As many businesses are floundering (or going out of business altogether), Google seems to be doing just fine. The other week they announced record revenues for the fourth quarter of 2008 of $5.7 billion. And a very big chunk of that revenue comes from advertisers paying for clicks on Google AdWords.
There are two ways to look at this record quarter.
The positive way to look at things is that AdWords works. And works really well.
As more and more businesses discover the power of AdWords, are having more success with AdWords, and as advertisers are getting more savvy on how to use AdWords effectively – costs per click are rising.
That means more money for Google.
Also on the sunny side, you have advertisers who have cracked the code in their niche and literally can’t throw enough money Google’s way. These people have AdWords down to a science and know that for every dollar they spend on AdWords, they’re making $1.01, $2, $5 or much more. For these AdWords advertisers, there is no such thing as a budget. They carefully track, measure, test and tweak and buy as many profitable clicks they possibly can from Google.
The other way to look at Q4 results takes a more cynical view. This is where advertisers have heard about the promise of AdWords, but don’t have a clue at what they’re doing. They’re basically just throwing their money at Google hoping for good results.
However, there’s an even more cynical explanation for what pushed Q4 into record territory. During the fourth quarter some AdWords advertisers started posting/blogging about a subtle change in AdWords and were predicting the record fourth quarter long before it was announced.
The change they noticed was an expansion of search queries that trigger ads being shown for broad match keywords.
(A quick lesson here: There are 3 match types in Google – broad, phrase and exact.
Exact match is triggered only when the exact word or phrase you’re bidding on is typed into Google.com.
Phrase match is triggered when the exact phrase you’re bidding on is typed into Google.com, even if it contains additional words. For example, if you bid on “tropical fish” your ad will appear for the search term “saltwater tropical fish” but not the search term “fish that live in tropical waters.”
With broad match, Google decides what search queries are relevant to your keywords and trigger your ads to be shown.).
So, what some people think is going on is Google has gotten more liberal in determining which search queries qualify as “relevant” to broad match keywords. This means advertisers using broad match are having their ads displayed for a greater number of search queries which may or may not be relevant to their product/service. When your ads show for more search terms . . . you will likely have more clicks . . . which costs you more . . . which means more money for Google.
For those who don’t know what they’re doing with AdWords, this can potentially be a huge drain on their budgets.
So which view has more to do with Google’s Q4 results? The answer lies somewhere in the middle but whether it tilts more toward the positive or cynical view, I have no idea. And quite frankly, I don’t care. And you shouldn’t either.
The bottom line is if you’re an advertiser that falls on the positive side of the spectrum, you’re probably not reading this blog post because you’re too busy closely managing your campaigns, getting rid of broad match keywords or adding lots more negative keywords, and laughing all the way to the bank.
If you fall on the other side of things, you have no one to blame but yourself for contributing to Google’s record revenues. AdWords is a tremendously powerful marketing tool, however it’s getting so big, so complex and so competitive that it’s more critical than ever that you know what you’re doing.
And if you don’t know what you’re doing, my advice is to either learn how to use AdWords effectively (here are some AdWords resources to point you in the right direction) and/or get an AdWords professional to help you. Otherwise, you’re mostly throwing your money away.
I think Google is a great company and AdWords is a great marketing tool – BUT it’s your responsibility to manage and control your campaign to ensure it’s working for you and your business and not abdicate control to Google’s policies and algorithms.
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