How do you spend your Google AdWords budget? If your AdWords strategy is to lead to PPC advertising that gets seen, gets clicked, and gets conversions, you’ve got to do it right.

WordStream, the maker of popular PPC software and paid media grader tests, recently revealed its insights into $500 million-worth of ad spend. Its grader tests are a good indicator of the current market, having been ran more than a million times on real-life Google AdWords accounts owned and managed by real businesses. Here are five insights into that data and what we make of it for our clients.

1. The Importance of Keyword Quality

WordStream looked at the quality of Adwords ads and found that quality was more important than ever. The overall Google AdWords Quality Score of keywords has risen since WordStream last looked at such data in 2013. What that means is that low-quality keywords just don’t cut it anymore. Whereas an ad for a low-quality keyword might have gotten mediocre ad impressions a few years ago, the same ad today probably just won’t get any impressions.

From WordStream:

What’s happening here is that with the rise in mobile search and the loss of right side ads, there are fewer ad spots overall, so Google has to be pickier in terms of deciding which ads to show. Not surprisingly, they are increasingly preferring to run higher-quality ads…

Because of this increased competitiveness for fewer ad spots, low score keywords are far less effective. If your keywords are scraping the bottom of the barrel, you need to move up the line to keep up with your competition.

2. Tough Competition Is Boosting Click-Through Rates

Like keyword quality score, click-through rates (CTR) are getting more competitive. Google is less likely to show ads that have bad keywords and that perform poorly in terms of CTR. That’s created a situation where the industry as a whole is pushing for more click-throughs for their campaigns. While last year’s average for small- and medium-sized businesses was 2.7%, this year that number’s up to 3.23%.

If you’re wondering more about where your business falls, here are some figures:

• If your CTR is 1.91% or lower, you’re in the bottom 25th percentile.
• If your CTR is 3.23%, you’re in the 50th percentile.
• If your CTR is 5.58%, you’ve reached the 75th percentile.
• And if your CTR is 9.5% or higher, you’re in the 90th percentile of all advertisers.

The report also notes that the newly unveiled Google expanded text ads (ETAs) are doing much better than classic text ads — with up to four times better CTRs! All the more reason to transition to ETAs now.

3. Negative Keywords Are an Untapped Opportunity

According to WordStream, negative keywords, that list of terms and phrases irrelevant to your content and target audience, are a big untapped opportunity. Building your negative keyword list doesn’t take a whole lot of effort and can really pay off, saving you money by not showing your ad to users who aren’t in your target audience that could otherwise cost you clicks that won’t turn into conversions.

According to the WordStream’s report, half of all AdWords accounts examined didn’t add a single negative keyword in the last 30 days. That’s a lot of ad spend wasted on web users who aren’t even looking for what you’re selling. At the other end of AdWords users, about 7% added more than 250 negative keywords in the last month.

4. Get Ahead Just by Installing Conversion Tracking

With half of AdWords accounts not having a negative keyword strategy it shouldn’t be too surprising that many folks don’t track conversions either. If you want to leap ahead of half your PPC competition (and you haven’t done so already), just set up conversion tracking. Regarding technical demands, this is far, far simpler than building accelerated mobile pages or making your site design responsive, yet could have just as much positive business impact.

So get conversion tracking set up, and you’ll immediately move into the top 46% of AdWords accounts. From there, you can increase your conversions, sales, and growth by tracking your AdWords results and making optimizations and adjustments to your paid media efforts for better results.

5. Conversion Rates Basically Static

The final insight from WordStream’s data is that conversion rates haven’t budged much in the last few years. The median rate is around 2.9%, and previous studies showed a typical range of 2.5–3.5%. However, top advertisers are head and shoulders above their competition — the top 10% had conversion rates of 8% or higher.

Our Take

AdWords is more competitive than ever. For online businesses, it’s important to actively manage your paid media strategy, building campaigns with high-quality keywords, reviewing your search query reports and adding to your negative keyword list, and tracking and optimizing your conversions. Data shows that businesses that put resources and effort towards these tasks reap big rewards.

Looking for expert advice on your Google AdWords strategy, paid media campaigns, or PPC advertising? Call us at 313-338-9515 or email hello@kaleidico.com to learn how our full-service digital agency can help.