Unlike other forms of advertising, where costs are decided up front for per-impression (PPM) or per-click (PPC), the Google AdWords program uses an auction for every search to value the advertisements it will show. Google takes a number of factors into account outside of the maximum bid specified, including the relevance of the keyword, the content of the landing page, the number of times your link has been clicked in the past, and your website’s PageRank and quality score.
If it’s not clear what your strategy should be for reducing the actual cost per hit that you pay Google, let me put forward a premise. If you could pay $1 per hit for tens of thousands of hits a day or $0.10 per hit for a few hundred hits, which would you prefer? Ultimately, the answer will depend on your product’s margins and your existing marketing budget, but most startups would see higher profits from the second choice. Unfortunately, simply setting your budget at $0.10 per hit will not earn you hundreds of hits a day, it will, most likely, earn you none. In order to get placed on the Google Search advertisement sidebar with low bids, it’s vital that you increase the quality of your landing page in order to compensate for the reduction in your maximum bid.
If you haven’t started to build your page with rock-solid SEO, this is one of your most valuable strategies, in terms of real monetary gains from lowering your marketing budget. Not only will you reduce the overall marketing budget due to higher organic hits, but you will also be more relevant for the long-tail keywords you’ve optimized for when Google is making the calculation to place your advertisement in the sidebar, earning a few impressions at a fraction of the cost your competitors may be bidding.
As your marketing budget increases, the number of hits you receive will make more of an impact on your bottom line than the cost of the hits. Eventually, you will be forced to compete with major marketing organizations on their own terms, using a spread of keyword bids on high-budget, high-value keywords without the luxury of using long-tail optimization.
The key to a successful campaign is not simply earning more hits and increasing conversions, reducing the actual cost of hits can also make a significant impact on your bottom line.