Vilfredo Federico Damaso Pareto was born in Paris in 1848 and became known for his contributions to the worlds of economics, engineering, sociology, political science and philosophy, so he made good use of his time. He is possibly most famous for his discovery that income follows a distribution where a large percentage of income is received by a small percentage of the population (don't we know it!).
This observation was found to apply to a surprising range of distributed data sets, so much so that it became known as the Pareto Principle. To greatly simplify this principle, it can be said that for any given set of data, roughly 80% of the effects come from just 20% of the causes. While Vilfredo spins in his grave over my simplification, let's look at AdWords...
"Vilfredo Pareto". Licensed under CC BY-SA 3.0 via Wikimedia Commons
I review a great many Accounts and one of the most common things I see in those Accounts is that there are usually far too many Keywords. Many advertisers appear to operate under the impression that they need to include Keywords that can cover every possible search term that might imaginably be relevant to their product or service. This isn't just the concept of "long-tail" Keywords but rather an attempt to draw people in who may only be peripherally interested in the product, using words that perhaps are only vaguely related to the core business. In most cases there is the potential for a conversion to occur for these terms, but in reality, those conversions hardly ever happen. We're not talking small numbers here; many of these Accounts contains tens or even hundreds of thousands of Keywords and a couple many more than that...
So what does the Pareto Principle have to do with Keywords? One Account I reviewed last year contained more than 3.3 million active Keywords (yes, that's just the enabled ones in enabled Campaigns/Groups). I think anyone is likely to suggest that's too many, but it becomes even more interesting when you know that in the 12 months prior to my review only 41,000 had resulted in a conversion of any kind, that's just 1.2%. In effect, that company could (probably) have paused 98.8% of all their Keywords and made the same income. These figures are so extreme they're not even really a good fit for the Pareto Principle, but I find that generally speaking the idea behind this principle holds true:
Where an Account contains a large number of Keywords, usually only 20% or less of those Keywords are responsible for 80% or more of the income.
So, what are the problems associated with running an Account where most of the Keywords do not appear to be contributing to the cause?
- Cost: Obviously, if the 80% of non-converters are receiving clicks, that's just money down the drain. If they're receiving anything close to 80% of the clicks, that's horrible. If that were the case, your ROAS (Return on Advertising Spend) could be five times what it is currently. Of course, in reality, the 20% will probably be responsible for a larger proportion of the spend, but any spend on the 80% is an opportunity for improvement in ROAS.
- Time: Time is money and managing AdWords effectively takes time. I shudder to think at the enormity of the problem of effectively managing even many tens of thousands of Keywords, let alone millions, and the effort required is probably largely wasted if 80% of those managed Keywords are actually returning no income. Even large scale tools like Scripts and the API will require a lot of work to manage large Keyword counts (in fact, at the time of writing Scripts can only process 50,000 Keywords in a single iterator and with more complex operations will time out long before this limit is reached) and for very large counts the cost of developing automated solutions could be substantial.
- Flexibility: When your Accounts are fit and lean, they are easier to work with for experiments and short-term promotions. It's easier to keep track of changes and analyse their effects, easier to adapt targeting for locations, devices and demographics, create short-term promotions and Ad changes, etc.
- Adapting to change: We all know the AdWords program itself can change and some of those changes require user action. If your Account is efficient, those change may be trivial, if it is bloated and unmanageable, a large change to operation could require weeks or months of additional work.
The only real "upside" to such large Keyword numbers is the opportunity for "assists". It may be that some Keywords do not convert frequently but do assist frequently, and you should check for such situations. However, I'd bet those assists will still be trivial compared to the 80% that convert directly.
So, how can you check your Account? Fortunately, it's very simple.
- Log into your Account and ensure you're showing only enabled Campaigns, Ad Groups and Keywords, then click the Keywords tab.
- Select a good long date range - at least 6 months probably. Make a note of the total number of Keywords (rows) - look at the bottom right of the screen.
- Create a new filter, and choose Converted Clicks >= 1 (or another filter, depending upon your measurement of success). Apply this filter and make a note of the new number of rows.
- Divide the second number by the first, and multiply by 100 and that's the percentage of Keywords that have converted in your time period.
Whatever figure you find, consider what it means and play with the filters. It may be that you have a lot of Keywords that have converted just once, with a much smaller number that have converted more than 10 times, so spend some time examining various options.
What do I do if I find I should pause 80% of my Keywords?
The most important thing is not to make any rash decisions. Even if you are sure you can pause these Keywords, you need to ensure you have a way back to the previous state before you do so, and the capability to measure the effect closely for a trial period after the change (so don't do it on a Friday afternoon and then go on holiday for two weeks).
I'd suggest using Labels to label each Keyword, Ad Group and Campaign you pause (bear in mind that pausing all these Keywords may cause some Ad Groups to have no enabled Keywords, and possibly some Campaigns to have no "enabled" Ad Groups). You can then use the Label to recover all these elements and re-enable them if the experiment fails. You may wish to use several Labels; one for those you're absolutely sure can be paused, another for those you're not sure about, and another for those with assists, etc.
Take a look at your Account now and do this analysis and if it turns out only 20% of your Keywords are creating 80% of your conversions, thank Vilfredo Pareto for spotting this trend in a program that was developed almost 80 years after his death.
AdWords Management Consultant, a Google Partner, based in Dorset, UK, but working worldwide... I'm very proud of having been a Top Contributor for AdWords since 2006 and enjoy being able to help others improve and develop their AdWords usage. I now work primarily as an AdWords Manager & Consultant. You can read my eBook "AdWords Preschool", just search on Amazon.
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