”:

Google AdWords Example: Sandwich Delivery Ads | Disruptive Advertising

EZcater, Jimmy John’s and DoorDash all seem like good results for my search (I’m getting hungry just writing this), so there’s a good chance that I’ll click on one of these ads and make a purchase.

However, let’s delete the ads and take a look at the organic results for my search:

Google AdWords Example: Sandwich Delivery Ads | Disruptive Advertising

EZcater and Jimmy John’s don’t even show up on the first page. DoorDash does, but it’s at the bottom of the page, so I’m unlikely to make it to them with so many good options at the top of the page.

Without Google AdWords, EZcater, Jimmy John’s and DoorDash wouldn’t have a chance at winning my sandwich order. With Google AdWords, they’re my top options.

Essentially, running ads on Google allows you to “cheat the system.” You can rank for those high-value keywords that you wish you ranked for organically and reap all the benefits of showing up on the first page today. You don’t have to put months or years into trying to rank for a keyword and hope that everything works out—Google AdWords is a pay to win advertising platform.

How Google AdWords Works

To run a profitable Google AdWords campaign, you need to understand the keyword auction process. Google AdWords is a pay-per-click (PPC) advertising platform, which means you pay to drive traffic to your website and/or landing pages, but advertising on Google isn’t as simple as saying, “I want to pay X for every click.”

Unfortunately, you’re not the only business out there who wants clicks from Google users. To make sure that your ads are seen, you have to outbid the competition. The Google auction is a lot like any other auction, except that Google cares about more than just your money—they also take the relevance and quality of your ads into account.

So, if you create high quality ads, you can potentially pay less per click than the competition…and still outrank them! (more on that in a bit).

Unlike display advertising, where you bid to have your ads displayed on various sites across the web, AdWords advertisers bid on specific keywords (like “sandwich delivery”) in the hopes of having their ads show up when potential customers search for those keywords on Google.

Depending on the quality of their ads and their maximum bid, Google decides what order ads are displayed to users in and then it’s up to your ad to catch a potential customer’s eye and convince them to click.

The Auction Process

No, advertising on Google doesn’t mean you’ll spend the rest of your career sitting in an auction house listening to John Giannandrea (Google’s head of search) rattle off keywords at high speed.

As fun as that is to imagine, the Google keyword auction is a much more efficient process than that. Essentially, you pick the keywords you want to run ads on and enter the maximum amount you are willing to pay for a click.

That maximum amount is your “bid” for that keyword.

When someone does a search that includes one of your target keywords, Google compares all of the bids on that keyword and chooses who ranks where depending on how much they bid and how good their ad is. The good news is, since this is an auction, all you have to do is outbid the next lowest advertiser—you don’t actually have to pay your maximum bid every time someone clicks on your ad!

However, your maximum bid isn’t the only thing Google takes into account when deciding where your ad will rank on the search engine results page (SERP). Google also takes into account how well your ads and landing page match the intent of a search.

Quality Score

For AdWords to continue making money, Google users have to trust Google to guide them to relevant content. This applies to both organic and paid results, but we’ll leave Google’s SEO theory for another day.

When it comes to paid advertising, Google is sticking its neck out a bit for the advertisers. If your ad gets a lot of clicks and your website fails to deliver, that violates users’ trust in Google. However, to make money, Google needs people to pay for clicks, so they have to risk that some ads will let people down.

To mitigate this risk, Google assigns a quality score to ads. The point of quality score is to encourage advertisers to maintain user trust. A high quality score means that your advertising fits Google’s business objectives, a low score means you are violating user trust.

If your ad is good, Google rewards you with a lower cost-per-click. If your ad is bad, Google punishes you, hopefully to the point where you remove or change the trust-breaking ad. Even if you leave the ad up, Google charges you a high enough premium for a low quality score that it offsets their risk of losing some user confidence.

Quality scores range between one and ten (ten is the best, one means your ad and/or landing page need some serious work). New keywords or keywords that haven’t had any clicks for a while have a “null” quality score, which just means that Google is waiting for more information before they assign you a quality score (no penalty or reward).

Then, when your keyword is up in the auction, Google adjusts your “effective” maximum bid based on your quality score. This image from Wordstream does a good job of illustrating how this works.

As you can see in the example above, Advertiser I has a quality score of 10, which turns their max bid of $2.00 into an “effective bid” of $20 (Google hasn’t ever told us exactly how this process works, so this is just an example to help you understand how max bid and quality score interact to produce ad rank).

In contrast, Advertiser II bid $4.00, which should beat Advertiser I’s bid of $2.00…except for the fact that Advertiser II’s quality score is only 4, so their “effective bid” is $16.

As a result, Advertiser I outranks Advertiser II and pays less for each click than Advertiser II—all because of their great quality score!

Optimizing Your Quality Score

Clearly, it pays to have a high quality score, so you’ll want to make sure you’re doing what you can to optimize your quality score. Essentially, Google assigns a quality score based on three related factors:

  1. Ad relevance
  2. Expected clickthrough rate (CTR)
  3. Landing page experience

Each of these factors is fundamental to how Google approaches advertising, so let’s take a look at them in more detail.

Ad Relevance

As we mentioned earlier, Google puts a lot of time, money and effort into ensuring that its search algorithms deliver highly relevant results. Google wants advertisers to do the same thing, so Google evaluates every ad and landing page to see if they are relevant to their target keyword.

For example, let’s take another look at our “sandwich delivery” search results. Which ads seem like a good match for our search?

Google AdWords Example: Sandwich Delivery Ads | Disruptive Advertising

Reading through EZcater’s ad, it doesn’t really seem all that relevant, does it?

“Deliver Caterers”? Honestly, I don’t know what that means (not good, confusing a potential customer is not a great way to earn clicks), but neither “Deliver Caterers” nor “Place Your Catering Order” sound like “sandwich delivery”, so I’m not likely to click on EZcater’s ad. It’s just not relevant to my search.

Odds are, while EZcater is in position #1, their quality score is probably terrible and they are paying way more than they need to for any clicks on their ad.

In contrast, take a look at Jimmy John’s ad: “Jimmy John’s Sandwich Delivery | Freaky Fresh. Freaky Good.” Sandwich delivery? Sounds like what I’m looking for. Freaky fresh and good? What more can you ask for?

Clickthrough Rate

Unlike EZcater’s ad, Jimmy John’s ad makes it clear that if you want a good sandwich delivered fast, they are the restaurant for you. Although DoorDash’s ad does say “Sandwich Delivery” in the headline, it’s pretty clear from the rest of their ad that I’ll still have to sort through all kinds of restaurant options just to get my sandwich.

Jimmy John’s ad is a lot more relevant, so it probably gets the majority of clicks from people who search for “sandwich delivery”.

Clickthrough rate (CTR) is the number of clicks your ad gets divided by the number of impressions (how many times people saw your ad) it gets. Since more relevant ads usually have a higher CTR, Google AdWords uses the CTR of your ads as an automated measurement of ad relevance.

Clickthrough rate isn’t the only factor Google takes into account when deciding your quality score, but it is the most important factor.

Essentially, Google compares your actual CTR to what Google thinks your CTR should be (using their internal data). If your CTR outperforms their expectations, you get a better quality score. If your CTR is lower than expected, you get a ding against your quality score.

Landing Page Experience

Of course, it’s possible to have a highly relevant ad with a great CTR that points to a completely irrelevant landing page. Your landing page is the first place a user ends up after they click on your ad, so Google wants to make sure that your landing page is exactly what a searcher is looking for.

Here again, Jimmy John’s does a great job with their landing page experience. You click on their ad and end up on a page where you can start an order…exactly what someone interested in “sandwich delivery” is after!

Compare that with EZcater’s landing page:

No ordering options…no menu…no sandwiches! Does this seem like what we were looking for? Not by a long shot!

This landing page is for breakfast catering, which has nothing to do with “sandwich delivery”. A landing page experience like this will have potential customers hitting the back button so fast that even Jimmy John’s would call it “freaky”.

Overall, Jimmy John’s ad copy and landing page is so relevant to their target keyword that even though it is in position #2, there’s a good chance that they pay a lot less per click than EZcater (and probably less than DoorDash does for clicks in position #3).

In a nutshell, this is how Google AdWords works. You bid on a keyword that you think a potential customer would use to find your business, product or service. Then, based on how good your ad and landing page are, Google assigns it a quality score and combines that quality score with your maximum bid to determine your ad position and how much you’ll pay per click.

Getting Started with Google AdWords

Google wants your money, so they make it pretty easy to set up an account and start advertising on AdWords. All you have to do is visit Google AdWords and hit ‘Start now.’

From there, you’ll be asked for your email (preferably a Gmail account) and the URL of your site. Easy enough, right?

At this point, you’ll have a variety of campaign types to choose from:

In this article, we’re going to stick with text ads on the Search Network (for the reasons we mentioned at the beginning of this article), but if you’re interested in running some of these other types of campaigns, check out the links below:

  1. Display
  2. Shopping
  3. Video
  4. Universal App

To get started creating your first text ad campaign, click on the “Search” option and let’s get started!

Step 1: Choose a Goal

Whether you’re advertising on AdWords or anywhere else, every good online marketing plan starts with a goal (or two, or three…). Knowing what you want to get out of your campaigns will guide every decision you make in AdWords, which is why the first thing Google AdWords asks you to do after you’ve picked a campaign type is to pick a goal.

That being said, not all goals are created equal. While none of these goals are inherently bad, they each focus your advertising on a different step in your buyer journey. Depending on what you’re trying to achieve, any of these goals could work, but it’s important to understand what each goal tells you about your campaigns.

Website traffic

To put each of these goals in perspective, let’s run through a hypothetical scenario where you are a partner in a law firm that averages $3,500 in revenue per new paying customer with a 50% profit margin.

The data for your top 5 campaigns looks like this:

Based on these results, Campaign 3 seems to be the clear winner—it has the most clicks, best click-through-rate (CTR) and the lowest cost-per-click (CPC).

Having a lot of traffic is nice, but lots of traffic doesn’t necessarily mean lots of new clients for your firm. If campaign 3’s clicks are all coming from people who searched for “lawyer jokes”, not “law firm near me”, it’s not a good campaign—no matter how cheap the clicks are!

Leads

A lead is someone who has expressed an interest in your business. Maybe they submitted a form on your site, called you or even chatted in on your site (we call actions like these that move people through your marketing funnel, “conversions”).

Not every business wants leads, but unless you’re selling a product online, driving leads is probably a reasonable goal to consider.

For our hypothetical law firm, leads are critical, because a new client isn’t just going to sign up online. They want to meet with their prospective lawyer and get feedback about their case before they sign a contract.

With all that in mind, here’s what it might look like if our campaigns above were focused on driving leads, not web traffic:

Despite its relatively poor conversion rate (CR), Campaign 3 still seems to be outperforming all the others. In this case, the cost-per-click was low enough to overcome the effects of the low conversion rate.

Campaign 4, however, continues to take last place. Between its lousy conversion rate and high cost-per-click, it’s producing leads at nearly 9x the cost of a lead from Campaign 3.

All that being said, focusing on leads does not guarantee that our campaigns are profitable. If those leads aren’t turning into new clients, you could be wasting a lot of money.

Sales

Unlike the previous two goals, having sales as your goal means you are optimizing your advertising to produce the ultimate goal of all marketing: new revenue for your business. One common metric that advertisers use to measure the effectiveness of their campaigns is return-on-advertising-spend (ROAS).

Here’s the formula for ROAS:

(Revenue – Cost) / Cost

Easy enough, right? You take the total revenue generated by whatever marketing component you want to evaluate, subtract what you paid to run your ads and divide the result by your ad spend.

ROAS allows you to see how much new revenue you can expect to get from investing in an AdWords campaign. Let’s take a look at the sales and ROAS data for our imaginary law firm:

Looking at this information, it suddenly becomes clear which campaign is actually benefiting the company the most.

Campaign 3, our winner for traffic and conversion metrics, has the worst sales rate (SR) and the highest cost-per-sale (CPS). Even more importantly, since fulfillment eats up half the revenue from a sale and the ROAS for this campaign is only 92%—the firm is losing money on cases from this campaign.

On the other hand, Campaign 4, which had looked like our biggest loser, is actually the most profitable campaign.

Perhaps traffic to Campaign 4 is lower in the sales funnel than traffic in Campaign 3, which is why cost-per-click (and the sheer number of clicks) was lower. Maybe the landing page for Campaign 4 traffic does a better job of filtering leads, resulting in a lower conversion rate.

Regardless of the specific reasons for Campaign 4’s profitability, this sort of scenario is not uncommon, which is why ROAS data is so important. Based on our click and conversion data, we might have made sweeping changes to Campaign 4 or put a lot more budget into Campaign 3—both of which would have been bad decisions.

Now, it might seem like sales is the only goal you should have for your campaigns, but things are rarely that straightforward in online marketing.

For example, if no one knows about your business, you might want to run an awareness campaign to drive traffic to your site , but that campaign probably won’t produce a lot of sales. On paper, it might look like a waste of money, but in 6 months, when people have a need and remember that your business can help them, you’ll might be glad your goal was traffic, not sales.

This is why it is so important to pick your goal before you launch a campaign. If you know your goal is traffic, you may want to target different keywords, write different ads and/or use different landing pages than you would if your goal was sales.

Long term, your goal should always be sales, but for specific campaigns, you may want to focus on driving traffic or leads.

Step 2. Pick Your Settings

Once you’ve decided what your advertising goal is, it’s time set up your campaign.

Pick a name and language for your campaign and then select where in the world you want your ads to be displayed. Unless your target audience really is everyone in the US/Canada or the whole world, I recommend using the “Enter a location to target or exclude” search bar.

Location Targeting

Here, you can enter specific locations and then pick from a list of targeting options:

Here, AdWords gives you the ability to target or exclude certain locations, so if we wanted to target all of Florida except for Sarasota, that’s an option.

This is important, because lot of companies target everyone in a state, region or country without realizing that they don’t actually want to pay for clicks in that area. For example, if you’re a dentist working out of Tampa, FL, you probably won’t be able to convince someone in Sarasota to drive for an hour to get to your office—no matter how good your ad is!

In fact, you might not even be able to get a St. Petersburg resident to drive all the way across town to your office, so even running ads in the greater Tampa-St Petersburg area might be a waste of money. So, while being smart about your location settings may not be particularly exciting, it’s well worth your time.

Step 3. Decide on Your Budget

The advertising budget you choose can have a big impact on the bidding strategy you want to use, so we’re going to skip the “Bidding” section in Google’s setup process for a minute to talk about your budget.

Often, marketers and business owners pick their AdWords budget on a whim or based on what they feel like they can afford at the time. This is a real shame because careless budgeting often leads to ineffective campaigns…or a lot of wasted ad spend.

To spare you both of those problems, let’s take a little time to figure out an AdWords budget that will help you achieve that business goal you just picked (since sales is the ultimate goal of your Google ads, we’ll talk about budgeting for sales in this section, but these principles apply to traffic and leads campaigns, too).

Here are 3 important questions to answer as you plan your AdWords budget:

1) Who Am I Marketing To?

To figure out your budget, you need to know who you’re marketing to and how much a new customer is worth. If you’re like most businesses, you have several different types of customers, so you’ll want to think about each of these “buyer personas” separately.

For example, say you are marketing for ACME Widgets, the world’s premier widget manufacturer. Your average customer has a lifetime value (LTV) of about $24,000 (widgets are good money, eh?).

If it costs you $50,000 to get a new widgets customer on AdWords, you might be tempted to think, “Why bother with AdWords? It’s a waste of money!”

And, you’d be right…if every ACME client was worth $24,000.

However, ACME has three very different types of client that are interested in 3 different lines of widgets:

All of a sudden, if AdWords is producing new “Infinity Izzie” sales at $50,000 a pop, you’ve got a gold mine on your hands!

Knowing who you are marketing to and how much they are worth to your company is a critical part of creating an AdWords budget. Otherwise, you can end up underfunding a campaign that could be driving the majority of your value and overspending on an unprofitable campaign.

So, if you don’t have buyer personas, don’t know the lifetime value of your personas, or are uncertain about what percentage of your sales come from each persona, now’s the time to figure it out!

How Will My Buyer Personas Find Me?

Most of the time, business owners and marketers use a “one size fits all” approach to calculating how much it costs to bring in a new customer.

For example, if ACME spends $400,000 on AdWords and generates 90 “Classic Cindy” sales, nine “Pro Paul” sales and one “Infinity Izzie” sale, here’s how their acquisition cost would break down:

With this model, it looks like ACME loses money hand over fist on “Classic Cindys,” but more than makes up for it on “Infinity Izzies.”

However, this model also assumes that “Classic Cindys,” “Pro Pauls,” and “Infinities Izzies” all come through the same campaigns at the same frequency. If you think about it, that doesn’t make a ton of sense.

Is “Infinity Izzie”—an enterprise customer who will drop $1.59 million on widgets—likely to search for the same things on Google or respond to the same ads as “Classic Cindy”? I highly doubt it.

Maybe most “Classic Cindy” sales come through keywords like “cheap widgets”. “Pro Pauls” search for “business-class widgets”. “Infinity Izzies” come from search terms like “custom enterprise widget supplier”.

If that’s the case, here’s what ACME’s actual acquisition costs might look like:

Now, your buyer personas may not be quite this straightforward, but with a little effort, you should be able to connect your marketing dollars with the buyer persona sales they produce. Once you know that, it should be fairly easy to identify the keywords you need to target and how much you can afford to spend on each persona.

How Much Can I Afford to Spend to Generate a New Customer?

At this point, we have all the information we need to calculate ACME widget’s marketing budget, all we have to do is run the numbers.

Since this is kind of a pain to do by hand, I’ve created a free calculator to help you out:

[calculoid id=”19629″ show_title=”0″ show_description=”0″]

To use this budget calculator, simply enter the monthly AdWords budget you’re considering, how much new recurring revenue you would like AdWords to produce in 12 months, fill out the fields for up to 4 buyer personas and we’ll take care of the rest.

You can drag the sliders next to each buyer persona to see how different numbers of monthly sales affect your results. Alternatively, try playing with your acquisition cost, order value or # of purchases to see how optimizing each of these elements will affect your AdWords budget.

If you have a fairly simple customer base and you only want to look at only one buyer persona, simply drag the sales bars to zero for buyer personas 2-4.

Once you’ve figured out a budget that makes sense for this campaign, divide it by 30 and enter the result as the average you want to spend each day in the “Budget” section. In a given month, AdWords won’t spend more than 30 times more than your daily average, but it might spend more or less in a specific day.

If you want Google AdWords to spend your budget as quickly as possible (you’re advertising morning coffee, for example), click “Delivery method” and switch to “Accelerated”. Otherwise, it’s time to select your bidding strategy!

Step 4. Select a Bidding Strategy

Your bidding strategy dictates how you want Google to spend that budget you just worked so hard to figure out. Goog