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AdWords Users Beware: Broad Match Keyword Ads Losing Value

December 22nd, 2008

google-adwords-marketing-information.jpgThis evening I received an interesting report suggesting that AdWords advertisers may be losing money on broad match keywords because of recent changes to Google’s algorithm.

Perry Marshall, a well-known AdWords expert and author of the Ultimate Guide to Google AdWords, released some revealing details of an email conversation he had with one of his Roundtable members. The gist of the conversation and its concluding theory is that since overall advertising spends have been declining due to a general recession, Google is attempting to make up for the shortfall in revenues by loosening its standards for broad match keyword displays. This is having the effect of allowing existing advertisers to have their ads shown on more pages of both the search and content networks even though some of these ads are not always relevant for the associated search queries or content pages. This means more clicks and ad revenues for Google but lower clickthrough rates and conversions for advertisers who have not recently adjusted their campaigns and are using the same broad match keyword groups as they were previously.

Perry Marshall provides a good example of how broad match vs. exact match keywords can produce very different results for AdWords advertisers. In the email text below, he notes that if someone selling red wagons (the kind that would be used as a toy for children) ran the ads only for exact match on the main keyword, it would display only on pages for the search query “red wagon.” However, most advertisers don’t do this; they just run their ads for the broad match versions of the most obvious keywords. In the red wagon example, this results in their ads displaying for queries like “red Toyota station wagon”, which are obviously not relevant to the advertiser’s product even though the phrase still contains the words “red” and “wagon.” This is how many newbie and non-savvy advertisers lose money on AdWords while unwittingly helping Google increase its revenues and stock price.

As one might expect, the recommended strategy here is to be careful when advertising on the broad match keywords and target the exact and phrase match ones for the highest conversion rates, especially if you are working with a very limited budget. Here is the actual email text where this is explained in greater detail.


Karl,

Got this email from John, a very astute Roundtable member:

—————————————–
Perry,

Over the past couple of weeks, I have been trying to increase my overall search campaign CTR (which is +3%!) by continuously pausing the high impression- low CTR keywords from my campaigns. I figured: OK, take out the dogs that are not a good match for my market, and shoot for 6%, just to see if I can do it.

What I have found is, I can’t do it, no matter how many .5% or less high impression keywords I cut.

I am still in the 3-4% range.

My theory: Broad Match Keywords are the cause.

Since Google is loosening it’s standards, our broad match keywords are showing up more and more to the unwashed masses, where they are less relevant, in order for them to keep their click income up. It’s like they are taking our search keyword campaigns, and throwing them into the content network.

The more keywords you have in a broad match long tail, the easier it is for Google to justify doing this.

I am going to pause my broad keywords completely in some of my campaigns to test it.

Any other theories???

John

—————————————–

John,

I think that is a very sound theory actually. I should blog about this…. I can’t think of any other explanation.

Strategy, then:

Broad match in a separate ad group. Makes a lot of sense actually…..

Perry

—————————————-

Perry,

Early test results show that we were right. CTR is soaring on the exact and phrase match words. Some broad match keywords have a very high CTR, while the rest tank.

Google Broad Match = The new Content Network rebranded, since they weren’t able to make that fly the way they intended to.

Here’s to the poor unsuspecting fools out there who are making Google rich.

Talk to you later today…

John

————————————-

So let me explain.

The big advertising spenders are spending less with Google. But Google can still hit their revenue targets by making adjustments to their ad formula.

The best way for them to do this is with BROAD MATCH keywords. All they have to do is tweak a number somewhere in their engine and ads will show up more easily for terms that don’t match.

So for example let’s say you sell red wagons.

Smart advertisers bid on:

[red wagon] (exact match only)
“red wagon” (ad shows only for queries that contain this phrase)
red wagon (ad could show for “red toyota station wagon” or any number of other unrelated searches)

Then they watch conversion rates and adjust bids accordingly, to make sure their ROI is solid.

Most people just bid on:

red wagon (broad match)

And they get all those kinds of traffic mixed together.

So if Google lowers the quality threshold to get more exposures and clicks, they win and you lose.

I’m telling you, you’ve got to follow my system and you’ve got to sleep with one eye open.

Now… let me tell you what this means for Google.

AdGooRoo.com monitors millions of search engine results and they are noting a 54% growth in Google’s “first page advertisers” - see http://www.adgooroo.com/blog/ for their full report. They very well may be poised for a record quarter for Q4 2008. That’s what I’m predicting.

In any case, Google very much has control of their destiny. But you’d better make sure you’re on top of your conversion numbers!



One Response to “AdWords Users Beware: Broad Match Keyword Ads Losing Value”

  1. comment number 1 by: Dan Pay Per Click Manager

    thanks, very interesting. i am also going to blog about this, and btw, I have placed broad keywords in a separate campaign altogether, but this is alot of work.

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