Category Archives: Google

AdWords Rot

Adwords RotAn AdWords account that starts off making a worthwhile profit for the owner is often neglected and, within a year or two, is losing money. Potentially a lot of money. I have seen it happen again and again. If you are running a Google AdWords campaign, you have to at least monitor it. Better still, actively maintain it. Otherwise the rot will soon set in.

Here is an example of an AdWords campaign that was professionally set up and then left to coast, unmanaged. You can see that the cost per converted click (blue) rose, while the number of conversions (orange) fell a little. The average cost per conversion (trial) rose by a factor of 3 in just 4 years. What was once a profitable account was now wasting a lot of money. Ouch.

adwords conversion graph 2

The main reason for the rot is that Google are continually changing AdWords, and they may opt you in to new features without asking you. For example they automatically opted display advertisers into showing ads in free-to-play AppStore games. B2B business owners were paying thousands of dollars for clicks made by bored children in Flappy Bird and the like. I have seen accounts where thousands of dollars have been spent on these worthless clicks. And these were  small companies. Other reasons include:

  • Your display ads might start showing on a new website where they convert badly.
  • Poor targeting. Perhaps a new product, film or band has appeared with a name similar to your product.
  • Increased competition and bid price inflation can reduce a healthy amount of traffic to a trickle, reducing profitability.
  • Click fraud.

So you really need to keep an eye on your AdWords account. At an absolute minimum you should monitor the number of conversions and the cost per conversion and investigate any unfavourable changes. To keep your account in good shape over time you need to actively maintain it, e.g.:

  • Delete any keywords with poor click through rates (typically I delete keywords with a CTR of 0.5% or less after 200 or more impressions).
  • Delete any keywords with poor quality scores (typically I delete keywords with a QS of 3 or less).
  • Delete any keywords or ads with poor conversion rates.
  • Examine the dimensions>search terms report for negative keywords to add.

You can easily set up filters and get automated reports sent to you to make this fairly painless. These checks should be done perhaps once a week for a new or high budget campaign and perhaps once a month for a mature or low budget campaign. You can also make your life easier by setting up AdWords so that Google is doing most of the heavy lifting for you. For example you can use CPA bidding and you can set the ad rotation setting to Optimize for conversions: Show ads expected to provide more conversions.

A mature account that has been well set-up and has a budget of around $1k per month, probably only needs an hour a month to maintain. Alternatively, if you can’t spare an hour or two a month to manage your AdWords campaign, do yourself a favour and shut it down. Now.

Are you wasting your AdWords budget on in-app ads?

2 out of the last 3 AdWords campaigns I have looked at for consulting customers were spending substantial amounts of money on worthless in-app ads, without even realising it. Feast your eyes on the following:

in-app placement ads$1,071.04 spent on clicks from a single game app, that resulted in 0 trials of the software product being advertised. Hardly surprising given that it was a B2B app that cost around $1000. On further investigation this company was spending a substantial percentage of its AdWords budget on completely useless clicks from in-app ads. Ouch.

And this is from a different AdWords account for another B2B software company:

in-app display ads

Many of the apps in the iOS and Android app stores are now funded by in-app advertising. The creator of the infamous Flappy Bird game claimed to be making tens of thousands of dollars per day like this.

Flappy Bird In-App ads

(Note that the ad shown in the screenshot is not related to either of the two companies I mentioned above).

At least the ad is well away from the ‘play’ button. Some, less scrupulous, app makers place the ad in such a way that it is easy to accidentally click on it.

Who would want to pay for in-app ads, knowing that most of the traffic will be accidental clicks from frustrated gamers (many of them children) just trying to get to the next screen? If you run ads on the Google display (content) network, it might be YOU. Google started showing display ads in apps some time ago and it seems that all existing display campaigns were automatically opted in. Worse still, the apps they are advertising in appear to have no relevance at all to your content campaign keywords.

App makers get some money, the public gets free apps and Google makes mega bucks. The advertiser is financing the whole thing and getting (in many cases) nothing in return. But don’t feel too smug. If you have a display campaign that you aren’t carefully monitoring, you might also be throwing away money. To find out:

  • Log in adwords.google.com.
  • Click on All online campaigns.
  • Choose a sensible time frame, e.g. the last 6 months.
  • Click on the Display network tab.
  • Click on Placements.
  • Click on the Cost column to order from highest to lowest cost.
  • Look down the Placement column for entries that start with Mobile App.

Adwords display placements report

While you are there, it is also worth checking the relevance to your product of the other sites you are running display ads on.

Hopefully no horror story awaits you. If it does, you can exclude the offending placements to stop your ads appearing there again.

exclude AdWords placement

But this is a bit like playing whack-a-mole, as you will be continually excluding new apps (I haven’t found a way to opt out of in-app ads wholesale). Alternatively, just pause your display campaigns. Personally I gave up on display ads some time ago. The conversion ratios were so miserable (much lower than search ads) that I could never make any money on them.

If you have been stung for hundreds or thousands of dollars, it may be worth complaining to Google, to see if you can get any money back on the grounds:

  • You never explicitly opted in to in-app ads.
  • The apps your ads appear in bear no relationship to the search terms in your content campaign.

I have no idea if that will be successful, but it might be worth a try.

Google are continually changing the rules of the AdWords game and you would be naive to assume they are doing so with your best interests at heart. If you are running an AdWords campaign you must monitor it continuously or bad things will happen.

Related articles:

Upgrade your Adwords accounts before the 22nd July – or else!

google adwordsGoogle will automatically switch all Adwords campaigns to ‘enhanced’ on 22-July-2013. If you don’t do it before then, Google will do it for you. And you can be confident they will be thinking of their interests, rather than yours. The changes are mostly bad news for those of us that sell software for desktop computers. In particular you can no longer choose not to bid for clicks on tablet devices. I would like to have more control over how I bid on different platforms, not less, so I am not happy about the changes. However your choices are either to upgrade your campaigns to ‘enhanced’ or close your Adwords account.

You can at least bid less for clicks on mobile devices. If you are selling downloadable software that doesn’t run on mobile devices, I recommend you set your bid adjustment much lower for mobile devices. My own analytics data tells me that mobile devices only have one tenth the (measurable) conversion rate of desktop/laptop computers. So I have set my mobile bid adjustment at -90% for mobile devices. Presumably you can set it to -100% if you don’t want to bid for mobile clicks at all. I don’t understand why advertisers aren’t being given the same option for tablet devices.

Note that you can’t set a mobile bid adjustment for CPA campaigns. However Google should notice the lack of downloads and sales on mobile devices and adjust the mobile bids down for you automatically.

Upgrading is pretty straight forward and should only take a few minutes. More details on the software promotions blog.

The declining profitability of Google Adwords

Google Adwords used to be a great way to get targeted traffic cheaply (if you knew what you were doing). I think those days are well and truly over.

I have been using Google Adwords to advertise my table plan software since 2005. The following graphs show some metrics from my Adwords campaigns over that 8 years. The graphs show 12-monthly cumulative figures (e.g. each point represents the value for that month plus the preceding 11 months). Using cumulative data hides some of the noise, including the seasonal variations that are inevitable in a business related to weddings (more people buy my software when it is summer in the northern hemisphere), and makes the overall trends clearer.

Average cost per click (CPC)

Average cost per click (CPC)

Clickthroughs

Clickthroughs

Conversions (sales)

Conversions (sales)

Profit per month

Profit per month

The trends are clear and it’s not a pretty picture. Less, more expensive clicks = less profit. I can either pay more and more per click to maintain the same number of sales. Or I can continue to pay the same per click and get less and less clicks. Either way, my profit goes down. It isn’t a trend I see changing direction any time soon.

I think these long-term trends are mostly due to increasing competition. As more and more companies bid on Adwords for a finite number of clicks, it inevitably drives up the cost of clicks (simple supply and demand). It also doesn’t help that a lot of Adwords users are not actively managing their campaigns or measuring their ROI, and are consequently bidding at unprofitably high levels. Google also does its best to drive up CPC values in various ways (suggesting ridiculously high default bids, goading you to bid more to get on page 1, not showing your ad at all if you bid too low – even if no other ads appear etc).

Of course, this is just my data for one product in one small market. But the law of shitty clickthrus predicts that all advertising mediums become less and less profitable over time. So I would be surprised if it isn’t a general trend. Are your Adwords campaigns becoming less profitable? Have you found another advertising medium that works better?

The imminent demise of Google Reader

Sadly, Google is killing Google Reader on 01-July-2013. If you are reading this blog using the RSS feed via Google Reader, I suggest you start looking for another RSS reader. I have been trying feedly. It is ok, but so far I prefer Google reader. What is your favourite Google Reader alternative?

Selling software vs selling eyeballs

Lets say I’ve written some downloadable software and I want to make some money from it (‘monetize it’  in the ghastly common parlance). Should I charge people for using the software or should I give them the software for free and make my money from ads?

Lets look at some numbers.

The typical conversion rate for downloadable software is around 1%. That means that about 1% of the people that visit your site will typically buy your software. So, for each $1 of your sale price you will make around $0.01 per unique visit. Downloadable software is often priced around $30, so lets say $0.30 per unique visitor. Some software sells for less than $30, and some for a lot more. Also I haven’t taken account of the lifetime value of a customer (e.g. upgrades) – which will increase the value per customer; or payment processing and advertising costs – which will reduce the value per customer. It is just a ball park figure.

How much money could I make from advertising if I give the software away instead? I have been doing some research for a while on this. Based on various data I have gleaned from the BOS forum and blogs, advertisers typically pay per $1-$2 per 1000 impressions (CPM). Some data points:

  • A well known ad network offered me a $2 CPM (-19% commission) to put ads on this blog.
  • Dating site plentyoffish.com reported making $10k/day from Adsense off 200 million pages per month in 2006, which is a CPM of $1.5
  • A sample of 8 Facebook app developers were averaging less than $1 CPM.
  • “If a site like Stack Overflow, which does almost a million pageviews a day, can’t make enough to cover even one person at half time using Google AdSense, how does anyone make a living with AdSense? Does it even work?” (Stackoverflow blog)
  • “Charging your end user isn’t the only way of pricing software. You can choose to give it away for free and then make money by, for example, charging for consulting, installation and training; or selling advertising. The latter, although a common model for web sites, is extremely hard to make work. CPM – the cost per thousand impressions – can be as low as a dollar. In other words, to generate one thousand dollars of revenue you might need to serve up as many as a million pages. To generate enough revenue to support a team of three or four people, that means having ten million page views per month. Most web applications simply aren’t going to attract that sort of traffic.” (p57 of “Don’t just roll the dice”)

So, taking a ballpark CPM of $1.5, I would be making $0.0015 per page impression.

Obviously I am comparing apples (unique visitors) and pears (impressions) here. How many impressions does 1 unique visitors equal? My own table planning software averages around 2 impressions per unique visitor (many visitors bounce out after reading 1 page, even those that buy might only visit the home, download and purchase pages). So, assuming this is typical, the product based site described above should be making around $0.15 per page impression. Based on these (admittedly rough) numbers an ad driven site needs approximately 100 times as many page impressions per day to make the same money as a product driven site. To make around $100k per year the product site would need about 900 visitors/1,800 impressions per day. To make the same amount the ad driven site would need around 90,000 visitors/180,000 impressions per day. But it is worse than that because the ad driven site is going to have significant hosting fees and potentially many more users to provide support for. I know which business model I prefer.

So why not get the best of both worlds – sell the software AND put ads on the site? Because then you are sending out all sorts of bad vibes (“this software isn’t good enough that they can make a living off it”) for a measly 1% extra income from the ads. I’m confident the presence of ads will lose you >1% in product sales.

An ad supported model is only viable when you have lots of traffic. Most downloadable software (or web apps) won’t be able to generate that sort of traffic, even if it is good and you give it away for free. If you really want to run an ad supported business, you are probably better off basing it around forums and user generated content than free software.

In the final analysis if you are creating software I think it makes more sense to create something of value, grow some balls and charge for it. Rather than giving it away and selling eyeballs in the hope that someone else will take their money and throw you some scraps. Think balls, not eyeballs.

Setting an optimal bid price for Google CPA bids

A couple of years ago I wrote up the results of an experiment comparing Cost Per Action vs Cost Per Click bidding in Google Adwords. At the end of the experiment I decided that I did trust Google CPA bidding, but the results from CPA bidding weren’t compelling enough for me to switch. So I stayed with my mature CPC campaign. Subsequently I spoke at length with Adwords guru David Rothwell and Adwords master practitioner Alwin Hoogerdijk. They convinced me that:

  • I hadn’t really given Google CPA enough learning time – the more data Google has the better it should be able to do. The mighty Google brain might even be able to spot and exploit patterns I would find very difficult to emulate (e.g. based on season, country, day or week or time of day).
  • I should switch from paying per sale to paying per download, as this would give Google an order of magnitude more data to work with.
  • CPA bidding would require a lot less of my precious time to manage.

So I switched back to CPA. This time measuring a conversion as a successful download and install (my table planner shows a help page in a browser on first run, this contains the Google conversion tracking script).

So now, instead of having to choose thousands of bid prices (one for each keyword and match type in each campaign), I had to choose a single bid price – what I am prepared to pay Google for a download. If I pay too little for a download: Google won’t show my ads much, I won’t make many sales and my profit will be low. If I pay too much for a download: Google will show my ads a lot, but the amount I pay for each conversion will be high and my profit will be low. In between their should be a ‘sweet spot’ that gives me optimal profit. But how to find that sweet spot?

Looking at analytics data I have a good idea at what rate Adwords traffic converts to sales. I chose a CPA bid based on this and then I randomly varied the bid up or down every 7 days (some days of the week perform consistently better than others for my product). The graphs below show the results. Each data point is 7 days of data. The black lines are linear trend lines. I deliberately haven’t put values on the axes, but the x and y axes are all linear, starting at 0.

The trends are pretty clear. Increasing CPA bid price:

  • increases the number of times your ads are shown
  • makes little difference to the click through rates
  • decreases the click to download and download to sale ratios

So higher bids means more sales, but also a higher cost per sale. But, of course, the really important metric is profit. So I worked out the average daily profit from Adwords traffic, which is the net sales income (gross sales minus sales costs, including payment processor fees and support costs) minus Adwords costs. Again each point is 7 days of data. The black line is a 2nd order polynomial trend line.

The data is quite noisy. But some data is a lot better than none and there does appear to be sweet spot about where the red arrow is. The curve is fairly flat meaning that I don’t have to be too precise in my bid price to get a near to optimal return. But if I bid twice the optimal price my profit will drop by about 35%.

In an ideal world I would have run all these different bid prices concurrently, instead of one after the other. But that just isn’t possible with Adwords at present (you can use Google Adwords experiments to split test bid prices, but only 2 at a time). Also I could have gathered a lot more data, used longer time intervals (7 days probably isn’t long enough for Google CPA to get into its stride) and bid a lot higher and lower, to make the trends clearer. But I wasn’t prepared to spend the extra time and money required.

If you are using CPA bidding you should be able to carry out a similar analysis on your own Adwords account to find your own CPA bidding sweet spot. If you are still using CPC, perhaps you should consider switching to CPA and let Google do some of the heavy lifting for you. You can switch any campaign that has 15 or more conversions per month to CPA bidding in the ‘Settings’ tab.

You can always switch back to CPC later. If you aren’t using Google conversion tracking, well you really should be.

A word of warning. Not all downloads are equal. You might think that download to sale rates would vary a lot less than impression to click and click to download rates (I did). But download to sale ratios can vary a lot between different campaigns, even for the same product. For example, my analytics data shows that downloads from Adwords display (=contents/adsense) traffic only convert to sales at around a quarter of the rate of Adwords search traffic. So display campaign downloads are worth a lot less to me than search campaign downloads and I set my CPA bids accordingly.

I showed a draft version of this post to Alwin Hoogerdijk of Collectorz.com collection database software, who first persuaded me to switch back to CPA and knows a lot more about CPA than I do. He had the following to add:

When using CPA bidding you should give Google more room to experiment. On search, this means using more broad match terms, or at least modified broad match. And less negative keywords (I removed a lot of my negatives lately). The idea is that Google will automatically find out what works and what doesn’t (again, this may take a lot of time).

On the Content Network it means being less trigger-happy with the site exclusions. Without CPA bidding, I would be more likely to exclude generic sites like Facebook, about.com, etc… But with CPA bidding, I tend to allow the optimizer to display on those sites and the find the right pages within those sites to show my ads on.

In my experience, the optimal CPA bid can vary (wildly) between products, campaigns, etc. . Content Network CPA’s in general tend to be much lower, for the same products. Strangely enough, content network visitor sign up (or downloads) are worth less than search traffic sign ups. Which wasn’t what I was expecting. Of course, content network traffic is less targeted in general so one would expect a lower sign up rate. But even if those visitors sign up, they convert less well to actual sales too. Tricky.