Adword Crash Course

  1. Manage your expectations and set your budget
  2. Buy some clicks to learn about your market
  3. Build exact match ad groups + negative keyword lists
  4. Track your conversions
  5. Always optimize

Editor’s note: This insanely info-packed guest post by our friend Iain Dooley may take more than 1 read. Suggest bookmarking it. Cyber Monday offer at bottom.

AdWords looks complex – but it’s really very simple.

Yes, the interface is arcane…

Yes, there are a million different blog posts about “best practices” and they all seem to contradict each other…

Yes, experts in AdWords seem capable of charging HUGE sums of money…

Yes, you can go online and find a million stories of people having lost HUGE sums of money without seeing anything in return…

Yes, Google staff rarely provide useful advice on how to use their own product…

…but trust me: AdWords is simple. Notice I didn’t say EASY. But it is simple. Sort of like dieting and exercising is simple: you can easily learn what to do and how to do it, but it takes a little while to really nail it.

Let me show you the essentials here and now in this free crash course in AdWords. You’ll see how to find and dominate a niche for your business on Google AdWords – even if you’ve never used it or you’ve lost boatloads of cash with it.

Step 1: Manage your expectations

I think a lot of the stress caused by AdWords stems from the fact that people go into it expecting a completely different experience from what it actually delivers.

There are two prevailing mythologies surrounding AdWords:

1. “I went on AdWords and got tonnes of traffic really cheaply and ended up with a million dollar business and YOU CAN DO IT TOO!!”

2. “I went on AdWords and spent HEAPS of money really quickly and got nothing in return, even though I did everything that the books told me to, and now I can’t pay my rent”

Let’s start by clearing this up a bit. When AdWords first came out – hell, even up to as recently as 6 years ago – there was a tonne of cheap traffic available… and the regulations were comparatively very relaxed.

In fact, a lot of people that made out like bandits in the early days were simply buying traffic on AdWords and driving it to pages covered in AdSense ads (i.e. Google’s own ads), which paid them a higher cost per click than they’d paid for the click in the first place.

This type of craziness was pretty short-lived, but it’s an example of how easy it was to make money from AdWords… in the beginning. You could get clicks as cheap as $0.01 in many niches and it was a quick, cheap and simple way to get new customers for just about any business…

…This is no longer the case.

There is still cheap traffic available on AdWords. But in general you should be expecting to spend at least $10 – $20/day, and you should expect to “waste” about $600 while you figure out what’s working and what isn’t.

Depending on your product, your website and your market, you may find that you’re able to generate sales or leads immediately, or that you can get away with spending less money. But most often you’ll find that, whilst AdWords identifies an effective marketing channel, you need to work on your sales (e.g. landing pages, lead magnets) in order to actually get a return on your investment.

AdWords is immensely valuable regardless of your industry or budget, but it’s not magical and it’s not super cheap (unless you compare it to almost every other form of effective paid marketing).

You can get away with spending only a few hundred dollars and still get some valuable information out of it, but if you’re only planning on spending your free $75 AdWords voucher and expecting to see sales on day one, prepare to be disappointed.

Step 2: Buy some clicks

If you’re already running an AdWords campaign, you can skip this step.

If you’re not, check out a couple of videos from my own AdWords eBook, free for you here…

1) The Keyword Research Video

This video takes you through my process for finding an AdWords niche in which you can “afford to fail”. What this means is that you will be able to buy traffic at a sufficient volume to allow you to learn about your market quickly enough, at a price that won’t send you to the poor house before you figure out how to sell your product:

PPC How-To VideoClick here to watch in a new window

2) The Campaign Setup Video

This video shows you how to setup your campaign once you’ve done your keyword research. (Don’t worry about the talk about “match types”, we discuss that in a second.)

PPC VideoClick here to watch in a new window

Those two videos should give you the basis to get a campaign setup and start buying some traffic, which you’ll use in the next step.

Step 3: Analyse your search terms report

This is the crux of AdWords and the single most important thing you can learn.

The search terms report is a list of all the search terms that have triggered clicks on your ads.

A quick word about the display network

If you setup your campaign in the previous step, you should only be running a search campaign. But if you’re running a campaign already, you might have set up both search and display ads in the same campaign.

There are 2 things I’d like to say quickly about the display network:

1. It’s not really all that great as a starting point. The display network is best used to dramatically increase your reach once you’ve already worked out your sales funnel and target market. During the early stages, though, you don’t learn nearly as much from display campaigns as you do from search campaigns.

2. Even when you DO use display you should keep your search and display campaigns separate, because there is no way to retroactively separate out display keywords from search keywords via the search terms report

If you’ve already set up your campaigns to use both the display and search networks you can still do the search terms report analysis described in this section but I highly recommend going back and separating out your display ads from your search ads into separate campaigns.

The match types interlude

To really understand the significance of the search terms report, you first have to understand “match types”… and the difference between a “search term” and a “keyword”. This won’t hurt a bit.

In AdWords, a “keyword” is the thing you put into an ad group. When you enter your keywords you can choose one of three “match types”:

1. A broad match keyword is one or more words with no other punctuation, e.g.: ladies shoes

2. A phrase match keyword is one or more words surrounded by double quotes, e.g.: “ladies shoes”

3. An exact match keyword is one or more words surround by square brackets, e.g.: [ladies shoes]

A “search term” is something that people type into Google, and when you’re bidding on a “keyword” what you’re really bidding on is a place on the page of results that person will see when they enter their search term. If you’re new, these are called search engine results pages, or SERPs.

The broad match keyword ladies shoes will bid for places on the SERPs for search terms such as:

  • evening shoes for women
  • sling back pumps
  • women’s tennis shoes

The phrase match keyword “ladies shoes” will bid for places on the SERPs for search terms such as:

  • ladies shoes petite sizes
  • cheap ladies shoes

but will NOT bid on SERPs for:

  • ladies evening shoes
  • shoes for ladies

The exact match keyword [ladies shoes] will bid for a place on the SERP for the search term:

  • ladies shoes

That’s it. Nothing else.

So you can see that as you go from broad… to phrase… to exact match, your targeting becomes exponentially more narrow.

And therein lies the secret to AdWords: you are actually rewarded for making your ads MORE targeted.

In other words, the strategy for AdWords is to get your ads in front of the RIGHT people, not the MOST people.

The mechanism that AdWords uses in order to make this happen is called Quality Score. The biggest factor in Quality Score is your “click through rate”, which is the number of clicks each of your keywords gets as a percentage of total impressions. Quality Score is a DIRECT factor in your cost per click.

The end result is that, the higher your click through rate, the cheaper your clicks, by a significant margin. You will be able to get a higher position on the page than your competitors for LESS money, by having a higher click through rate.

And the single biggest improvement in your click through rate will come from better targeting.

With that in mind, let’s go…

Back to the search terms report

To get to your search terms report, click on the “keywords” tab for either a single campaign or “all online campaigns” then choose “Details -> All”:

Winning at Adwords with Iain Dooley

If you only just started bidding, you’ll find that it takes a few days for data to show up in your search terms report. This is a normal (if annoying) part of AdWords.

What you’re looking at once you’re in the search terms report is the list of actual search terms (not keywords) that people have typed in, that have triggered clicks on your ads.

This is incredibly valuable because, rather than just being the search terms that you thought people might use, these are the actual search terms they are using.

To start off, download your search terms report and open it up in the spreadsheet application of your choice. (I just use Google Docs spreadsheets.) We’re going to use this to create targeted ads and more.

Creating targeted ads

Firstly, order in descending order by the “conversions” column and take the highest converting search terms, then put them into their own ad groups, that is: one ad group, one keyword, one ad. You can also do the same for any search terms with high Impressions: although they may not be converting yet you may still consider them to be a good opportunity (see the section below on tracking conversions for more on this).

When you do this, use the exact search term in the headline of your ad text, and then use elements from the search term in the rest of your ad copy as much as possible:

CPC and more in AdwordsClick to see the larger, more detailed view

You might also notice that several search terms use the same “phrase” or pattern of words, but that no single search term stands out.

In this case, you might choose to create an ad group to house a “phrase match” keyword in order to target things better whilst still giving you the chance to “learn” a bit about what types of search terms people are using.

So how does this magically increase your click through rate?

There are 2 ways that targeting your ads using the search terms report increases your click through rate:

1. When you’re bidding on broad (or even phrase) match keywords, there are several search term combinations that will trigger your ads that may not be relevant. Every time someone sees your ad and doesn’t click, your click through rate goes down. By targeting just the most relevant search terms with phrase and exact match keywords, you drastically reduce the chance that your ad will be shown for completely irrelevant search terms (incidentally, bidding on broad match is a double whammee: your ad is shown to people who aren’t in your target market, but some of them will click anyway, so not only are you paying more for your clicks, but you’re getting more WASTED clicks as well!!)

2. Google will put any words in your ad text that are relevant to the search term in bold font. When your headline matches the search term exactly, it means it’s in bold font which makes it stand out. Also having your ad text and headline match exactly what the person was looking for makes them far more likely to click on your ad, than that of your competition.

Blocking unwanted clicks

The next thing to do with the search terms report is to go through and identify any search terms that you do NOT want to bid on the SERPs for.

If you’re spending on broad or phrase match keywords, you’ll find that there are a bunch of search terms in the search terms report that are totally irrelevant to your business. A classic example is people looking for “jobs” or “careers” in your industry – you probably don’t want to pay for those.

Start by highlighting the search terms you’d like to block, then add a new column in the spreadsheet next to the search term column. Go down and choose a “phrase” or [exact] match negative keyword that would have blocked that search term:

Negative keywords to block

The match types work exactly the same for negative keywords as they do for normal keywords. So for example if you saw the search terms:

  • careers selling ladies shoes
  • ladies shoes for free

You might choose to add the following negative keywords:

  • “careers”
  • “free”

It’s also worth noting that there are situations where you should use an [exact match] negative keyword. For example, if you found that you were spending a lot of money on the search term [shoes] by itself, but getting a terrible conversion rate, you might block that with an exact match negative keyword.

Once you’ve chosen your negative keywords in your spreadsheet, you can add them in one of two ways:

1. At the campaign or ad group level by clicking on the “keywords” tab and scrolling down to the bottom:

Negative keywords in Adwords and exact matchClick to see the larger, more detailed view

NB: This works identically at the “ad group” level, that is you click on an ad group, go to the keywords tab and scroll down and you can add negative keywords just for that ad group.

2. Using a “negative keyword list” in the “Shared Library” section which allows you to apply the same list of negative keywords to multiple campaigns more easily:

Negative keyword lists and shared library

Which method you use will depend on how you have your campaigns setup. I separate my campaigns based on match type, that is I have 3 campaigns: broad, phrase and exact match.

As I “distill” out phrase and exact match keywords from my search term report into their own ad groups, I add them to corresponding phrase and exact match negative keyword lists which stop the broad, phrase and exact match campaigns from competing with each other. (Want more step-by-step guidance? Get the book and save $100 with code CYBERMONDAY. This isn’t a sales pitch; it’s only if you want to go deeper and broader on this stuff.)

I then have my “general exclusions” negative keyword list which stops search terms that are not relevant to my business from triggering ads in my broad and phrase match campaigns.

The net effect is that I “distill” the value out of my broad/phrase match campaigns and into exact match spending, which makes it very easy to optimise my campaigns on an ongoing basis.

Step 4: Track your conversions

Setting up AdWords conversion tracking on your website is not technically challenging. If you manage your own website, you should be able to find out how to do it using a couple of quick Google searches; here’s a helpful article by Wordstream. If you have a developer you work with, they’ll know what to do.

The difficult part of tracking conversions is not in setting it up, but rather deciding what to track.

You might think this is obvious: I’m running a SaaS website, so my conversion event is when someone signs up. I’m running an eCommerce store so my conversion event is when someone buys … right?

Well, eventually, yes. But in the early days of “distilling” or “prospecting” out those gold nugget keywords from your search terms report, all you actually care about is whether or not a particular search term identifies someone as being in your target market.

If you put your conversion event behind a “high commitment” event and you haven’t already optimised your sales funnel and messaging and clearly identified your target market, you’re essentially trying to do conversion optimisation on your website at the same time as attempting to optimise your AdWords traffic. You won’t be able to tell which is actually causing the problem.

Some examples of “low commitment” conversion events might be:

  • Not bouncing (if you want to do this I highly recommend using Google Tag Manager which enables you to easily create a rule to fire a conversion on every page of your site except, say, the homepage)
  • Viewing your pricing page
  • Signing up for a newsletter
  • Downloading a free guide
  • Clicking the “tell me more” button after reading a description of your product

Having this information communicated back to AdWords and in your search terms report can make it much easier to determine where your best opportunities are. It’s particularly valuable for tech startups who may not have an easily identifiable market or whose product can be difficult to describe.

For an eCommerce business, you might find that you’re able to choose a “low commitment” conversion event that identifies which search terms are being performed by people in your target market, even if your pricing is too high, or your checkout process too convoluted – or any number of other issues that can prevent people from buying plague your site.

This allows you to solve your marketing problem separately from your sales problem, which is important. If you’re selling floral summer dresses, and you find people looking for floral summer dresses, and you get 10 clicks per week, and you can’t sell even one floral summer dress to these people looking for a floral summer dress, then you know you have a problem.

This is a problem that MORE TRAFFIC will not solve. It’s a sales problem, not a marketing problem.

Using AdWords allows you to set up a highly controllable and cost effective marketing channel with which you can experiment and learn to sell your product.

If you can solve the sales problem for floral summer dresses, you’re likely going to learn something which will allow you to solve your sales problem more generally for other products you sell.

The information you get during this (relatively) inexpensive process can provide you with invaluable insight into your business.

Step 5: Optimise for life

Building up your exact match ad groups and negative keyword lists represents a tremendous competitive advantage.

If you invest in building this “sales machine”, you have very finely grained control over your marketing budget and can react to competition and market changes appropriately.

Firstly, having a large negative keywords list means that you can “unblock” new market or product searches in your broad and phrase match campaigns when you expand your product range or need new prospects, without wasting money on unwanted clicks all over again. Not only this, but anyone who wants to compete with you will end up having to waste all that money in order to build up their own negative keywords list, which will cost them just the same as it cost you.

In fact, if you’ve already worked out your sales funnel, you’ll find you can bid the price up a LOT on keywords on which you know you’ll get an ROI, meaning your competitors will find it incredibly difficult to break into your market as inexpensively as you did.

Secondly, having control over your spending at the search term level (which is essentially what you achieve by focusing your spending in exact match ad groups) makes ongoing optimisation of your campaigns an absolute piece of cake.

In fact, in order to optimise your spending, you only really need to remember two things:

1. If you have low clicks, you need a better ad

2. If you have low conversions, you need a better page

Whether you’re on a tiny budget or a huge budget, you can focus in on just the search terms that produce the most revenue, present the biggest opportunity or are underperforming.

Here are some examples of identifying under performing ad groups:

  • You run your broad, phrase and exact match campaigns for 1 month, spending a total of $600 and ending up with 5 exact match ad groups which all have conversions on some “low commitment” conversion event, for example viewing your pricing page.
  • You pause spending on all but these 5 ad groups which get you an average of 20 clicks per week, but no sign-ups. You’re spending about $30 per week to get those 20 clicks, all from people in your target market.
  • You move your conversion event to the “sign-up” page, ie. the page that people see once they click “try it out” and find that, out of the 20 people, 8 are getting to your sign-up page but no-one is actually signing up.
  • You change your sign-up page a couple of times to reduce the “form clutter” and have some testimonials and a clearer description of the service. You remove the credit card requirement and allow sign-up without no credit card.

Now you find that 4 people sign-up per week. You create an email sequence or drip campaign to send them following sign-up. You tweak this for 2 months (or test it) until you’ve gotten to the point where 1 out of every 8 people that signs up will convert to a paid plan.

This process took you about 3 to 4 months, and you now have a sales funnel which gets you get 2 people onto your paid plans per week, for just $30. You make an educated guess at your “lifetime value” based on how much your service costs and surmise that you’re making about $500 per new lead over and above marketing costs.

This is a tremendous ROI, but you’re still only getting 2 customers per wee … and you worked for 3 to 4 months to make it happen! Don’t be disappointed, though: look at all you learned.

You can now go back and do any number of things to get more prospects into your sales funnel:

  • Increase your bid on keywords that you already know are working
  • Test a better ad to increase your CTR and get a better share of the traffic
  • Unblock spending on some of your other exact match ad groups
  • Unblock spending on your broad and phrase match campaigns to get new leads

Go back and do another round of keyword research focused on the keywords that are converting, but at a HIGHER bid so that you can buy the more competitive traffic. Why? Because now that you know your conversion rates, you can determine what you can afford to spend to get each lead which gives you a tremendous competitive advantage.

This is why it’s so important to “set your expectations”. I find that so many people go into AdWords thinking that they’re going to get MASSES OF TRAFFIC and live the rest of their lives on Easy Street, but the reality is more often than not very different.

Succeeding with AdWords is more like cultivating a bonsai tree. You need to think like Mr. Miyagi, not Gordon Gecko.

Another scenario might be one where you have a larger marketing budget in an established market. You’re selling women’s clothing. People are looking for it. They’re coming to your site, and they’re buying. You do a LOT of work analysing the search term report and end up with about 1,000 exact match ad groups – and there’s still plenty of volume to go in your broad and phrase match campaigns – but you’re spending your entire budget on your exact match campaign.

A basic strategy to optimise this spend, increase ROI and free up some budget to get new keywords from your phrase/broad match campaigns would be:

  1. Move your conversion event to the “sale” page and use a dynamic conversion value to communicate how much each person spends back to AdWords
  2. Use filters to identify which keywords are underperforming
  3. Pause underperforming ad groups while you bring in new keywords from broad and phrase match OR;
  4. Reduce your costs per click on under performing ad groups so they generate a positive ROI

How do you know if something’s underperforming?

The trick here is defining what “under performing” is. There’s a relatively simple way to do it.

Let’s say you running an eCommerce store, and you’ve got dynamic conversion tracking in place. With this, every time someone makes a purchase, the exact purchase value is communicated back to AdWords.

To see what’s performing well, you would set up two “saved filters”, which you would periodically use to pause spending on underperforming ad groups:

FILTER 1: A filter which gives you a list of ad groups that have gone X number of clicks without a conversion, where X is determined by calculating the lowest possible conversion rate of those keywords which have converted.

For example, you can first find all keywords which have converted at least once, and then order in ascending order by conversion rate to find out what the lowest conversion rate is.

NB: The screenshots below are from a client I’m doing some optimisation work for, I’ve removed any information that would identify their keywords or account details.

First click the “filter” dropdown and choose “create filter”:

Using Filters in Adwords

Now create a filter that shows you everything with at least one conversion, and then find the lowest conversion rate, like so:

Filter in Adwords

Next, calculate the minimum number of clicks that should produce that conversion rate. For example, if you find that the minimum conversion rate of all ad groups which have converted at least once is 1%, then you would say that if an ad group reaches 100 clicks without a conversion, it will most likely never convert:

Filter PPC what won't work

You can periodically go in and pause these ad groups. Later, you can go and find all the ad groups you paused and choose those with the highest clicks, and see if you can create a landing page just for them. Because each of your keywords is in its own ad group with a single ad, all you have to do is go and add a second ad to that ad group driving traffic to a different landing page and see which one performs better.

You can continue to optimise each of these ad groups incrementally forever, building as you go an ever increasing competitive advantage that is not only immune to “Google algorithm changes”, but also to threats from new competitors with bigger budgets than yours.

FILTER 2: Do the same to find keywords that convert, but this time look for those with a poor ROI. You can use the “Value/cost” column to create a filter that shows you all ad groups that have converted X number of times but haven’t brought in enough revenue. Obviously you need to give each of your ad groups a chance to prove themselves: the first time someone buys a floral summer dress they might only spend $20, but the next person might spend $500. As with the previous example, you should try to avoid “arbitrary” cut-off points, by analysing the behaviour of your other ad groups. This one is a LITTLE bit more tricky, but bear with me:

You can first find out the average value/cost and number of conversions for all ad groups which are performing above average in terms of value/cost:

Winning at PPCClick to see the larger, more detailed view

Then find all ad groups that are performing below the target in terms of value/cost but have had more than, say, 5 conversions:

Converting better with AdwordsClick to see the larger, more detailed view

You’ll find some surprising things. Often, even though certain ad groups do produce sales for you, they’re not producing a suitable ROI. In cases like that, you can either choose to pause them OR reduce your bid to the point where your cost per conversion will produce a positive ROI:


That is to say that you apply this formula:

(Current Cost / (Target Value per. cost)) / (Number of clicks) = Target CPC

Reducing your bid means that you will move further down the page. So your CTR will drop. And you’ll get fewer clicks overall. But the clicks you do receive will produce a much better ROI because there is no change in conversion rate between positions on the page – this has been verified by Google.

As an example, if you have an ad group for the exact match keyword [floral summer dresses] that brought in $400 from 300 clicks and you want to ensure that it’s generating $2 for every $1 spent, your target CPC for that ad group is:

(400 / 2) / 300 = $0.66c

If you were bidding $2.20 previously for a #1 position and getting 36 clicks per month from that one ad group at a CTR of 25% – which cost you $80/month – you might find you now get a #5 position with a CTR of 4% for a total of 6 clicks per month which will cost you $4.

It will now take you about 2 years to get the 300 clicks required to make $400 from that ad group. However you will only spend $200 to make back $400 over 2 years, instead of spending about $660 to lose $260 over about 8 months. Interesting, right?

In other words your absolute sales numbers will go down, but your ROI will increase.

Multiply this boost in ROI across all your exact match ad groups, and you can see how it can dramatically improve your numbers.

The reason we want to base our “cut-offs” on the average campaign performance is because the value and conversions are entirely dependent on the market, the product and the website. You can’t say, arbitrarily, “My ads should be getting a 5x ROI!!” because maybe that’s just not possible and you have to increase the lifetime customer value by up-selling or cross selling other products.

What we’re looking at here are strategies for optimising traffic, rather than optimising conversions.

For sites with larger budgets/volumes, the quickest and easiest way to improve their ROI from AdWords is to optimise their traffic/spend rather than optimising their site. That is, it’s much easier for them to double their ROI by reducing spending on underperforming ad groups than it is to double their conversion rate for traffic that is currently underperforming. This will only get them so far, though.

As most startups find, eventually you’ll discover there are no more “easy wins” in adjusting your traffic and spend. That’s when it’s time to focus on improving your ads (to get a higher click through rate and more traffic) and improving your site (to get more conversions).

These are just a few examples from my own experience in dealing with both large and small budgets in a variety of industries, but I think these case studies give you a good idea of just how much control you’ll have over your campaign optimisation once you concentrate all your spending into exact match ad groups.

You actually feel like kind of a super-hero.

Now you’ve seen how to find a niche, set up a campaign, target your ads and optimise your spending, all without using any of AdWords’ more fancy/tricky features: just a bit of gumption and smart analysis and you’ll be able to crush the competition like the insolent bugs they are.

Simple …… but not easy. 🙂

If this piqued your interest in better, smarter AdWords campaigns – or if you’re thinking of refocusing your AdWords efforts in 2014 – quick offer for you: you can save $100 on my Adwords ebook until midnight on Monday, Dec 2, 2013. Just enter code CYBERMONDAY, and download it instantly.

Iain Dooley runs a full service digital marketing agency called Decal Marketing, which specialises in AdWords training. They can manage your campaigns, or teach you how to find and dominate an AdWords niche for your business in just 3 hours. More here