Focus on what each click is worth, not on what position it should be in
general, if a purchase conversion is worth $10, and one out of 10
people purchases, you should pay about $1 per click. You should offer
that maximum price to Google (or another search engine) for the
specified keyword.

After you launch campaigns, continue to test them for conversion
metrics and adjust your top bid accordingly. Many marketers think that
if the clickthrough rate is higher, the keyword should be more
expensive. But you should determine the value of a keyword based on
conversion rate, not clickthrough rate, because you only pay by the

Heads or tails?
Head keywords are generic terms
that people search while browsing or doing product research, such as
“mp3 player.” Head keywords often benefit from being in first position,
because they capture a lot of “browsers” who just click on the first
link and may be exposed to your site for the first time. These people
may not buy now, but they’ll connect with your brand.

Tail keywords are often best in third or fourth position. These
keywords are specific and appeal to committed buyers, such as “black
ipod nano 8gb.” People searching for these keywords are usually more
ready to buy, so they’ll look at — and even click through
— several ads to find the best deal, even if that deal appears in
a link halfway down the page.

The upshot? Head terms get much more volume and are often more
expensive to boot, so to justify your investment you may need to
measure carefully which visitors return to your website.

Set a top position
This is a tool on Google you
can use to hold your keywords down in the rankings, even if you are
bidding enough to be #1. It’s always better to figure out first how
much your keywords are worth to your bottom line, and then find out
where that places you. But this tool can be useful if you find that
position #1 gets a lot of poor quality traffic that never converts.

Focus on the dirty dozen
Most marketers spend the majority of their budgets on a few top keywords, usually about a dozen, which are high volume and
have a strong conversion rate. Focus on fixing the position of these
keywords first, because correctly placing these top keywords will have
the biggest impact on total revenues. Let the others fall where they
will according to their conversion rates as described above.

Turn off Google Search and Content Networks
you don’t opt out of Google’s search partners, like AOL and,
your position numbers will reflect a blend of your positions across all
of those properties. To get an accurate picture of where your keywords
are positioned on Google itself, turn off the additional distributions.
You can always turn them back on after you finish your measurement.

Turn off Google Content Network. Ditto as above
figure out what your keywords’ true positions are, focus on Google
itself, not your position across all its content partners, such as New
York Times, MySpace and

Work weekends
Some keywords perform stronger on
the weekend, such as “gardening” or “beach wear,” for example. Set up
automatic bid increases for these terms to boost your position solely
on the weekends. (Google supports this at the campaign level; MSN
supports this at the Ad Group level; and Yahoo doesn’t support it right
now.) Remember: These boosts should be based on changes in conversion
rates, not click volume. Look for the pattern before you set the boosts.

Pony up for brand and “executive” keywords
you’re Coca-Cola, you just have to pay whatever it costs to have
“Coca-Cola” be in the top position — that’s crucial for your brand.
Plus you can use your company name in those brand-term ads, and other
advertisers cannot (call the support team at the search engine if you
see any violations of this). Likewise, if your CMO tells you the
company needs to be in top position for certain keywords, like “digital
camera” or “PC” to build your brand in those categories, then just pay
what it costs to be in the top spot (and pull the cost from the
branding budget!).

Chris Lien