Google AdWords Changes

This month (August), Google is testing important changes to their AdWords system. I´ve seen some discussions on marketing forums about it and some people seem to be worried if pay per click advertising with Google AdWords is going to cost them more money ?

Well, I believe that it´s going to be easier and cheaper ( if you are doing it right ).

So let´s have a quick look at the key changes:

1) The minimum click-through-rate of 0.5 % will be removed, the keyword status will now be only either active or inactive instead of “normal, in trial, on hold or disabled” and your account won´t be slowed anymore when it doesn´t meet the performance requirements (such as miminum CTR).

These changes are definitely making it easier for you to advertise with Google AdWords and open the gates for using certain general keywords that you couldn´t use until now because it was too hard to meet the minimum CTR. One example is the keyword “health”: there were seldom ads listed for this keyword before the change, because it was hard to meet the 0.5% CTR. If you had a fitness product, you couldn´t test if people searching for “health” are interested in your offer, but now you can.

When you now search for “health” you´ll find lots of ads for different health related topics (weight loss, fitness, acne, …) and even non-health related topics ( when I searched today I saw an ad for a web design software).

Looks good that you now can use any keyword you like without having to worry about relevancy and performance of your ads, so it´s getting pretty simple to use AdWords, but on the other hand the gates are also open for advertisers to bid on totally unrelated keywords, which means there could be more competition than before, thus increasing advertising cost.

How does Google intend to get rid of that problem ? An answer might be the introduction of …

2) quality-based minimum bids

Formerly, the minimum bid has been 5 cent for each keyword. Now, the minimum bid on a given keyword might be different for each advertiser and depend on the quality score of your ad.

The quality score is determined by factors like relevance of your ad text, your ad´s CTR for a given keyword and the historical performance of your ad. Based on the quality score, the system calculates a minimum bid price for you.

Simply put: if you choose keywords that are relevant to your product/service and write good ads (for high CTRs) then you can expect to pay less for a better position than a competiting advertiser who has an irrelevant ad.

In the example above: the advertiser who placed an ad for the web design software under the keyword “health” will surely pay more per click on position 8 than the advertisers with the more relevant ads in the higher positions.

I think Google will still need to test the right formula for calculating minimum bids in order to make totally unrelated ads like in the above example so expensive that it won´t benefit the advertiser.

To sum it up:

Part 1 makes it easier for you to use Google AdWords and part 2 can make it cheaper for you if you are doing it right, i.e. choose targeted keywords and write relevant ads that perform well. If you want to learn how, I recommend you read Perry Marshall´s AdWords Guide