To Commenter #4: The article below may explain your problem with decreased ROI.
What follows is an excerpt combined from three articles written by Robert X. Cringely, one of Silicon Valley's brightest minds over the past 20 years. http://www.pbs.org/cringely/archive/
. (The articles are from 9/22/05, 10/6/05, and 10/13/05).
(half way down)
One of my readers makes his living selling goods over the Internet, and his sole means of obtaining customers is through Google AdWords. His business is robust for a one-man operation and he makes a good living. Knowing the actual numbers, I would say he makes a VERY good living, which shows the effectiveness of Google and AdWords as an advertising medium.
But one can never make enough money, it seems, so this reader decided to do some research to see if he could improve his results by modifying this and that. He decided that the best way to conduct this research was not by altering variables on his existing, very profitable web site, but by creating a separate site purely to be used for these tests.
Clearly, this is a behavior that the big brains of Google did not expect.
It was no big deal to create a separate experimental site. Web hosting companies offer e-commerce sites for only a few dollars per month. A Google AdWords account costs only $5.00 to set up. The actual content of the new web site could simply be copied over from the pre-existing site and changed at will as dictated by the experiment.
Most people would alter variables on the main site and see what happens, but this guy didn't want to mess with the success he was already achieving, so he came up with this parallel experimental design.The first thing he wanted to study was the impact of paying more or less for AdWords.
He knew that paying more would result in higher placement -- especially given that both the ads and the AdWords would be identical between the two sites. What he didn't know, however, was whether a slight increase in cost-per-word would more than pay for itself in increased sales, or whether a slight decrease would go effectively unnoticed, thereby increasing his profit margins.
His old site with the same ads had been running successfully for a year paying at the relatively low rate of $0.10 per word (the AdWords minimum is $0.05 per word) and generating about 15,000 clicks-through per day. But for the new site, he started out paying $1.00 per word for exactly the same words. Based on everything he had read about AdWords (remember nobody actually SPEAKS to Google about these things -- the service is totally automated from Google's end), he expected his ad to move higher in the rankings and, hopefully, to make more sales as a result. And that's exactly what happened, though not to the extent that he would have liked.
Buying AdWords at $1.00 versus $0.10, his ads DID move higher on the page and his revenue was increased, though not by enough to justify going all the way to $1.00 with its associated higher cost basis.
All the while, of course, the essentially identical original web site was churning along, still entirely dependent on AdWords, still carrying identical ads for identical products as the test site, and still generating an average of 15,000 click-throughs per day. Now it was time to drop the per-word price a bit on the test site to see whether he could increase his profit margins after paying too much at $1.00. So he set the new per-word price at $0.40 -- still four times as much as he was paying per word through his main site. And his clicks-through dropped from 15,000+ to 1,200 per day. Huh?Same products, same ads, same service, but by paying four times MORE than his main site his results dropped by an order of magnitude.
A bit more experimenting showed a similar effect and he was never again able to match the success of his original site as it continually operated in precisely the same market with precisely the same services over the exact same period of time.
I have no idea what the heck is happening here, but my friendly reader, who makes his living from this stuff, has a theory. He believes the Google AdWords algorithm tries to do many things and one of those is to encourage advertisers to pay more for words. By modifying something that in turn modifies the results, Google is effectively encouraging advertisers to change their behavior.
So increasing the amount per word DID increase sales, though not enough to justify the additional cost. Google's revenue per word, of course, went up by 10X. But dropping the price by more than half was greeted by a huge decrease in clicks-through that could only have resulted from some unknown resultant change in GOOGLE's behavior, given that all other variables were constant.If that's indeed what's happening, it isn't illegal and to some might not even be unethical (I guess) but it feels just a little bit EVIL.
Ironically the only way this could be observed was though the use of parallel, otherwise identical web sites and AdWords accounts."It's like Vegas," said my friend. "They want you to lose. Try to game the system and they cut off one of your legs."
Now back to Google AdWords, which I wrote about two weeks ago (it's in the links) and promised an update today. To review, a friend of mine conducted some AdWords tests in an effort to fine-tune his yield as an already successful advertiser. He set up a parallel account using the same ads that had worked well before and found that raising his bid-per-word helped sales to a certain extent, but then reducing that bid led to a precipitous decline BELOW the level of clicks-through that he was getting all along with his original site at a significantly lower bid. What gives? I asked. Was Google punishing him for lowering his bid in this controlled experiment?
Readers weighed-in, generally cautioning that the experiment wasn't at all controlled because the new site was new. If it and the original site were exactly the same age then it might, indeed, control for time effects, but as it was presented the experiment was probably just showing that the AdWords algorithm somehow gives preference to sites with longevity.
Other readers took exception to the idea that a single experiment could show any reliable results. Give then 100 or more experiments, they said.For his part, Google VP of Engineering Jeff Huber offered to help:
If you or your friend would be interested, we'd be happy to take a closer look at the behavior experienced and help understand what might be going on. I can vouch that we do take our company motto of "don't be evil" very seriously, and we work very hard to ensure that our advertisers get great return-on-investment for the money they spend with AdWords.
So, on further thought and without specific data on the account(s) involved, here are some potential non-evil explanations of what might be happening:
1. ad position does have non-linear behavior -- higher position ads tend to get a multiple of clicks of lower position ads,
2. auction dynamics can change if any additional entrants/competitors began in the period (it is very dynamic -- think of a marketplace that does many multiples of daily transactions of the NYSE or NASDAQ),
3. end-user perceived quality, as measured by ad click-through-rates, substantially affects ad ranking (more than bid price, in fact; we hope & believe that our emphasis on end-user quality & relevance is fairly non-evil :-)
4. in some areas there can also be a "brand effect" to end-user perceived quality, where users will choose brands they recognize & trust more; if your friend's established business has established brand effect in his/her segment, it could be getting higher click through rates, and therefore getting higher/better placement and more traffic, with lower keyword bids,
5. we also strive to provide diversity of high quality ads for better end-user quality; if the ads in question were pure duplicates (e.g., in destination URL) attempting to show on the same end-user queries, they may get a lot less traffic than the original account/campaign (which has an established history & track record of high quality)
And there may be others. With more data from the accounts in question, we should be able to tell a lot more. If you'd like to connect me with your friend, we'll take it from there -- all we'll need is account ids/e-mail addresses from the experiment.
My friend preferred not to have Google help him with his experiment, which by the way was one of 17 experiments based on well-established research methodology. What was so peculiar about his results was that the market in question has very little competition so both of his ads (and those of his single real competitor) were nearly always on the first page no matter what the bid price. Odder still was the fact that shortly after my AdWords column appeared, THE EFFECT SUDDENLY STOPPED. Go figure.