Having had the opportunity to look at, review and/or re-organize hundreds of AdWords accounts, I have seen mistakes of many kinds in accounts built and managed by beginners and amateurs (if I may use the word) which have cost business owners a lot of money or (sometimes even worst) lost opportunities
This is NOT to say that all beginners do big mistakes, for sure not, but my experience as a professional consultant have made me discern a few patterns and recognise some pitfalls that befinners/amateurs often seem to fall into.
And this article will list what in my experience seems to be some common and most costly ones, in order for others to use it as a checklist and be able to avoid them.
What is a cost?
A cost if, of course, when you spend money. $100 dollars spent is a cost of $100. $100 spent that have accrued 10 conversions makes a cost per conversion of $10. If that is too much for your business to be profitable, than you have too high costs (overall or per conversion), and have spent money unwisely.
But a cost can also be an opportunity cost:
Simply stated, an opportunity cost is the cost of a missed opportunity. It is the opposite of the benefit that would have been gained had an action, not taken, been taken—the missed opportunity. (INC.com)
For example, had you managed you account better and spent your limited budget in a smarter way, or spent more money if you could get more sales that way, you had would have had a better financial result - and that is an opportunity that you lost.
The accounts that I have reviewed during my career have suffered at least as much from over-spending as targeting unwisely and under-spending, not reaching the people they could have and really should have reached, but did not, because money was spent elsewhere or not at all.
1. Using too broad keywords
Not learning how keyword match types work is probably very common - at least amongst advertisers with smaller budgets - and can be very costly. I´ve seen many accounts using only broad match, and first thing I do when getting my hands on a new account is running a search term report to show the advertiser what search queries actually triggered their ad and was ensued by a click.
As many of them thought their broad match keyword only showed an ad when someone searched for just that (mistaking it for an exact match), this is often an eye-opener and the list of words and phrases with low or no relevance to what they offer very long.
2. Targeting (or not targeting) the display network
I have found that especially accounts with very low maintenance or campaigns created a long time ago often are targering the Google display network, often without the owner/manager being unaware of this.
Advertising with keywords on the display network (contextual matching) is different from search advertising - and generally it is much more difficult to get good targeting. Thus conversion rates are usually lower and conversions more expensive.
If the account also hasn´t setup conversion tracking, it´s basically impossible to know if conversion costs for display network ads are low or high. But to my experience, unconscious and unattended display network advertising can be very costly and easily swallow a large portion of a budget.
At the same time, no doubt, opportunities with display advertising are huge, and advertisers who only use search and never even give display a try may have a great opprtunity cost.
I do encourage everyone to give it a shot, but it needs to be done with care and attention.
More in this video here.
3. No conversion tracking
To set up conversion tracking using the AdWords tracking pixel or Goals in Google Analytics doesn´t cost anything. But in order to fine-tune your advertising it´s a necessity, and it´s principally impossible to know which part of money spent is giving results otherwise.
So if you don´t use conversion tracking in any form I´d presume you are over-spending. But it can also be that you are spending too little and under-performing, not daring to increase bids and budgets (in certain segments) and thus exploit great opportunites, just because you don´t know and can´t measure results.
4. No ad optimization
Are you sure your ads can´t perform much better? Have you tested them? It´s so easy, and so cheap - just add some more to your ad group and let them run simultaneously.
Ad optimization have 2 great benefits when it comes to costs:
a) by rotating your ads you can find out which ones are getting a higher CTR, and a higher CTR means higher Quality Score, which means higher AdRank and lower CPC (all things equal)
b) higher CTR also means more clicks, which means more potential customers visiting your websites. So if you have a CTR of let´s say 5% when you really could reach 7.5% by optimizing your ads, that would mean a 50% increase in clicks and hopefully also sales. So the opportunity cost of not optimizing your ads can be huge.
5. No or few ad extensions
Using ad extensions is part of optimizing your ads, and using them will probably effect your CTR. But the use of ad extensions also had direct positive effect on Quality Score, thus on your cost per click.
Although I believe many beginners use ad extensions to some extent (all are encouraged to configure them when setting up a new campaign), they often seem to be left unattended for a long time and I seldom see accounts where they are used to their full extent.
6. Bids too high (or too low)
Working with an auction system like AdWords bidding (and the analyses proceeding it) is fundamental, but can be complex, tricky, demanding and resource-consuming.
To be able to know what to bid for a keyword (or placement, or whatever targeting you are using) you need to have set up conversion tracking of some kind. If you don´t measure conversions and cost per conversion, bidding will be always a guess work, lead by gut feeling rather than data.
So what to bid? Well, that depends, but basically you need to figure out how much you are willing to pay per conversion (per keyword, or cluster of keywords) and you´ll have to make calculations for that using your numbers for conversion rate, margins (per product) and sales-volume.
And you need to be rather careful when you make these calcuations, because paying too much for a conversion makes your business less (or even un-)profitable, and paying too little means that you are not getting as many conversions as you could, which clearly is an opportunity cost and effects your bottom line.
Of course you want as cheap conversions as possible. But very few cheap is actually also not good, ´cause selling little won´t make you much money.So you really wannna find a balance between volume and cost, and you can do that by fine-tuning you bidding.
You could consider many aspects when you put your bid: seasonality, users device and geographic position, time of day or weekday, keyword match type, placement url.
And in order to be as confident as possible that you´re putting the right bid at the right time for the right user, you should use tools such as the attribution modelling tool and multi channel funnel.
Too low bids could mean your ads are not showing as often as they should, or in as high position as they ought to, which means fewer clicks on them, thus fewer sales or leads for you.
You´re leaving money on the table.
A too high bid gives you a conversion cost that is higher than you can actually accept. Except getting you too expensive conversions, the effect of bidding too high may also be that low-quality, unprofitable clicks and conversions are consuming your limited budget.
7. Budget too high (or too low)
Obsiously, if your targeting methods (such as choice of keyword) are not good, giving you very expensive conversions for money spent (making your business unprofitable), any budget would be too high, because money is just wasted. In that case, setting a lower budget will save you some money, but not solve the main issue: your targeting and/ord bids.
But if you have a profitable campaign running with a too low budget hitting the roof every day, is equally bad, costing you a lot in terms missed of opportunities because your budget was spent on clicks of lower quality (profitability).
Not having bids and budget aligned can be a very costly mistake. And peoples reaction when they notice that they´re reaching their budget limit often is to increase the limit. But if you´re not really profitable (or don´t know if you are), it may very well be a better option to decrease bids, at least for some keywords, so that you get more clicks for your bucks, which could compensate for the not so good targeting and your low conversion rate.
So, make a calculation to find out what your highest acceptable cost per conversion is, check your conversion rate (for related keywords) and set you bid in accordance with that.
The formula for this is:
conversion rate X max conversion cost = max cpc
(as actual cost per click is often somewhat higher than your cpc, your bid could probably be higher than your “max cpc”).
9. Not using negative keyword or excluding placements
Unless you´re only having exact match type keywords and managed placements with specific url:s, risk is high you´re showing your ads for at least some search queries that are not really related to what you offer. If you use broad matched keywords that risk is even really high (for example: you sell tennis shoes, are using the keyword tennis clothes and your ad is shown when someone searches for tennis shirts).
I´ve seen accounts that could have saved tens of thousands of dollars per year just by adding negative keywords. So take your time and run a search term report regularly and add your negatives in order to increade your profitability.
The same thing applies to placements (or any other targeting method) when you´re advertising on the display network.
10. The cost of not paying attention
AdWords can be a rather resource-consuming system, both in terms of money and in time and effort. But the cost of not spending the time it needs to keep you updated and have an account that is fine-tuned and takes advantage of opportunities to promote your business - that cost can be be immense taking account both the waste of money and that competitors will take your potential clients instead.
So start working smart, devote some hours every month to AdWords, to keep your cost low and grab more of the opportunities that are out there!
Self-taught webmarketer with a PhD in Intellectual history (focus on german philosophy and social sciences 1800-1900) Using AdWords since 7 years. Today working as an SEM-consultant. AdWords and Analytics Qualified.
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