If you analyze Google’s 2020 earnings report, you will see they’ve consistently been beating annual projections.
What is causing this revenue increase? How is Google consistently beating its forecast?
To understand this, you must understand the details of Google’s business model. The most significant revenue driver for Google is still their ad platform.
If Google is consistently beating revenue projections, one can make the connection that their ad revenue is increasing.
It’s true that more and more advertisers are turning to Google, but there are more factors at play here. Google has improved its earnings to such a degree by taking more and more control over their auctions.
And with this, pushing automation and increased budgets on the advertisers.
As a small business owner, this might seem intimidating. If you haven’t started advertising on Google Ads, you may be wondering if it’s too late.
In this article, I will review the recent changes to how Google’s advertising works. But along with this, I will go over ways small businesses can compete and thrive in the current Google Ads landscape.
First, we will go over the details of the exact changes Google made and how it impacted both small and large businesses.
With this in mind, we’ll show how to combat this by reviewing the specific Google Ads strategies small businesses can use.
If you play your cards right, Google Ads can still be an excellent option for any small business. But if you are unaware of the recent changes, Google can slowly eat away at your marketing budget.
Google Ads Basics
To understand the changes to Google Ads, you must know the basics. At the fundamental level, Google ads is an auction.
This is easiest to understand within the search network. For every search typed into Google (referred to as a “search term”), advertisers have the opportunity to bid on that term and show their ad.
When multiple advertisers are bidding on the same search terms, Google chooses which ads to show and which order to show them based on their ad rank system.
The first element of the ad rank system is the bid for each keyword:
- For example, if you are a company selling “cat food” and you bid on the $2 search term “buy cat food,” this means you are willing to pay up to $2 a click for that user.
- If all other companies bidding on this term are only willing to pay$1.50, your ad will show above theirs, given that the quality score is equal.
Quality score is the other component of Google’s auction and is not quite as straightforward.
The full dynamics of the quality score calculation are a little outside the scope of this article. But I will do my best to give a simplified version below:
- Google wants their search results to be relevant. When you type a search into Google, you trust that they will show you the most relevant results.
- If they relied on the bid only, and any company could bid on any search term, this would lead to irrelevant listings.
- Instead, Google calculates a quality score rating based on how relevant your ad and landing page experience is.
- The more relevant your ad and landing page are to the search, the higher your quality score will be.
- This enables Google to show relevant organic and paid results.
To sum up, Google’s ad rank combines your bid on the search term and your quality score. The higher these two numbers are, the higher your ad will show.
Google may choose to show ads with a lower cost per click (CPC) above those with higher bids when the click-through-rate (CTR) is higher because they will make more money overall.
How has Google Changed its Auction?
To be clear, the dynamics of the auction are still the same. The combination of bid and quality score will lead to a higher ad rank.
But what is changing is Google is pushing more aspects of the ad campaigns towards automation, leading to greater control of each auction.
To fully understand this, I will give a brief overview of the bidding systems:
- On the one hand, you have manual bidding, where you, as the advertiser, choose how much you are willing to pay for each keyword (search term that you are targeting).
- Over the past few years, Google has developed automated bidding. To put it simply, you input your goals, and Google will choose the bids for you based on the available data in your account.
Although automated bidding can be highly effective, most businesses are now using this as their preferred bidding method. This means that Google is gaining more and more control over every auction.
With more accounts using automated bidding, the auction system is much less straightforward. Now it becomes less about the bid and quality score and more of a black box fully controlled on Google’s side.
How Have Keywords Changed?
You may be thinking, well, as long I created targeted keyword lists, it should not make too much of a difference if my campaigns use automated bidding. In theory, this is true.
But recently, Google has been removing the transparency and control advertisers have over their keywords.
Keyword Match Type Overview
A full understanding of keyword match types will help to understand the impact of these changes.
Google has three main match types, broad match, phrase match, and exact match:
- Exact match is just as it sounds; it refers to the exact search term:
- Using our example from above, if your exact match keyword is “buy cat food”, your ad will only show when the identical term is typed into Google.
- Phrase match is one step removed from exact match:
- If your phrase match keyword is “buy cat food,” that phrase must be included, but other words can be added before or after this.
- For example, “buy cat food near me” will trigger the phrase match keyword “buy cat food”.
- Broad match refers to your keywords or searches Google deems similar to your keyword:
- For example, broad match “buy cat food” might match to “purchase cat food”.
- These match types can be useful for expanding your campaigns or discovering new keywords.
How Match Types Have Changed
For a while, the match types were straightforward. But recently, Google introduced close variations.
The definition of this is vague, but even if your keywords are phrase or exact match, Google will match you to any search if it considers it relevant or a “close variant.”
Basically, exact and phrase match are no longer as strict with the searches they match.
Sometimes this works out positively, with conversion on terms you would never have added to your account. But this also can work out negatively.
- For example, if your exact match term “buy cat food” suddenly started matching to “cat food,” you would likely be bidding much higher on the more general search.
Not only did Google introduce close variants, but they started to limit the number of search terms they show.
Prior to 2020, most of the search terms your keywords matched to were shown in the search terms report. But due to privacy concerns, Google started limiting this number.
This means that not only are your keyword match types not as strict, but you might not even see which keywords are triggering your ads.
How These Changes Impact Advertisers
The recent changes result in a challenging spot for advertisers. With the combination of automated bidding, variants on match types, and limited search terms, the transparency of your campaigns is significantly decreased.
Some industry experts say this is Google trying to cater towards larger brands who are not as worried about direct marketing.
Others say it’s simply Google trying to grab revenue wherever it can. Either way, it has limited the options of paid search advertisers.
How Small Business Owners Can Combat This
The knowledge of these changes puts the small business owners at an advantage. For one thing, if you are aware of these changes, you are a step ahead of many of your competitors.
Unless someone has their finger on the pulse of the industry, they might not even notice these small and gradual changes.
This means that your competition might be leaking money away on irrelevant variant search terms or improperly monitoring automated bidding campaigns.
Now with this knowledge and a little work, you can take back control of your Google Ads account or start with an advantage over those who are unaware.
Google Ads Recommendations for Small Business Owners
In this section, I will go over a few tactics that we use for our clients and recommend to all businesses. Using these, you will be able to optimize your account or start a new one without leaking your marketing budget.
1. Monitor your search terms like a hawk
Monitoring your search terms was always important, but now this is even more crucial to your Google Ads account’s health.
With the introduction of variations, you not only have to monitor your search terms, but what keywords your search terms are matching, too.
Read through every term, a couple of times a week, if not every day. Then use negative keywords to block out all irrelevant terms and make sure your phrase match and exact match terms are not matching to garbage.
By monitoring not only the search terms themselves, but what keywords are matching to what terms, you will gain as much control as possible over your campaigns.
2. Start your campaigns manually
With the push for automated bidding, many advertisers start with automation right away. This can be a big mistake for new accounts and campaigns.
Automated bidding can be effective, but it must have the proper amount of data.
Start your campaigns off with manual bidding and push what converts. Then only after you reach a fair amount of data per week, move over to automated bidding.
Using automated bidding when first launching a campaign is a great way to waste your marketing budget.
3. Limit the use of broad match keywords
Since phrase and exact match are becoming less targeted. There is less of a need for broad match keywords.
Additionally, these keyword types can start matching to irrelevant terms and drive up your spending.
We prefer to stick to mainly exact, phrase match, and modified broad (which Google just announced is being phased out).
Broad keywords can be great if you are looking to discover new search terms. But the bulk of your ad dollars should be spent on exact and phrase match.
4. Look at historical data
With your search terms now limited, you might not know everything you are matching to. With this in mind, it can be great to use Google’s keyword planner or 3rd party tools like SpyFu.
Type in your terms and look at the relevant searches that come up. If there are terms you are not looking to match, use negative keywords to block these prior to creating your campaigns.
This way, you are preemptively blocking out negative terms before you waste your marketing budget.
5. Bid on your competitors’ terms
Bidding on competitor keywords can be a great strategy. If your competitor is not as knowledgeable about Google Ads or these changes, you are at a distinct advantage.
Now you have room in the budget to bid on their terms, drive their brand price up, and gain some market share.
We’ve had clients build their business almost exclusively off of this strategy. By bidding on a larger brand that is not watching their account closely, you might find a great opportunity.
Ready to Improve Your Google Ads in 2021?
I won’t sugarcoat it. Advertising on Google is getting more difficult for small businesses. But the more knowledge you have and more work you put into your campaigns, the greater advantage you have.
Smart marketers have a leg up on those who are simply willing to let their marketing dollars go to waste.
These strategies are just the tip of the iceberg but are great starting points for new campaigns or optimizing those you already have. But with these basics, you are off to a great start.
1. Improve your quality score. Ensure your landing pages match your ad content to reduce your average cost per click (CPC).
2. Use manual bidding. Only use automated bidding once your campaigns are consistently converting.
3. Limit the use of broad match keywords. While they can be good for discovering new keyword phrases, they can cause wasteful spending on irrelevant searches.
Want even more tips from Lior Krolewicz? Join our BizSugar Mastermind Community and read his answers in How to Optimize Google Ads for Maximum ROI: AMA with Lior Krolewicz.
Demystifying Google Ads: PPC Fundamentals for Small Businesses
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