Here’s how it works: if you’re a business, your location-specific phone number will display next to your Adwords ad as a clickable (touchable?) link for people who are searching on smart phones. Once they tap the number their phone will call your business and Google will charge you for an ad click.

If you’re a local business advertising on Adwords you should definitely take advantage of this. Not only does it provide the shortest path for a searcher to contact you/become a lead, but by displaying your local number you will instantly grabs searchers’ attention with your area code letting them know you’re located next door.

Have you tested this out yet? What kind of results have you seen? Let me know in the comments!

Related posts:

1. 3 Ways NOT To Display Your Business Phone Number On Your Website
2. TC50 Winner 'RedBeacon' Points to Local Search Evolving… Are You Prepared?
3. 9 Tips For Writing Irresistibly Click-able AdWords Headlines

Click here to download Adwords Editor

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1. Adwords Editor 7.6.1 Released – Go Get It

This may shock you, but a large part of winning the pay-per-click marketing game has to do with how much you pay per click.

There are two schools of thought when it comes to setting pay-per-click bids: position-based and economics-based. This will be a quick summary of both models and an argument for why I believe you must follow one of the schools over the other if you want to truly maximize the performance of your Google Adwords and other PPC campaigns.

A common-sense approach

Let’s forget about pay-per-click marketing for a second and take a quick look at how we make decisions concerning prices in all other aspects of our life.

If I told you I was buying a used car for $4,500, then asked you if you thought it was a good deal, you would probably say something like, “What’s the Blue Book?” You would need to know what it’s actually worth before knowing if the price is right… right?

Similarly, if you’re looking to buy an investment propery and your realtor calls you and says “Hey, I’ve got this great house on the market for only $425,000,” would you be able to confidently buy it over the phone right then? Of course not. You would first need to estimate the actual value of the property as accurately as you could before you knew if the price made sense.

Now, pretend for a second you know nothing about pay-per-click marketing, Google Adwords, quality scores etc. and just answer this question: How much should you bid for any given click?

The correct response that a successful marketer should give is: “It depends… what’s the click worth?”

Makes sense, right?

Here’s the dirty little secret: a large majority of marketers do not ask that question. It’s not because they are lazy pay-per-click managers (although that’s definitely the case for some); but because they subscribe to the “position-based” school of bid management.

What is “position-based” bidding?

“Position” refers to the position that your ad appears relative to other ads on the search results page.

The general rule: the higher your ad is on the page, the more your ad will get clicked. It will have a higher click through rate and bring more traffic to your website, resulting in more leads/sales for your business.

With Google Adwords (Yahoo & MSN have similar systems), your ad’s position is determined by the following equation: CPC bid x Quality Score.

Quality score is Google’s somewhat-secret sauce that is a number 1-10 given to your ad based on it’s CTR and relevancy to the keyword and to your landing page. Getting a high quality score is an important topic, and one that an entire e-book could be written on (and a few have been). For now we’re talking about bid management, so the factor we’re interested in is the CPC bid.

Position-based bidders believe that there is a “sweet spot” position on the page for every keyword in their campaigns, and they will adjust their bids accordingly in an effort to keep their ads showing in that position consistently.

You’ll often hear position-based bidders say things like…

• “Positions 4 through 6 are the most profitable spots to be on the page. You’ll still get solid traffic without paying the premium for the 1 through 3 spots.”
• “Positions 1 through 3 drive a lot more conversions than lower positions, so we’re going to keep bidding high to keep our ads up there.”
• “If you’re ad isn’t showing on the first page then you need to raise your bids to make sure you’re getting traffic.”

Are these guys right? Do some positions lead to better conversions? Is one position truly better or worse than another?

Everything wrong with position-based bidding

Almost as if they were the ones managing your Adwords account, position-based bidding lets your competitors decide how much you bid.  When your competitors’ bids go up, yours have to go up to keep your ads in the same position.

This is a problem for two big reasons:

1. Your competitors have different economic models than you. Just because a lead may be worth $10 to one of your competitors doesn’t mean it’s worth $10 for you. If you have a better sales funnel than they do, that lead could be worth $15, 20, even $50 for your business…
2. There’s a good chance your competitors simply don’t know what the hell they’re doing, especially when it comes to pay-per-click bid management of all things. This makes bidding based on position often a true case of the “blind leading the blind.”

Additionally, let’s dispel a myth — different positions on the page do not have different conversion rates. Sure, you may get more conversions in position 1 vs. position 5, but that’s only because you get more clicks the higher you are on the page. The actual percentage of those clicks that convert into customers does not change. (Here’s a report on the subject released by Google in Aug. ‘09: Conversion Rates Don’t Vary Much with Ad Position)

A return to common sense: economics-based bidding

Bidding based on economics simply means determining your bids by asking the age-old question, “What’s it worth?”

Applied to PPC, that means looking at every keyword and asking, “How much is a click for this keyword worth to my business?”

Notice that this is a fundamentally different question than asking, “How much are my competitors paying for this click?” or “Where will I show up on the page for this keyword?”

None of these things matter when it comes to deciding how to set your CPC bids. Once you know click’s value to your business, figure out the price you’re willing to pay for that value and that’s your bid. It’s that simple.

A quick example

If you’re bidding on “widget,” and your data shows 15% of people who click on your ad after searching for “widget” end up buying your $50 product, and you’re willing to spend 10% of sales on advertising, then your numbers for keyword “widget” look like:

• Conversion rate: 15%
• Sale value: $50
• A/S (Advertising/Sales ratio): 10%

To get the value of the click, we multiply your product’s sale value by the keyword’s conversion rate.

Click value = Conv. Rate * Sale Value

In our example, the value of a click for keyword “widget” = $50 x 15%, or $7.50.

To determine how much you should bid per click, multiply the click’s value by your A/S ratio.

Your bid = Click Value * A/S

In our example, your max CPC bid for “widget” = $7.50 x 10%, or .75 cents.

Position is irrelevant

Once you have set your bids using the economic model, you don’t need to worry about position. If your ad’s in position 1, great!

What if your ad drops off the page to position 12? Oh well. That means the current economics of your business (sale price, profit margin) combined with effectiveness of your sales funnel (conversion rate) aren’t enough for your ad to profitably display on the first page.

Does this mean you should raise your bid? Nope.

Does it mean you’ll be off the first page forever? Not by a long shot.

Maybe a handful of your competitors for that keyword are operating at a loss (especially if they’re using the position-based method). Once their money runs out and/or they finally realize it’s unprofitable for them too, they’ll drop their bid. If enough competitors do this, then all of a sudden your bid is high enough to be appearing in position 8 or 9.

What’s important is not your position, but that you have a bid that makes economic sense for your unique business and sales funnel.

Use the economic-based method to set your bids and you can be sure that wherever your ad shows up is exactly where it’s supposed to.

Related posts:

1. How Adwords' "Dynamic Keyword Insertion / DKI" Works
2. 9 Tips For Writing Irresistibly Click-able AdWords Headlines

You may have heard about this Adwords trick, also known as “DKI” if you’re a really cool industry insider. Here’s how it works: you insert {keyword} in your headline, and then Google changes your headline on the fly to exactly match the keywords that people search for.

For instance, let’s say you’re selling gingerbread cookies. You put {keyword} in your headline, target the keyword “gingerbread” and let it fly. Someone searches for “gingerbread houses.” Guess what your ad’s headline is? Gingerbread Houses.

What if their search term is longer than 25 characters? What if they searched for “the most awesome gingerbread houses ever”? Unfortunately that’s too long to be your headline. Here’s what you do: instead of just running with {keyword}, you set your headline as {keyword:Best Gingerbread}. Now, if your ad is triggered by a search phrase longer than 25 characters, you have told Google to display your headline as “Best Gingerbread.” Cool, right?

Sort of. DKI is popular because it’s a no-brainer way to make sure that your headline contains your searchers’ keywords. That being said, don’t get married to it…

Dynamic keyword insertion encourages poor market research. I recommend finding the top 10 high traffic keywords that are relevant to your business and getting those “stories” down pat. By getting the story down, I mean writing entire ads (not just headlines) that focus on each specific keyword, then creating landing pages to match each one.

You can’t do this with DKI, because who knows what your headline is going to be?

You’d be better off with an ad all about gingerbread houses that leads to a landing page with some awesome pictures like this:

What is your opinion about dynamic keyword insertion? Has it worked for you in your campaigns? Let me know in the comments.

Related posts:

1. 9 Tips For Writing Irresistibly Click-able AdWords Headlines
2. Position-Based vs. Economics-Based PPC Bidding

An AdWords headline can only consist of 25 characters. That’s 82% shorter than the maximum length of a Twitter message.

The headline also happens to be the most important line of your ad. If your headline doesn’t grab searchers’ attention as they quickly scan a Google search results page, your ad will go unseen. That means you have a very short window of opportunity to make those 25 characters count.

Here are nine guidelines to writing headlines that will give your ads the highest probability of being clicked on.

1. Don’t use your company’s name.

This is a big one that I see a lot of small businesses get wrong. Unless your company is a household name like Amazon, Walmart or Coca Cola, don’t waste your precious headline space by announcing the name of your company.

The only people who will recognize your company name and click on your ad are those who are already aware of your business and are probably already a lead or, even worse, a current customer themselves.

And for those who have never heard of you? They don’t care what your company’s called. They just want to know if you can solve their problem. By using a headline that doesn’t grab their attention, they will probably never get the chance to find out.

2. If you’re a local business, mention the location you’re serving.

If you’re a dermatologist in Nashville, Tennessee, put “Nashville” in your headline. Remember, it’s all about grabbing the searcher’s attention. You have to make the headline as relevant to them as humanly possible. What better way to do this then to put their location in big blue letters right at the top of your ad?

By the way… if you’re doing this make sure you’re geotargeting your ads OR all of your keywords include “nashville.”

3. Use emotional trigger keywords.

Cheap. Free. Fast. Limited Time. Special. Now. You.

These are all words that evoke emotion in people. Human beings may be complicated, but we have the simplest triggers that get our attention and compel us to take action. Use them to your advantage and your ad is more likely to be clicked on.

4. Include the price of your product or service.

If you’re beating most of your competitors when it comes to price, don’t be afraid to put it right there in your headline with a shiny dollar sign in front of it. Most other advertisers won’t be doing this.

5. Try reverse psychology.

“Don’t Buy < x >,” “Don’t Try < x >.” Replace x with your product or service. If you use this technique, in line one of your ad you should lead with something like “Unless you buy from us.” This will almost certainly stand out against other ads in your industry (unless your industry is internet marketing).

6. Make an outrageous claim.

“Acne Free In 3 Days.” I haven’t checked to make sure that’s 25 characters or less but you get the point. Make a bold claim, but make sure that your landing page backs it up… Google actually has rules about this. You don’t need scientific reports (necessarily), just be sure you have some info on the page that supports your claim.

7. Put it in quotation marks.

“Studies have shown” that human beings’ eyes are “drawn to quotation marks. “

“See” what I mean?

8. Use at least part of your keywords in the headline.

If you’re bidding on the keyword “gourmet catering,” don’t just run an ad with a headline that says “Food Delivery.” You want to use at least one of the keywords in your headline for two reasons: one, because any words that match the Googler’s search term will be displayed in bold (ex. “Fast Catering”), and two, the word is more likely to catch the searchers’ eye because it is exactly what she searched for.

9. Use symbols $#@*-!

The majority of advertisers don’t use symbols in their headlines. Using a few where appropriate can make your headline stand out as searchers scan the page. Note that I mean “where appropriate” very loosely… I test pretty much all of my headlines with a question mark at the end at some point.

Photo credit: try_to_touch

Related posts:

1. How Adwords' "Dynamic Keyword Insertion / DKI" Works
2. Google Introduces Pay-Per-Call to Adwords Mobile Ads
3. How The Huffington Post Utilizes The Awesome Power of Split Testing

How do I know?

In Adwords campaign settings, Google gives users two options for ad rotation:

• Optimize – ‘Show better performing ads more often.’ With this option, after a short amount of time Google takes the ad with the highest CTR and then gives it over 80% of the impressions, displaying it much more often than the other ad.
• Rotate – ‘Show ads more evenly.’ This tells Google to give each ad an equal number of impressions. Best for smart advertisers.

I recommend that as an advertiser you shouldn’t listen to Google’s recommendation to optimize your ads. Letting Google pick your best ads will kill your split tests before you collect enough data to truly declare a mathematical winner.

Despite this, Google has always set the default for this setting at “Optimize,” even going so far as to recommend it for new advertisers.

Recently, as of August ‘09 Google updated their Adwords web interface to make it even harder to change this ad rotation option.

In fact, if you’re setting up your new campaign settings before you write any ads, as I’m sure many do, it’s literally not an option for you.

Here’s a screenshot of the ad rotation setting for new, ad-less campaigns:

So, if showing your ads evenly is the best way to run split tests to get fast results, why doesn’t Google set this as the default?

I speculate about this and write about two other settings you should go against Google’s recommendation on for every new Adwords campaign you create in my post, “3 Adwords Settings You Must Change to Avoid Campaign Suicide.”

I recommend that as a smart advertiser you should set up your ads (or just create a test ad) and change this ad rotation setting to “Standard,” giving all of your ads an even shot at becoming winners for your campaign.

Related posts:

1. 3 Adwords Settings You Must Change To Avoid Campaign Suicide
2. Is Google Split Testing a New 'Search' Button?
3. How The Huffington Post Utilizes The Awesome Power of Split Testing

Pay-per-click marketing is just a platform shift for advertising methods that have been utilized by the direct mail industry for decades.

SearchEngineLand recently came out with an interesting post pointing out that a lot of the things experienced marketers have learned about consumers from dropping catalogs in the mail year-after-year probably still hold true today for pay-per-click marketing.

In fact, they are currently performing a study to see if these two principles that have proven to be accurate in the direct mail model will apply to PPC:

• Rural, low-population density areas have a significantly higher response rate to ads than urban areas. (Their early numbers show this is true: those in rural areas click on PPC ads around 60% more than city dwellers.)
• Ads shown to consumers by companies who have a brick & mortar store in or near the consumer’s zip code are much more effective at driving sales.

I’ll be very interested to see how this study turns out. I’m predicting that both of these principles hold true when applied to pay-per-click marketing.

As further data is gathered around what factors heavily influence PPC click-through-rates and sales, SearchEngineLand points out that Google would be smart to provide tools to Adwords advertisers that allow them to target their ads to smaller, thinly sliced demographics.

Maybe in the near future, “Urban” will be an Adwords targeting option. I’d personally settle for “Frequently honks when driving.”

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