Category Archives: adwords tips

What is a Good Average Position for your Business?

Google defines Average Position as “A statistic that describes how your ad typically ranks against other ads.”

In other words, Ad Position and Average Position tell where your ads are being displayed on the Google Search Network, Google Display Network or Google partners network.

Google provides 8 ad positions on a SERP. Google numbers these ad positions from 1 to 8, 1 being the top-most position above all the other results. And 8 is the bottom-most position. Your ad can be anywhere between 1 to 8. It can also be on the second SERP where the ad positions are numbered 9 to 16.

How Google determines Ad Position?

Ad Position of an advertiser’s ad is determined by the Ad Rank of that particular ad. Google defines your Ad Rank as the product of your Max CPC Bid and the Quality Score of the keyword that triggered an ad.

Ad Rank = Max CPC * Quality Score

What is Average Position?

It is simply the mean average of ad positions of an ad, keyword, ad group or a campaign. It is also important to note that Average Position statics are available for ads and campaigns as a whole too.

A working example to calculate Average Position –

Let’s say a search query triggered your a hundred times ( hundred impressions) in the last three hours. Google positioned your ad at 1 twelve times, at 2 twenty-three times, at 3 twenty-seven times, at 4 seventeen times and at 5 twenty-one times.

Ad Position No of Impressions
1 12
2 23
3 27
4 17
5 21
Total Impressions = 100

Avg position =(Ad position * No of Impressions) ÷ Impressions

{(1*12) + (2*23) + (3*27) + (4*17) + (5*21)} 100 = 3.12

I have used a very simple formula to calculate the Average Position. We calculated your Average Position to be 3.12  in the last three hours.

Interpreting Average Position –

From the example above, we can see that the Average Position need not necessarily be an absolute figure like 1 or 2. It is mostly a decimal number like 3.12 (from above). What it means is that your ad got the most impression at Ad Position 3.

How to access the Average Position data from your AdWords account?

Average position as a metric is available in almost all views in AdWords including campaigns, ad groups, keywords and ads. One recurring requirement is to observe whether average position changes during the day. You can see that by going to the dimensions tab and segmenting the data by Hour of day.

Average Position

More about Ad Position and Average Position –

Till now we focused majorly on ad position in respect to AdWords Search Network. There is a different approach to evaluating the position of your ad listings. Advertisers very popularly call this “Top vs Others”.

To get the data about your ad placements, you can segment your AdWords tables. In the segments tab in your campaigns, select Top vs Others.

Average Position

Here is what Google says about Top vs Others segmentation. “Apply the “Top vs. Other” segment to your statistics tables to find out where your ad appeared on Google’s search results pages and search partners’ pages.”

To add, Google has also provided guidelines to help interpret the data from Top vs Other segmentation. There are five different terms and each of them is explained for easier understanding.

  • Google search: Top – Your ad was displayed above the organic Google search results.
  • Google search: Other – Any AdWords text ads that don’t appear directly above Google search results are categorized as “Google search: Other.”
  • Search partners: Top – Your ad was displayed above the partner’s organic search results on a search partners’ page.
  • Search partners: Other – Ads that don’t appear directly above partner search results are categorized as “Other.”
  • Google Display Network – Your ad ran on the Google Display Network.

All of this is a lot of information, and Average Position is a topic that gets deeper as you dig. Let us consolidate on what we already discussed in the article.

  • Ad Position is dependent on Ad Rank.
  • Google determines Ad Rank using Max CPC Bid and Quality Score.
  • Average Position is the mean average of impressions per Ad Positions.
  • Data related to Average Position is available in under the dimensions tab.
  • Advertisers also use Top vs Other segmentation to evaluate Average Position.

What is a good Average Position?

We have learned different approaches to segment and collect the data. But what is a good Average Position? A good Average Position for your business is where you are making a positive ROI. It need not necessarily be #1.You can understand this when you look at the Cost-Per-Click and Conversions reports. The lower your CPC, the better. In contrast, higher the conversions, the best.

From customer insights, AdNabu suggests that an Average Position of 2 is idle for a balanced progress. Click-through Rate of positions 1 and 2 aren’t significantly different. But to retain the top position, advertisers might end up bidding higher. Unless the Quality Score of an advertiser is exceptionally better than the competition, pushing to get on the top isn’t cost-effective. Top position is no harm as long as it is not draining the budget. If the Average Position is >= 3, AdNabu suggests improving it.  

Moreover, instances where a higher position with lower conversions and a lower position with higher conversions are not new. In such cases, bringing down the position is a must to maintain a good return on the ad spend.

How to adjust Average Position?

To attain a higher Average Position you can either increase the bid or focus on improving the Quality Score. Likewise, to reduce the position, you can bid lower. Also, there might be a situation where Google Search: Top might be performing lower than Search Partners: Top or vice versa. These are a few optimization techniques to keep your Average Position good.

In conclusion, as we all already know, each keyword, campaign, AdWords account, and advertiser are different in their own way. What works best for one need not produce similar results. This blog post is aimed at equipping advertisers with an in-depth knowledge of Ad Rank, Ad Position, and Average Position. We hope that you have learned something new, and can make better decisions when optimizing your campaigns.

How is the new Enhanced CPC going to change the bidding game?

Enhanced CPC

A little about the basics of CPC and auctions –

To understand enhanced CPC (cost-per-click), let’s recap the concept of cost-per-click and how auctions work.

Cost-per-click is the bidding strategy in Google AdWords. Google, therefore, charges an advertiser only when a user clicks on their ad copy. The link in the ad copy redirects the user to the landing page. Google rules out the cost for displaying the ad in this bidding strategy.

When a user searches for a query on Google search, using the keyword in the query as a cue, Google sends ads of different advertisers to the auction. Also, advertisers define a maximum cost-per-click they are willing to pay for their ad to be shown. This maximum bid is extended up to 30% of its original value to benefit an advertiser to beat the competitors. This is only for advertisers who has opted for enhanced CPC. And this is done only on auctions that Google thinks have a chance of conversion. Based on this max bid and quality score, ad rank is calculated. Google decides which ad is shown on the top using ad rank. And the rest of the ads come next in the order of their ad ranks.

What is the new enhanced CPC?

Google’s new enhanced CPC aims at removing the 30% cap on the maximum CPC bid. Instead, Google adjusts the bid automatically while considering the probability of a click leading to a conversion. Google predicts the conversion probability of that particular advertiser’s account based on the historical data of conversions. Other factors including the match type, keyword-query match, location, language, browser, time of the day, date of the month etc. Your bid might increase or decrease as needed. Google believes that this automated bid adjustment strategy will increase the ROI of AdWords campaigns.

The transition from the old strategy to the new –

Even though Google officially announced the launch of enhanced CPC, the transition from the old strategy to the new might probably be slow. Especially, AdWords, as per popular reports, might do a split testing first.

With regular evaluation, AdWords will validate the improvements from the test. If these results show a significant progress, this new automation might get popular among the AdWords community.

An important note for everyone –

With enhanced CPC being still an experiment, at present, the outcomes are only theoretical. Your spend might, first of all, see a spike in the initial weeks. And probably even out in the months to come. It might also go down drastically initially but burst out later. We furthermore aren’t sure of anything as of now. But at AdNabu, we recommend not switching to E-CPC yet, instead use our in-house Bid Optimizer, at least for your campaigns on AdNabu.

What is a good Click-through Rate in Google AdWords?

Click-through Rate

What is a good click-through rate?. This question frequently comes up during our AdWords Q&A. Before we get into the quest of finding out what a good click-through rate is, we have a few basics to revise.

What is Click-through Rate?

Click-through rate is the ratio of the number of clicks and impressions. It is expressed in percentage. Click-through rate is a key performance indicator of both keywords and ads. To avoid misinterpretation, I have listed down a few important points that highlight the extent and limitations of click-through rate.

  • CTR measures the immediate response, not the overall response- CTR talks about the % of people who clicked on the ad right away to reach the destination page. It doesn’t include people who failed to click on the ad then but visited the website later seeing the ad.
  • CTR doesn’t measure the quality of clicks – A click can merely be out of curiosity which might not lead to a conversion. Hence a high CTR doesn’t necessarily guarantee a good Conversion Rate or a low CTR doesn’t mean a poor Conversion Rate.
  • A good CTR leads to better Quality Score – Good CTR means that an ad is relevant to the searcher’s query. The relevance of an ad is an important parameter when Google assigns Quality Score.

What are the factors that affect Click-through Rate?

Like most of the metrics in internet marketing and AdWords in particular, click-through is also dependent on various other factors. Without a doubt, the ad copy is one of them, but it isn’t the only one.

The advertising network –

Most advertisers, when looking at CTR, overlook the fact that CTR for search, display & partner networks vary significantly. Search network has a higher CTR than display. And partner websites usually have a lower CTR than Google-owned websites.

The device –

Again, device level CTR is a metric that varies heavily. Devices like smartphones and tablets usually see a slightly lower CTR than laptops or desktops. This may, however, vary from campaigns to campaigns.

The industry –

The good click-through rate for each individual industry is different. An eCommerce website can expect a different CTR than a lead-generation website.

Location targeting –

Ads which are locally targeted can have a higher CTR than ones that are targeted globally. We have observed that for countless AdWords accounts localized campaigns have a higher CTR due to customers trusting a store near them.

The ad type –

A text ad might not work well as a persuasive ad, whereas it could be an effective informational ad. Likewise, an image ad might work well for an eCommerce website but not for a lead-generation website. An informational ad might drive a viewer curious and persuade them to click, whereas an acquisitional/promotional ad might not have the same impact.

Ad relevance –

When considering the content of ad you want to advertise using, it is a must to consider the relevance it has to the product/service you are advertising for.

Target audience –

If your ads are placed in front of the wrong audience, CTR will be low. Who do you want to see your ads? This determines CTR too.

Keywords –

The kind of keywords you select, it affects the CTR too. A unique keyword like AdNabu will without a doubt see a good CTR. Because it is not generic, it is focused and it doesn’t have competition. But how would a keyword like Quality Score guide or AdWords optimization software perform? They are generic, a lot of advertisers are using these keywords and CTR is distributed across the advertisers!

Average ad position –

Of all the factors, ad position is the top most factor that affects the CTR. You can’t expect the same performance from an ad that is the bottom of the pile as the one that is at the top.

Having brushed up on the basics, let’s not dive into finding an answer to this complex question:

What is a good click-through rate?

Even though most advertisers look at generalizing CTR and quantifying it, sane ones do understand that this quantification makes very less sense or no sense in most of the cases. Why is it so? Because of the above-listed factors! There are so many considerations, most of which are unique for each advertiser. One could assume all the factors to be at their best, then state a measure of CTR that is good. But that is not the case.

What one can do is take the industry benchmarks listed by popular advertisement management agencies as just a reference. The agencies publish this information which is an average of both low and high performing accounts. They also include the less spending accounts along with the accounts that are burning a lot of cash. You can’t just compare Amazon’s CTR to a local retailer who has just launched their store. There are so many such contradictions.

Yet, with a few meticulous considerations, an advertiser can derive a good click-through rate for their campaigns. One widely accepted and relevant consideration is the average position of ads. Based on the average position, generalization of good CTR makes some sense.

For average ad position between 1 & 2, 20% click-through rate can be considered good. For 2 & 3, 10% and for 3 & 5, 5%.

How to improve click-through rate?

  • By improving ad relevance –  This is one trained and tested ways to improve the click-through rate. Using techniques like Dynamic Keyword Insertion, enhanced ad image quality, catchy ad text and most importantly by choosing the right keywords.
  • By improving ad position – If I have to pick one factor that can surely make a difference the click-through rates, it would be the average ad position. No matter the industry, product/service type, targeting, device and other factors, if the average ad position is good, your click-through rate will be good.

And I can already sense the follow-up question, what is a good average ad position, right? – We have a few elements to investigate before judging an average ad position to be good or bad. One important element here is the spend. How much are you paying to achieve or retain an ad position? We will discuss the ad position in detail in the next blog.

What is Cost Per Click in Google AdWords?

Cost Per Click

Cost Per Click Header

What is the cost per click?

Cost per click is the price an advertiser pays to a pay-per-click advertising campaign service provider like Google AdWords or Microsoft Bing Ads, for each click the advertiser get on their ad through these PPC platforms.

Note: CPC is a measurement of an advertising campaign’s cost on per-click basis whereas PPC is a payment method of an advertisement campaign based on clicks.

How to calculate the cost per click?

Google AdWords is one of the leading Pay-per-click advertising service providers today. Only when their ad gets a click in AdWords advertising campaign, an advertiser is billed. But how is an advertiser actually charged?

Using the following formula, Google calculates the CPC –

[Competitor AdRank / Advertiser’s Quality Score] + 0.01 = Actual Cost Per Click

    • The actual cost per click is the minimum amount an advertiser pays Google to get the Ad Position of their ad.
    • Based on the Click-through rate and other metrics, Google adjusts the Quality Score.
    • The product of Quality Score and Max CPC bid by an advertiser is AdRank.

Note: Maximum CPC is the price an advertiser bids on a keyword in the AdWords auction.

Why is CPC is important?

Be it an AdWords campaign or any other PPC campaigns, CPC helps measure their success. Also, consider the quality of the clicks to evaluate a campaign, not just the number of clicks.

It is ver important to understand how AdWords bidding works, we have written an in-depth blog to explain the same. Likewise, a detailed explanation of Quality Score and AdRank are available too.

The ultimate guide to improve your Quality Score by AdNabu.

Quality Score Guide

Quality Score Guide by AdNabu

Quality Score is an essential component of every successful PPC campaign. Its value has increased exponentially in the recent times due to higher competition, so has the difficulty in achieving it. We are all well aware of the basics of Quality Score in AdWords, but interestingly a lot more lies submerged about which Google doesn’t emphasize enough on. Quality Score benefits an advertiser directly and a viewer indirectly, find out how in our Quality Score blog.

In this blog we will learn about the two types of Quality Score that helsp an advertiser, yes, Keyword Quality Score is not just the only one. We will also dig into how both types of Quality Score contributes to the overall success.

Let’s start off by listing down the two different Quality Score types:
  1. Account Level QS
  2. Keyword Level QS

Note: The only available Quality Score metric on any AdWords account is the Keyword Level QS. However, after years of inquiry, it has been widely accepted that QS at other levels exists, Account Level is one of them. Many expert advertisers segregate QS into other different levels such as Ad Group Level, Ad Level, Landing Page Level etc, but what is important to understand is that all of these are dependent on Keyword QS. As everything in AdWords revolves around keywords. Hence optimizing keyword QS improves the other types of QS also.

Account Level QS is determined based on the historical performance and data of the already existing keywords and ads.

Account Level QS comes into play when you add new keywords to your AdWords account. During the first auction, Google assigns a score based on the account’s overall QS to the new additions because no data for them is recorded yet. What this means is that, if your account’s QS is high, all your new additions will start off with a high QS too. Likewise, if account’s QS is low, the initial bid for these additions would be higher.

Having said that, let me highlight that there are ways to improve the Account Level QS, but again the first and foremost step is to have a good Keyword QS. The other important step to improve Account Level QS is to avoid creating a new AdWords account if you can use an already existing account.You are losing out on data that was acquired over years if you are suddenly starting a new account. Also it is painful to manage multiple accounts.

Keyword Level QS is the only Quality Score metric that Google reveals to an advertiser.

It is safe to say that all other “ make-believe” QS that various bloggers talk about are derivatives of Keyword QS. It is utterly important to understand, to learn and to optimize Keyword QS to better every other possible QS metric. There are a few vital well-researched steps you have to follow to improve Keyword QS. The improvement, however, is a continuous process and can be seen over a period of time, it isn’t instantaneous.

A keyword has to meet an impression threshold which is a number of impressions ( a multiple of thousand ) before it’s performance is considered to calculate it’s QS. Before meeting this threshold, QS is assigned based on the Account Level QS.

Once the impression threshold is met, following steps can help you in improving Keyword QS.

  • The very first step is choosing the right keywords. When researching for keywords, regular practice is to use third-party keyword tools that return keywords that are popular in your industry. Even though you get a list of keywords you can use, all of them might not be apt for your business. Instead, it would be of a greater benefit if you use your account’s analytics to look out for keywords which have actually brought traffic to your website or keywords that led to conversions. Variations of such keywords would make more sense than using generic keywords.
  • Once you have a list of keywords, the task at hand is to segregate them under Ad Groups. What most advertisers do is that they put a number of keywords under a single Ad Group. This isn’t the best approach because when an ad group is clumsy, it’s performance is compromised. At AdNabu we recommend using Single Keyword Ad Groups (SKAG). A SKAG increases the relevance between a search query and the triggered ad. This also makes it easier to track the performance of a keyword. All of these augment the QS significantly.
  • Writing great ads is the next step. Once you adapt the idea of SKAGs, having an ad specific to each keyword doesn’t need justification. However, for the benefit, Ads that contain your keyword help increase the QS as well as the CTR. You can do this manually or use Dynamic Keyword Insertion for the same.
  • A good ad is followed by a great a landing page. Landing pages which are highly relevant to your ad group and contain your keywords help boost the conversions, also the QS. Learn about landing page optimization in detail to improve your Keyword QS.

To wrap up, Quality Score is an important and mysterious metric in AdWords. Focusing on improving this from the very beginning pays off big time. It is a continuous process and it takes time. However, it can be mastered by religiously following a few simple steps that are covered in this blog.

AdWords webinar on Google AdWords with Leadsquared

AdWords Webinar

AdWords Webinar by AdNabu hosted by Leadsquared

PPC marketing is an ocean in itself, be it a professional marketer or a rookie, everyone has a plethora of questions, answers, and opinions. To help fellow PPC marketers find their ground, AdNabu went live answering questions on an AdWords webinar hosted by Leadsquared titled Google AdWords Tutorial –  A Comprehensive FAQ for PPC Marketers.

Around 100 odd PPC marketing related questions were answered in this AdWords webinar by CEO of AdNabu, Salil Panikkaveettil. The key takeaways from the webinar are:

  • How to identify and filter the right keywords for search campaigns?
  • Multiple strategies in campaign creation and structuring.
  • The correct way to optimize campaigns.
  • How to properly maintain search campaigns?

A gist of some noteworthy questions from the AdWords webinar are listed below.

Why do Single Keyword Ad Groups (SKAG) have more efficiency? Which match type should be used? Does it impact impression count as well?

There are many reasons for its high efficiency. In simple words, because you have just one keyword and a very relevant ad copy, the relevance of the ad would be more, and so would be the Quality Score of the keyword. This would obviously lower your impressions. However, the CTR would be higher because of high relevance between search term, keyword, and the ad copy.

Which match type you should choose would be decided by variations of tests and measuring the performance of your ads. Start with broad match modifier. If you are getting irrelevant searches, then mark negative keywords, and try using a phrase or exact keyword instead – testing would give you a better idea of what to use. For consumer businesses, like e-commerce, this ad structure can become very hard to manage, however, it is one of the most efficient ones.

Sometimes in CPA, whatever we put as the targeted Bid, the end cost goes more than that of a CPA? How to control this? [E.g. I put a CPA as 50 but the end value goes up to Rs 70]

It’s like trying to predict the future. That will happen with any system. In any kind of AdWords management tool, like Google AdWords conversion optimizer or AdNabu conversion optimizer. But all these systems essentially try to predict the future by looking at past data. This might not give you accurate results always.

But, if it’s 50 and it’s showing 70 for you, and if you have not made any landing page changes or ad changes, then it’s not an ideal situation. Maybe you should go back to manual CPC bidding for some time, increase the number of conversions and then go back to CPA bidding because 50 to 70 is an increase of about 40%. I generally see an error of maybe 20% but 40% is a little too much.

How much should a SaaS startup (whose buyers are of a traditional mindset, i.e not technically savvy) spend in the first 6 months on AdWords?

It would depend on your general cost of customer acquisition, and how much is a customer worth to you. If your cost per customer (in Adwords) is Rs 50,000 but the revenue from your customer is only Rs 5000, then it doesn’t make sense. The ideal way to decide a budget is this: Do a calculation based on how many customers you wish to acquire in 6 months and your “lead to customer” conversion ratio – this would tell you how many leads you need to get the required number of customers. Then, you need your landing page conversion rate and the average cost per click. This would tell you how much money you need to generate the number of leads necessary to get “x” customers.

Doing a calculation with these numbers will help you come up with a budget that makes sense for you.
Here’s an example:
All values here are assumptions – you should consider values by looking at your existing metrics.
So let’s assume:-

  • Landing Page conversion rate: 10%
  • Cost Per Click (CPC): Rs 150
  • Lead to customer conversion percentage: 3%
  • Click-Through Rate (CTR): 2%
  • Impressions: 2000

Using basic formulae, we arrive at:-

  • Clicks = 2% (CTR) of 2000 (Impressions) = 40 clicks
  • Leads = 10% (LP Conversion rate) of 40 (Clicks) = 4 leads
  • Cost = Rs. 150 (Cost per click) * 4 (Total Leads) = Rs. 6000
  • CPL = Total Cost/Total Leads = Rs.6000/4 = Rs. 1500
  • Customers = 3% (Lead to customer conversion percentage) of 4 (No. of leads) = 0.12

So, to get at least 3 customers,

  • No. of leads = (4/0.12)*3 = 100 leads
  • Cost = 1500 * 100 = 150000

So, your campaign budget should be minimum Rs 1,50,000, to generate 3 customers. To reduce your campaign budget, optimize your campaign well enough so as to improve your conversion rate, and lead to customer conversion rate.

For B2B campaigns, we need to target ‘Industry’ and ‘Job Roles’ which can be done on LinkedIn. Does Google provide any such filters?

In display campaign, you can choose affinity or in a market audience but specific industry or job role can’t be done in Google AdWords. You can’t target a particular company. You can target keywords that these individuals might search for. Facebook is a different medium. Google Search is a different medium. LinkedIn is a different medium. There are some use cases where LinkedIn ads might work best. There are some use cases where Google Ads might work best. And there are some cases where Facebook might work best. You have to identify what works for your company.

If you are selling to very targeted individual positions, keep in mind that LinkedIn CPCs are really really high. But if you have a very high ‘customer value’, it makes sense to invest in LinkedIn ads also. But it’s a totally different medium. You cannot compare PPC with LinkedIn ads.

All the 100 questions asked during this AdWords webinar and their answers are drafted into a blog for the benefit of everyone. You can also find the video of this AdWords webinar here.

Do let us know what topics you would like us to discuss about, we will get back to you with that.

Bulk Update Old Standard Ads to Expanded Text Ads in Google AdWords

Bulk update old standard ads

Bulk update old standard ads

Many of you requested for a feature to bulk update old standard ads to expanded text ads. We heard you and we have come up with a tool which does exactly that! I will talk more about how to use this tool later.

We have already talked about why it is important to upgrade to expanded text ads. You can no longer create or edit old standard ads in AdWords. Even if this was not the case, it is highly recommended to update to expanded text ads due to the benefits the new ad format offrers. Most experiments showed an increase in CTR for expanded text ads as compared to old standard ads. This is universally a good thing which increases quality score and reduces cost.

If you are a new advertiser all your ads will be in expanded text ad format. You do not have to worry about updating your standard ads. But for a vast majority of advertisers who created campaigns much before last year, updating old standard ads is going to be a pain. You can always change ads manually but that is going to take a lot of time.

Lets explore a few scenarios on how to bulk update standard ads to expanded text ads.

Scenario 1 : Remove all ads and replace it with new expanded text ads

This is by far the easiest thing to do. You can remove all your ads (old standard ads as well as new expanded text ads) and replace them with new expanded text ads. This strategy however has some problematic downsides. You will also remove the new expanded text ads which might have had some good history. This strategy is only recommended if you do not have many expanded text ads in your campaign or if the ad history is not rich. Kindly follow this tutorial to bulk update all ads with expanded text ads.

PS : AdNabu’s expanded text ads software always had this feature.

Scenario 2 : Remove all old standard ads and replace it with new expanded text ads

The second strategy is much better. Here you will be removing all your standard ads and replace them with expanded text ads without touching other expanded text ads. This will preserve any history these new ads might have gained after their creation. The only downside to this strategy is that the new expanded text ads will be created in ad groups with both expanded text ads and old standard ads. Kindly follow this tutorial to bulk update old standard ads and replace them with expanded text ads.

Scenario 3 : Remove all old standard ads and replace it with new expanded text ads only if no expanded text ads are present in the ad group

This final complicated strategy might suit some advertisers. In this strategy you will be replacing standard text ads only if the ad groups contain no expanded text ads. Software will only replace old text ads if they are the only ad type in the ad group. This strategy however will not remove all old standard text ads as it will not touch the ad groups with expanded text ads. Follow this tutorial to selectively update old standard text ads to expanded text ads.

Let us know in the comments below which strategy you would like to follow and why?

Why you should never run exact only campaigns

Many AdWords strategists have been suggesting a strategy of running exact only campaigns. In this strategy, you have search campaigns which have exclusively exact match keywords. I have strong reservations against this strategy. Not only these campaigns are costly, they also miss a tremendous amount of opportunity in AdWords. Let us take apart their arguments one by one.

Exact match are high converting keywords

There is some element of data backing to this argument. Mostly exact keywords have a slightly higher conversion ratio than other match types. This is however not applicable across all accounts and campaigns and is certainly not a rule. There could be many keywords for which other match types might have a better conversion ratio.
Even if we assume that exact match keywords have higher conversion ratio, it would be a bad move to pause other match types. It is always better to change the bids so as to get conversions at same cost per conversion

Exact match will have lower cost

This argument has no logical backing. it is definitely a best practice to have a keyword in exact, phrase and broad match. This best practice only ensures that by doing so one can target keywords more accurately and will help bring down the cost. This cost reduction will only be visible when comparing a phrase match and exact match of the same keyword. In other words it is cheaper to target a search query from exact match keyword when compared to a phrase match keyword. 

There are some strong counter arguments against this strategy. let us look at them

Exact match searches can cover only a small percentage

Humans are extremely diverse and it would be extremely difficult to define every single keyword user might search for in google. Google sees at least 16-20% new searches every day. Exact match keywords can only cover at max 50% of your target searches. if you are not showing ads for half your customers, you are doing it wrong

For same cost, one can get more conversions if you target all matchtypes

Assume you have only exact match keywords and your campaign creates 100 conversions at 50$ per conversion which results in 500$ spend.

If we assume that other match types can get you equal amount of clicks and conversions, we can split the budget among exact and other match types. We already know that if we reduce conversions, cost per conversion will also reduce exponentially. This should ideally result in the following situation or something similar.

250$ spend on exact and 250$ spend on other match types. Since cost is reduced for the same number of searches, your cost per conversion will reduce. let us say this number is 40 from the earlier number of 50. Which means conversions of 125 in total. Essentially we have generated 25 more conversions at the same cost

In conclusions never exclude traffic based on silly assumptions. remember there are no non converting keywords, only keywords which converts lesser or higher

Why is there a difference between average cpc & max cpc in AdWords

Bidding in AdWords is extremely complex. Every time a user searches in google, an auction takes place between the many advertisers targeting the search term. How much each advertiser needs to pay depends both on the max cpc bid & the quality score. Let us now study max cpc and average cpc in detail

Max CPC

max cpc is the variable you have control on. One can decide the maximum amount, you are ready to pay per click for a keyword. let us say for a keyword, your max cpc bid is 10. When a user searches in google, an auction starts between you and other advertisers targeting that keyword. You would end up paying any number from 0 to 10, based on how competitors bid for the keywords. This cost varies with every single click. Here is a sample scenario that can happen

Auction Max CPC Cost
Auction 1 10 10
Auction 2 10 7
Auction 3 10 8
Auction 4 10 7

Avg CPC

Average cpc or avg cpc is the result of your max cpc bid and your competitor bids. It is an average of cost incurred for every single click. In the above example, We generated 4 clicks at 32 cost which comes to an average cost per click or avg cpc of 32/4 = 8.

Beauty of AdWords is that one cannot control the average cost per click. it is highly dynamic and can vary between accounts and with average positions. It can even vary with time of day, week or month.

Understanding the relationship between max cpc and average cpc is one of the most difficult but a core component for an effective marketing strategy.

Why cost per conversion will exponentially increase with number of conversions

As an advertiser lets say you are targeting all relevant keywords from your account and now wants to increase your number of conversions per month. What would the cost come to is a question everyone has. Most however fall into a linear growth model for cost also but reality is that cost rises exponentially with number of conversions.

Let us take an example here. An Advertiser generates 1000 conversions a month at 50$ per conversion resulting a cost of 50000$ a month. He wants to generate 1500 conversions a month. To increase the conversion number, the only option is to increase the bids for the targeted keywords. If one increases the bids for keywords, we will generate more clicks at a higher CPC. For a 50% conversion increase, most likely one would need to increase bids by 70% (not a scientific calculation. This number varies with the current position of ads). Since our conversion ratio will not change, this results in 50% increase in conversion number and 70% increase in cost per conversion.

The equation now changes to 1500 conversions a month at 85$ per conversion which results in a cost of 127500. Here is a summarized result of our exercise.

Scenario Conversions Cost Per Conversion Cost
Before 1000 50 50000
After 1500 85 127500

As you can see from the result, Cost increased by 155% for a 50% increase in conversion. Always keep in mind Cost increases exponentially with Conversions.