Author Archive

I was recently working with a client and struggling with a profoundly low conversion rate coming from search ads. The keywords we were buying were on target, the ads were performing well, and the landing pages appeared well designed. Then I tried to put myself inside the mind of the searcher. When I did that, I realized that the landing pages we were using were not as well designed as I thought, and our ads were missing the mark. The mistake we had made was to consider keywords, ads and landing pages independently. Sure, the ads were relevant to the keywords, and the landing pages were relevant to the ads, but we hadn’t really been thinking about the searcher’s intent through the process. The action we were expecting searchers to take did not fit the need that had motivated them to search. I spend a lot of time thinking about and optimizing for consumer intent, but after making such a mistake, I decided I needed a model against which to judge search ads and campaigns. Following is the model I put together.

Intention – before a person searches, she has an intent: intent to buy a pair of shoes; intent to learn about zanzibar; intent to determine the health benefits of a Blooming Onion; and so on. Some sort of information need driven by intention motivates her to search. When we start a search marketing campaign for a business, we begin by defining personae we intend to target with the campaign. The personae represent categories of intent. For example, shoe-shopping personae might include fashionistas and pragmatists. Fashionistas want to know what’s hot, pragmatists want a trustworthy vendor with a good return policy. We tend to organize our campaigns around the personae we define.

Search – once the person has translated intent into an information need, e.g. “I want a new pair of shoes” -> “where should I buy a pair of shoes?”, she turns to a search engine. While this step in the process garners a lot of attention among marketers, it is largely procedural in nature. Search listings do not address the searcher’s intent (you can’t wear them, for example), nor do they meet her information need in any real sense. They are merely pointers to information. The searcher quickly scans search results, looking for cues that indicate her need will be met by clicking on a listing. The right cues to include are a natural consequence of the personae we’ve defined. We also have to be mindful that there is a lot of information on a search results page. We can provide the right cues, but if our listing is boring or far down the results, it may never get evaluated.

Consideration – after clicking on a listing, the searcher evaluates the content on the landing page. Does it address her information need? She has criteria, conscious or unconscious, with which she will make a quick decision and either move forward or back up. The important thing here is to make sure that the landing page aligns with her original intent and is easy to digest. Too much information and she is likely to back up and look for a more suitable source. Too little information and her criteria can’t possibly be met.

Action – lastly, as marketers, we want the searcher to take some form of action, whether it be to call a number, watch a video or buy a product. Again, it is not a good idea to overwhelm the searcher with too many options, nor is it a good idea to present too few. Some people may be uncomfortable calling and prefer to communicate via email. Some people may want to read technical specifications before buying a product. The main thing is to decide what actions you want to emphasize, and make them as frictionless as possible.

This model bears a lot of similarity to the classic purchase funnel found in many marketing textbooks. It can be viewed as a specific instance of the funnel, applied to search marketing. I find it helpful, but the main point is that different types of keywords and search phrases belie different kinds of intent. When focusing on one stage of the process independently, it can be easy to lose track of that fact.

Nico Brooks is a data geek who struggles to get his head around marketing problems, but he always enjoys the struggle. Two Octobers is an internet marketing company that provides marketing services and strategic consulting to businesses selling to local markets.

Daily deal publishers such as Groupon and LivingSocial are a hot topic in local business marketing, but do they really work? We culled research on the topic, looking for answers to some of the questions that determine deal success or failure. We found a number of excellent studies that shed light on these questions, from the point of view of real businesses and consumers.

Does offering a deal attract new customers? Yes.

A poll of consumers by customer satisfaction firm Foresee Results found that 31% of deal shoppers were new customers. Respondents to the Foresee poll described themselves as:

• Frequent Customers – 38%
• Infrequent Customers – 27%
• Former Customers – 4%
• New Customers – 31%

In another study of businesses by Utpal M. Dholakia of Rice University, respondents indicated that fully 80% of deal buyers were new. Perhaps the discrepancy is one of perception, Dholakia’s study polled businesses, while Foresee polled consumers. Business owners may perceive all but the most frequent of customers as new, while in fact the number of deal buyers that have never tried a business before is much lower. Either way, the majority of deal buyers are not regular customers, and a solid percentage are brand new.

After purchasing a deal, do consumers come back? Not really.

Businesses, according to Dholakia’s study, say that only 20% of consumers return to a business after cashing in on a deal. On the other hand, consumers say that they will return. In a survey of consumers by Lightspeed Research, 65% of deal buyers said they had returned to businesses. The discrepancy can be explained by the fact that consumers return to some of the businesses they visit, but not all. Factors such as quality of service, location and price presumably influence their likelihood to return.

Does my target customer purchase deals? Probably not.

According to the Foresee study, deal purchasers are reasonably distributed across age ranges and income levels, with a skew towards women (59%). But a recent AdWeek/Harris Poll broad sample of all consumers found that 20% of respondents had purchased deals on occasion, and only 4% had purchased deals frequently. 48% knew about daily deals, but hadn’t purchased one. This points to the fact that deal shoppers are a small subset of consumers overall. Deals are a good (perhaps necessary) way to reach that subset, but most of your target market doesn’t buy deals.

How will offering a deal affect my bottom line? Positively, if you do your homework.

Dholakia’s study found that 56% of businesses made money when offering a deal. That means they not only gained some new, long-term customers and built awareness, but they actually made money in the process. The factors contributing to success or failure vary widely by industry and the particulars of a deal being offered, but we’ve tried to identify some of the more important ones below.

So, do daily deals work? It’s a coin toss.

In the minds of businesses who’ve done daily deals, it’s pretty divided. A MerchantCircle study found that 77% of businesses who’ve tried deals plan to offer one again, while only 48% of Dholakia’s respondents answered such. MerchantCircle members tend to be online-savvy, while Dholokia took pains to gather a broad sample, which may explain the difference.

It’s early days yet for daily deals, but on the whole businesses’ experiences have been neutral or positive. Merchants are still learning how deals fit in to their marketing, and how to structure deals so they don’t break the bank. There is also more competition between deal providers, which will be good for both consumers and businesses in the long run. It is worth noting that consumers have no particular loyalty to Groupon or LivingSocial, and many local or niche deal providers are offering better terms to businesses. For now, Groupon and LivingSocial will reach more consumers, but you may actually be better off starting out with a deal vendor that has less reach. The worst horror stories tend to involve massive numbers of deals being redeemed at unprofitable rates. It is a good idea not to bet the farm on your first deal, as you are likely to learn valuable lessons that will help you structure and target future deals.

Here are some of the factors that lead to deal success:

• Give consumers a reason to come back. Provide great service, great products and/or an innovative new offering and they are likely to come back again and again, and pay full price.
• Tie a deal to a new product or service. Since many deal purchasers will already be familiar with your business, this is a way to get more value from them as well as new customers.
• Time your deal in the off season. If your business experiences seasonal ups and downs, do a deal when you are likely to break even or lose money anyway.
• Structure your offer so that consumers are likely to spend a lot more than the value of a deal. The economics get a lot better for you if people end up purchasing 2X or 3X the face value of the coupon.
• Fixed costs are high. Businesses who have high fixed costs and low incremental costs per customer are finding deals very effective.

Some good articles/resources on the topic:

• Doing the Math on a Groupon Deal, Jay Goltz, New York Times. Describes in detail the economic factors that determine deal success, with examples.
• Grouponomics, Felix Salmon, Reuters. Discusses the business model of Groupon as well as its effectiveness for merchants.
• How Businesses Fare With Daily Deals: A Multi-Site Analysis of Groupon, LivingSocial, OpenTable, Travelzoo, and BuyWithMe Promotions, Utpal M. Dholakia, Rice University. This is an absolute must-read for anyone looking to understand deal economics for businesses.
• Is Groupon Bad for Small Business?, Vinicius Vacanti, TechCrunch – a level-headed view of deal economics, with tips for how to structure deals.
• Daily Deal Calculator – great tool for calculating deal profitability, from deal aggregator Yipit.

Nico Brooks is a data geek who struggles to get his head around marketing problems, but he always enjoys the struggle. Two Octobers is an internet marketing company that provides marketing services and strategic consulting to businesses selling to local markets. We wrote this because we are in the business of helping marketers make prioritization decisions based on data. We hope it is helpful and would love to hear your comments!

According to people who know more than I do, link building is the most important thing you can do to improve your search engine ranking, apart from avoiding stupid mistakes. Most link building advice falls into one of two categories:

1. Quit your day job and try to become more like the person giving the advice, spending most of your waking hours trolling the web and relentlessly tinkering.
2. Pay someone a lot of money.  There are low-cost link-building services, but they generally result in low-value and sometimes even harmful links. The people I know who do link-building well charge thousands of dollars.

This checklist is aimed at small/medium business (SMB) owners and marketers who can’t afford to spend too much time or money, but don’t want to ignore this important aspect of search engine optimization (SEO).

We recommend that you pick a few tactics from this list, and try them out over the next month. And do the same the following month and so on. If you want immediate results, you’ll need to do a lot quickly, but a slow and steady approach will also pay off nicely over time.

Here are the tactics, with full descriptions below:

1. Publicize events
2. PR
3. Do good
4. Create some link bait
5. Be social
6. Write guest articles/guest posts
7. Get reviews
8. Get links from friends and partners
9. List your business in online directories

Most of the items on this list will help market your business in other ways. We deliberately favored multi-purpose tactics, since SMB’s are always looking to maximize bang-for-buck. One tactic is not included on the list above, but applies to everything here and should be ingrained in your behavior: always include a link to your site in everything you do online: in signature lines, in comments, in profiles on social sites, in mentions of your business, etc. Always.

1. Publicize events
Promoting events is a great way to get links, since many sites maintain calendars of local or topical events. If you hold workshops, parties, demos/presentations or any other business-related events, make sure to publicize them on the web. Zvents.com is a good way to get your event listed in many places, since Zvents listings are distributed all over the web. Meetup.com is another great way to create awareness about your event, and includes tools that enable participants to share events with their friends. Also, look for local news and topical sites that post events – even if you think it’s a long shot that you will get attendees, it counts as a link!

2. PR
There are thousands of websites that aggregate local and topical news, and news search engines such as Google News are on the lookout for news content. Anything you do of interest to your customers or community can be released as a press release and will get you links. More newsworthy content is, of course, more likely to get picked up by journalists, so it’s best to use this tactic when you have something really worth talking about. Traditionally, PR was mostly done by PR firms, but many businesses now work directly with online PR services such as PR Newswire and Marketwire. The latter are less expensive than working with a firm, but you get what you pay for. A local PR firm will have contacts with local media, so should be able to get you better exposure than a distribution service. A good PR firm will also help with PR strategy, articulating what is newsworthy about your business. But most of the online services will also help write press releases, and cost a few hundred dollars versus thousands for hiring a firm.

3. Do good
People like to sing the praises of individuals and companies that do good. For example, a search for pages in Google with the words “Avon” and “breast cancer” returns almost 3 million results. Pick a cause and promote it on your site and through ads, Facebook, newsletters, networking and any other channels you can use to get the word out. Getting people to link to your “about us” page is hard. Getting them to link to a video promoting a cause is relatively easy.

4. Create some link bait
This linking business is all well and good, but what are you linking to? A services page with more or less the same description as a thousand other businesses? The most cost effective way to get links in the long term is to make people want to link to your site. Content that encourages links is called link bait. Strategies for link baiting include:

• Free stuff – give away anything of value and people will start linking. Virtual goods with no incremental cost to you per download are the best way to do this, e.g. mp3’s, software/games, ebooks, etc.
• Shocking or funny content – do you know anyone who can do something remarkable? I have a friend who used to be able to play Stairway to Heaven with a piccolo recorder stuck in his nose. Today he would be a YouTube star. There are quite a few examples of methods businesses have used to create viral content, check them out.
• Authoritative lists – are you an expert in something? Don’t just talk about it, turn it in to a list. For whatever reason, lists tend to capture web users’ interests much more than narrative text.
• Research – conduct or sponsor research relevant to your business/industry. People love to quote statistics on the web and even niche research tends to get a lot of play.

5. Be social
Find blogs related to your business, follow them and make comments when you have something to say. Do the same with discussion forums, Facebook pages, articles and any other social content being published on the web. Most of the time, links in comments are not actually worth as much to search engines, but the author will often follow the link to see who you are, and may link to you directly now or later. And be cautious with criticism and generous with praise. Critical comments will rarely make you friends, while a little praise goes a long way. Someone who has taken the time to write a blog post is eager for affirmation, and will be positively disposed towards people who show it.
Here are some tools to help you find and monitor for topics of interest to your business: 5 Great Free Reputation Management Tools for Local Business

6. Write guest articles/guest posts
People who maintain industry news sites or blogs are often receptive to contributed content, particularly if your point of view complements theirs. If you know of a site where you might be able to contribute, send them a note and see if they might be interested. Make sure to praise their writing, and give a few examples of the articles you are thinking about writing.

7. Get reviews
We love reviews for a lot of reasons, one of them being that they can be a great source of links. If reviews are relevant to your business (and they are to most), they are also an important source of customer feedback. If your customers make appointments, send them a follow up email with a link to Yelp, Citysearch or other sites and ask them to give you a review. If they come in to your shop, do the same on a sign, or have your staff ask them in person.

8. Get links from friends and partners
One very basic way to get links is to ask for them. Some vendors will automatically link to their customers, but many won’t. Ask vendors and partners to link to you, and don’t be afraid to ask customers either. If you have loyal customers, there’s nothing wrong with letting them know that you appreciate links. One thing to keep in mind: reciprocated links are worth less than unreciprocated links. So while trading links with partners is an equitable approach, it will benefit you less with search engines.
One good way to get links through business relationships is to publish or participate in case studies. If you produce your own case studies, make sure to mention vendors and other business that contributed to your own success, and let them know that they were mentioned. They are likely to mention (and link to) the case study themselves. And if you think you would make a good case study for a vendor, let them know, and even consider offering to help write it.

9. List your business in online directories
This is one of the oldest tactics for link building, but it is still very effective, especially for local businesses. Here is a list of sites that provide free business listings, as well as a couple of services that syndicate listings to many other sites: Top 10 Free Places to List Your Business

Remember, you don’t have to do everything on this list! Hopefully, a few of these tactics strike you as a good fit for your business and it’s perfectly fine if others don’t. The goal is to find a sustainable approach to acquiring links that doesn’t take too much of your time.

A few helpful resources:

• 101 Ways to Build Link Popularity A much more extensive list of link building tactics. Also includes a list of tactics to avoid.
• What is Link Building? Strategies & Examples This article from SEOmoz does a great job of explaining why links are important.
• Yahoo Site Explorer A very handy tool for keeping track of who is linking to you (or your competitors).

Are there tactics you’ve used to get links? We’d love to hear about them in the comments!

Everything I Know Is Wrong

As a long-time paid search advertiser, I’ve had to do as much unlearning as learning as I’ve gotten up to speed on Facebook advertising. In paid search, the key to success can be summed up in three words (to paraphrase the cliched real estate adage):

relevancy, relevancy, relevancy

This is in part because AdWords and other paid search systems reward relevancy in ads, moving them up the results. It is also due to the state of mind of the searcher. A person using a search engine is purposeful. She is looking for the answer to some form of question, and does not want to be distracted by superfluous jabber. A well-placed ad that answers her question will perform well, while an ad unrelated to her query will not.

In contrast, relevancy is relatively unimportant with Facebook ads. The mechanics of Facebook advertising do not reward relevancy as Google does. And a Facebook user is much less directed than a search engine user. People don’t go to Facebook to do anything in particular, and so are open to distraction. This means that advertisements that are distracting rather than useful can be very effective.

Take, for example, the raging advertising battle between LivingSocial and Groupon going on in Facebook. They are direct competitors, both running the exact same pointless ads.

I’m not quite sure what I’m supposed to “do” in either case, but the truth is much more mundane. With the real deals running today on Groupon and Living Social, I can go bowling or take a three hour walking tour of Denver.

Given my long-ingrained bias towards relevancy, I assumed these guys didn’t know what they were doing. I figured they were just aiming for high traffic numbers like the naïve search advertisers of the early days, without regard for ROI. But recently I’ve started working on some big Facebook campaigns, and recognize the merits of their approach.

Shoot for High Click Through, Low Cost Ads

Facebook ads with higher click through rates cost less and get better placement. Really high click through rates can lead to very low click costs. For example, we have run two ads in the same campaign for the same advertiser, one informational and the other sensational, and the former costs about $2 per click, while the latter costs about $0.20. In Google, cost differences often correlate to the revenue potential of keywords. Some of the most expensive keywords in Google are expensive because they tend to lead to high-dollar sales. But the same cannot be said of Facebook.

Facebook ads rarely lead to direct sales. If your goal is to sell products, Facebook ads will probably disappoint. If, on the other hand, your goal is to form relationships with potential customers, Facebook can be very effective. And we have found that ads that speak to emotion lead to connections, while ads that speak to reason do not. Also, on the whole, ads that have high click through rates also tend to lead to connections. Take Groupon as an example. Groupon wants me on their distribution list, so they can send me daily deals. The ad above is much more exciting than today’s actual deal. Looking at it, I’m left wondering what kinds of deals I might be missing out on. Groupon’s advertising is anything but naïve. Their ads not only have higher click through rates than factual ads, they probably lead to more conversions.

But …

It always ends with a but …

While relevancy and truthfulness in your ad copy may not improve the performance of ads, relevancy in ad targeting does. One of the things I love most about Facebook ads is the ability to target locations, demographics and interests. These are powerful tools for audience building. For example, if you know your customers tend to live in the suburbs and listen to NPR, target those groups.

In summary, let your right (creative) brain take over when creating ads, and try to strike an emotional chord, but put your left (logical) brain in charge when targeting.

Have you tried Facebook advertising? I’d love to hear your opinions in the comments!

 

A while back, I wrote about setting paid search bids based on ROI. Since then, we’ve been working on a number of CPC Facebook advertising campaigns and have found that the topic of bid setting continues to be important and challenging to online marketers.

With this in mind, we recently created the CPA Bid Calculator.

The calculator takes some of the concepts described in my previous post, and makes it easy for marketers to apply them when making budget and bidding decisions. It is primarily intended to give marketers a better feel for how conversion data can (and can’t) be used to set optimal bids.

Have a look, kick the tires. Is it useful? What features would make it more useful? I’d love to hear your feedback.

I will add the disclaimer that I am not a programmer, so I was definitely learning as I went. We plan on working on more tools to help with optimizing online marketing campaigns. In particular, my friend Dusty Candland and I are talking about creating a free, open-source bid optimization toolkit, and he is a programmer, a damn good one to boot. We worked together at several companies building bid optimization tools, and have some ideas for how to improve that mousetrap. If you like this idea, please let me know in the comments below, or on Twitter or elsewhere. We’d love it if other people wanted to work on the project too.

I’m not often accused of brevity, but this was a little too long to get out in a Facebook update.

In the past few weeks, I’ve heard a few business owners say that they don’t know if their website is doing anything for them. If you feel the same way, stop doubting. I could cite the preponderance of research that shows how people are researching online more and more before making decisions, but I’ll let you peruse it yourself:

Google results for “online research offline sales”

The point I want to make is this: if people you do business with have visited your web site, then it is contributing to your sales. When someone writes you a check, do they say, “gee, I’m writing this check because your floors are clean and your products are nicely arranged on the shelves”? No, but if you have dirty floors and products jumbled together in heaps, people will buy less. Same thing with a website.

This weekend, I had a coffee with a client who owns several boutique hotels in Mexico. We talked about some interesting ideas he has for a travel review site, with built-in mechanisms to verify the identity of reviewers, and weighted reviews based on the reputation of the reviewer. His motivation for thinking about this is the fact that, in his view, he has been screwed over by TripAdvisor. He described the prevalence of fake reviews on TripAdvisor, and the challenges he’s faced as a small business owner, without the resources or desire to game the system. I have heard the same complaints made by other hotel owners and marketers.

So it was with a sense of irony that I read this diatribe by Steve Kaufer, the CEO of TripAdvisor. In it he calls Google to task for unfair business practices, with the charge:

Links to Google Places appear at the top of the ‘natural’ search despite being an inferior product to sites that are dedicated to review collection and therefore more useful to the consumer.

He further cites the evidence that Google is currently under investigation by the EU Commission. On the one hand there are my client’s comments and the fact that pretty much every business above a certain size has been investigated for something, but on the other hand I sympathize with his frustration.

As I thought about his comments, I realized that, through no great achievements of my own, I have ended up directly in the path of the Google juggernaut many times over. Much like a Forrest Gump of Google disruption, I have found myself in the midst of battles, negotiations and detente with Google for the past ten years.

• [2000-2003] As one of the creators of the first (and best, for a time) pay-per-click bid management tool, I bounced between conference calls with Google and Yahoo as Google was gobbling up Yahoo’s market share in paid search.
• [2004-2006] I Then found myself working with the big advertising agencies in London, during the time when Google was contacting their clients, wooing them to work directly with Google on search marketing.*
• [2007] That led me to a brief stint at Microsoft, and under assault by Google on almost every front.
• [2008-2010] Next up were yellow pages publishers, of all things, where I advised on online content and advertising strategy.
• [2009-2010] Then came real estate, more specifically multiple listing services (MLS). I swear I was not trying to specialize in sinking ships.
• [2010-2011] Most recently, I have been working with news media publishers a bit, but it’s too soon to tell that part of the story.

I wish I could say that I have heroically led the charge forward in each of these cases, but I haven’t. I will say that in each situation there was a choice. The choice was between taking a defensive stance against Google or thinking ahead and focusing on market needs. In every case, failure came from trying to protect existing revenue. The argument goes like this: “most of our revenue comes from X. We can’t threaten X, so we’ll put together this under-resourced team to focus on innovation. But we’ll put them in this corner over here, out of the way, so there’s no risk to X.” Every time, same argument.

Occasionally, I have had the courage to call bullshit. After making the case to a yellow pages executive that names and addresses were no longer an asset, he looked me in the eye and said, “that’s all well and good Nico, but what we need right now are quick wins, not long-term strategy.” That typifies the stance of executives at each of these industries under siege.

So, is Steve Kaufer right and does Google sometimes favor revenue over what’s best for the consumer? Probably. But on the other hand, I have been a TripAdvisor user for many years, and it hasn’t evolved much. I think I know which choice they made.

* Anyone who was in the ad business in London at that time will remember it well. Not only was Google approaching advertisers directly, they also ended a kickback program that amounted to a significant discount on AdWords for agencies. It felt very much like war, and the agencies were armed with bows and spears, while Google carried heavy artillery. This was the time when Sir Martin Sorrell famously described Google as a frenemy of WPP.

As a business, we sometimes find ourselves slipping into bad behavior, so we came up with this Twitter code of conduct. We aspire to the code, but don’t always succeed. Please let us know if we are falling short.

1. Be genuine. Nuff said.
2. Listen. What? You think you know everything?
3. Connect. Beautiful things happen when people connect.
4. Have fun. All work and no play makes Two Octobers a dull company.

twitter.com/twooctobers

Oh, and here is our formula for Twitter success: there is no formula, see 1. above.

And these are some of the fine people who’ve taught us about good twitizenship: @alizasherman, @boulderrunner, @clearviewwater, and @timeforcake

I did a long-range marketing strategy session today with some folks at a company that owns apartment buildings. In preparation, I put together this deck of cards, inspired by Brian Eno and Peter Schmidt’s Oblique Strategies:

In my deck, there are two sets of cards, one with media trends and the other with quotes describing what it means to dwell. We drew one card from each deck and spent a few minutes brainstorming on how the trend might be leveraged to address the sentiment(s) contained in the quote. We got through six or seven pairs of cards in about an hour. The group came up with some fantastic ideas, I was really pleased with how it turned out. They asked me to come back, so I think they were pleased too. I’d be happy to share more specifics on how I put together the cards and how we used them, if anyone is interested. Just let me know.

Most of my friends know I’ve been involved in search marketing for a long time, so I’m often asked to look over Google AdWords campaigns to see why they aren’t performing well. People even pay me to do this. The very first thing I do when I look over an account is to check for various default configurations that should ALWAYS be changed. Google makes it fairly easy to create an account, but their primary goal is to generate revenue, so most of their default settings are geared towards ensuring that they can spend every penny of an advertiser’s budget.

1. Auto-bidding = Here’s My Wallet, Let Me Know When It’s Empty

I hope whoever came up with this idea got a nice raise, because it has to have made Google a boatload of money. The basic idea of auto bidding is to say to Google, “I’m willing to spend up to $X per day, now you figure out how to spend it for me.” If that sounds like a good idea to you, I’ve got some Alta Vista shares I’ve been hanging on to that I’ll let go of for a steal. When auto bidding is enabled, Google will set your bids uniformly to make sure you are spending your entire budget. The “uniformly” part is the bit that will really screw you. It never makes sense to pay the same for all keywords in a campaign. Some keywords are likely to convert better than others, and at the very least the products or services you sell are not uniformly priced.
The fix: specify bids when you create ad groups. Bidding is a complex topic, but there are two primary considerations:

1. Bid low enough that you are not hitting your budget cap. I think of the budget cap in Google as a safety net, and control my spending by lowering bids. The reason for this is the fact that Google will blow your budget on a single click if they can. For example, let’s say your budget is $10/day and you bid $10 for a keyword. You could spend your budget with just one click, when you might have been able to get 10 clicks at $1 apiece.
2. Set bids based on how much revenue ads generate. In simple terms, this means you should pay twice as much per click for keywords that generate twice as much revenue. Here’s the less simple version: Paid Search: Bidding Based on ROI

2. Broad Matching Can Be Very Broad Indeed

I’ve already spent some time explaining match types, so I’ll only provide the short version here. When you add keywords, Google assumes you want to broad match them unless you add brackets or quotation marks. Broad matching means that Google will match your ad to any search phrase they deem similar to the intent of the keyword on which you are bidding. I’m in favor of broad matching, since people search in such weird and varied ways, but it can result in a lot of worthless clicks. For example, if you broad match the term “computer repair”, Google will show the ad when someone searches for “computer repair jobs”. This is a very real example and happens all the time.
The fix: add negative keywords to the ad group or campaign. Negative keywords tell Google not to show the ad when those keywords are present. For example, adding the negative keyword “jobs” would have prevented the issue above. There are two good ways to figure out which negative keywords you should add. One way is to click on See Search Terms on the Campaigns > Keywords tab. That will show you some of the search queries that have triggered your ads. If you see anything that doesn’t make sense, add the offending keyword as a negative. The other way is to enter your keywords in Google’s Keyword Tool and see what comes up. Again, if you see variations on your keyword that don’t make sense, add those as negatives.

3. What Is The Display Network, Anyway?

If you don’t specify otherwise, Google will show your ads on the display network. There are two ways of looking at what that means:

1. Google will show your ads next to relevant blog posts, articles and the like.
2. Google will fritter away your budget on every loser webmaster that has the 60 IQ points required to join the AdSense network.

Google emphasizes the first view, but there are a lot of haters out there that strongly believe the second. The truth is somewhere in between. I’ve had campaigns where more conversions came from display than search, and generated better ROI. But I’ve NEVER achieved good results by letting the default settings be. By default, display will be bid the same as search, and ad group organization that makes sense for search may not make sense for display. On the display network, ads are not matched based on specific keywords, they are matched based on topics that Google views as relating to the ad group as  a whole. For example, I once managed a campaign for someone who sold maps of cities and places in New Zealand. I had an ad group with keywords like “Auckland map”, “Christchurch map”, “Wellington map”, etc. I caught Google red-handed serving my ad on a page that had to do with maps, but nothing to do with New Zealand. And if you bid high enough, Google will start showing your ads all over the place, relevant or not.
The fix: set lower bids for the display network. Ideally, you can do this based on ROI, but a rule of thumb I use when I don’t have ROI data is to bid down until I’m getting no more than half my clicks from display. Also, make sure your ads clearly state important qualifying factors like what you are selling, where you are and whether you are selling to businesses or consumers. That helps prevent irrelevant traffic from clicking on your ad. Sometimes, I’ll even create separate campaigns for display, so I can tweak them with display distribution in mind.

4. One Ad Group Only Makes Sense If You Only Sell One Product

And even then, it may not make sense. When you create a campaign in Google, it is not at all obvious that you are also creating an ad group. I know this because I’ve had to field the question, “what is an ad group?” many times. An ad group is a grouping of keywords within a campaign. Ads are associated with an ad group, and a default bid is set for an ad group. Because Google hides the ad group structure in the default campaign setup process, I’ve come across many campaigns that have a wide variety of keywords stuffed in one ad group. There are a few reasons why this is a problem. One is that ads work much better if they are closely related to the products or services you are selling. A one-size-fits-all ad group means your ads have to be very general. Another reason is that clicks convert to sales at a much higher rate if you land visitors on a page specific to their interests. Lastly, as described above, you should set bids based on the revenue generated by keywords and groups of keywords.
The fix: create ad groups for each product or service you sell, and/or each landing page towards which you are driving traffic.

5. Default Geographic Targeting Is Generally Stupid

This is where my ads will show up if my ads are targeted to Denver Metro:

Um, hello? All of northern Colorado is Denver Metro? I’m pretty sure not too many people are driving the 5 hours from Rangely to Denver to pick up their dry cleaning. If you are targeting a campaign to a state or a country, Google’s targeting works pretty well, but selecting cities or metro areas is usually a bad idea.
The fix: go to the Custom location targeting screen and select a radius around your business. You may find your traffic goes way down, but the traffic that’s left is the traffic you want.

Honorable Mention: How come the AdWords user interface sucks so bad when they can create such a beautiful search UI?!?
I have the AdWords web interface more or less tattooed on my brain, but even I find it confusing. How do you create a second ad group after you’ve created a new account? Where do I find Ad Extensions (and why do I want to)? How come quality score doesn’t just display like everything else?
The Fix: use Google’s downloadable AdWords Editor. It’s not perfect, but it is much better than the web interface.

I admit that I’m being a little hard on Google. In fairness, most of the changes I’ve described add complexity to managing campaigns, and complexity has its downsides as well. On the other hand, there are many cases where Google has erred on the side of spending more of the advertiser’s money, and I can’t tell you how many campaigns I’ve looked at that were driving a lot of traffic and converting to zero sales. Google AdWords is a fantastic advertising medium when managed well, but many businesses never get past the crappy defaults I’ve described here. If you’d like help getting things set up or figuring anything out, please let us know.