Adwords Explained - Page 5 - PPC Advertising - Ad impressions supply and demand

Supply & Demand of Ad impressions and clicks

Strategies for increasing or decreasing bids on a particular campaign are influenced by whether you have an excess of supply of ad impressions (and hopefully user clicks) or not. So what does that mean?

Under supply of ad impressions

If you have a daily budget of $10 and you are selling vacuum cleaners to say a country with a relatively small population like New Zealand, there may perhaps only be 300 searches on Google each day that match your keywords. In this situation, you may be inclined to bid more for these potential clicks, as you are competing for a limited supply of interested users or purchasers.

The key to understanding how the supply and demand of your market is working, is experimentation. If you are struggling to fill your $10 budget each day and you observe this consistently over a few weeks, then you either need to expand the number of keywords that you are matching on, or bid more to increase the position of your ads (to increase the likelihood that users will notice and therefore click on your ads), or perhaps enable 'Content Network' ad delivery if this is not already enabled.

Over supply of ad impressions

If however you are easily filling your daily budget each day and your ads stop showing by mid morning as you fill your daily budget very quickly, then it becomes more important to ensure you have found the “sweet spot” of the maximum number of user conversions for your daily $10 budget. This is one of the biggest unanswered questions that new users struggles with when commencing my work with Adwords:

“Is it better to get 5 clicks in position #2 at a cost of $2.00 each for my $10 budget, or am I better to get 20 clicks in position number 12 at a cost of $0.50 per click?”.

There is no single, one size fits all answer to this question, and (perhaps depressingly) the only way to answer this is to try each strategy for your business and see what delivers the best results. Anyone who simply tells you to focus on position #2 or simply says ‘start at $0.10 bids and progressively increase until you get the best results’ is over simplifying the situation.

Beyond a focus just on volume of clicks however, conversions are what you are ultimately seeking to achieve, and so ensuring that conversion tracking is enabled on your campaign, and ensuring that you are bidding on and focusing on those keywords which are delivering conversions are a low cost - is where you must focus to ensure longer term success.

Users do respond to (click on) advertisements which are not in the top positions, and whether these responses work well for your business and result in a positive Return On Investment is something you’ll need to measure and monitor to determine.

The Salsa Internet experience

Our overall experience has been that for Salsa Internet where there is an abundance of potential clicks on broad terms such as “website” and “web design”, that our greatest volume of clicks are achieved when focusing on displaying our advertisements in the range of position #5 – 8 at the lowest cost possible. This ensures maximum number of clicks each day giving us more opportunities to drive a conversion / inquiry while still ensuring we appear on the first page of search results (by far the greatest volume of clicks come from having your ads displayed on the first page).

The situation may be different for your business. For example, if you are not working in an area where the users’ intentions are clear, or if your advertisements are not well targeted to your audience, you may receive a high volume of clicks but a very low conversion rate to sales or ROI / ROAS. To address this you may need to adjust your advertisement wording to be more targeted to your audience’s needs, or add negative campaign keywords to ‘weed out’ people are aren’t good potential customers.   More likely is that you may need to simply cull certain keywords from your campaign which have shown over time that they do not result in conversions.    We usually recommend that you acheive at least 300 - 500 clicks from a keyword term before making any decisions about whether that keyword actually results in inquiries/sales, as with figures less than this, statistical significance of the results is called into question, and you may simply be witnessing an anomaly with the first few 10's or 100 clicks.

Page 6.....Bidding Strategies, and Keyword Research