When you, as an advertiser, can discover not only which queries people actually make but also what keywords and ads they trigger, you can take back control over your account and learn how easily people convert under the proper settings.

Negative keywords have other purposes than to simply weed out irrelevant inquiries. Here are 3 simple ways you can increase conversions by using negative keywords.

First, let’s take another look at where to find the correct negative keywords for your ad campaign. Remember- How we find negative keywords will indicate how best to use them. Google does a great job of hiding search query reports by running them in-line with keyword reporting in the Adwords UI. The reports are no longer under the Reports tab.

Finding Negative Keywords

The way to find negative keywords is to drill down the list of keywords into the campaign or adgroup you want to see queries for. If for example you sell musical instruments, and you want to see the queries for “Gibson guitars” you would navigate to the Gibson Guitars adgroup or campaign and view the Keywords tab.

Once you have this list of keywords in this adgroup or campaign, you have the choice to view queries for either a selected keyword(s) or all keywords. If you are curious to see which queries originated from a specific keyword simply select the box next to that keyword. You can select as many as you want. To see all the queries for that adgroup or campaign simply don’t select any keyword boxes.

Above the keywords, there is a drop-down box that labeled See Search Terms. Depending on whether you selected particular keywords, you will either click on All or Selected. If you didn’t select any keywords to begin with, you won’t have the Selected option available; you’ll have to click All.

Now you have your list of search queries. From here either view the information on page or download it to CSV file.

Using Negative Keywords: Limit Irrelevant Inquiry

If I were to ask a random group of any ten advertisers what they would use negative keywords for all of them would say, “in order to limit irrelevant queries” or something to that effect. So as advertisers have always used negatives, you would just pick the terms in the query that make it irrelevant or unqualified and add those specific terms to the negative keyword list.

If you are still viewing a list of queries in Adwords, you’ll have to go Back to Keywords and click Add Negatives at the bottom of the actual keyword list. Feel free to add as many as you need to the adgroup or campaign of choice.

Direct Traffic to The Intended Destination
Now this is a powerful thing to do when you learn that you are sending qualified traffic to wrong adgroups. Going back to our previous Gibson example; you see that there are “Gibson guitar pickups” queries showing up in the Gibson Guitars adgroup. People looking for this specific Gibson part are actually clicking on an ad that takes them to a landing page with just guitars- they came for a guitar part and saw only guitars. The most common reaction is to abandon ship without bothering to search for the part elsewhere on the site.

In this instance, you should add “pickups” to the Gibson Guitar specific adgroup negative keywords list. Now people searching for pickups on this site cannot see the ads that point them to the Guitars page.

Limit Overly General Inquiry

Continuing with the example, you see a query “music instruments” appear with several clicks in the negative keyword list. Bidding on the term “music instruments” is too costly despite the fact that you sell musical instruments. Perhaps a search for music instruments is too general and people that don’t have a specific instrument in mind might be less serious about a purchase.

In this case, not having qualified your visitors from those simply searching for “music instruments” leads to higher conversions costs. It is basically the same thing as bidding on the keyword itself.

There’s an easy fix. Simply add the exact match version of the term to the campaign. Adding [music instruments] exact match to your negative keywords will stop these visitors from costing you more and will directly result in lower conversion cost.

Sometimes, general queries require that negative keywords are actually used in conjunction with directing traffic to their targets. A good example is when a very general but relevant query surfaces in a product/service specific adgroup. The example would be if in your Gibson Guitar Pickups adgroup, you saw the term “Gibson guitar parts.” This is a relevant query, however, too general for this adgroup.

Once again, you should add exact match [Gibson guitar parts] to the negative keyword list of the Pickups adgroup. Merely adding “parts” as a negative keyword could result in your ads not properly displaying for the query “Gibson pickups and parts.” It is better to use the exact match negative keywords to eliminate the specific query.

Qualifying and directing visitors with negative keywords will result in lower conversions cost for 3 reasons:

1. You eliminate the cost of irrelevant or overly general queries. Now your click costs are used toward likely converting keywords.
2. For irrelevant queries, your ads no longer show which increases your CTR and could affect Quality Score, lowering your cost per click and subsequently your cost per conversion.
3. You direct more visitors to the most relevant landing page and increase your conversion rate by limiting abandonment and distraction. Given a fixed amount of clicks, your conversion cost is decreased.

Google published its projected increase for CPC (cost per click) in 2011 as 5%, the same as last year. When I heard this, I choked on my Americano. There is no way Google’s CPC only increased 5% last year. They must have done one of those weighted means we forgot about in Stats class. Even after digging up a subjective number, we found an 8% increase in CPC that was published by Jefferies & Co.’s analyst, Youssef Squal.

Youssef may not be so quick to overstate but I will. It’s more than that. It’s hard for us to tell because we manage our clients CPC down. When you think about all the advertiser accounts that go unmanaged or that are managed by a majority standard, 8% is the difference between a CPC of $1.00 and $1.08. Come on!

Above is a chart showing year over year differences in Google advertising revenues and advertiser performance metrics from 2005 to 2010. According to Hochman Consultants, Google’s average CPC rose from $1.03 to $1.24, a difference of 21 cents and a 20% increase in average cost per click. Since 2005, Google’s Average CPC has increased over 3.25 times the 38 cents it used to be.

Google Ad Revenue (In Millions)

The correlation between the average CPC and Google’s ad revenue isn’t exact year over year. However, they are positively correlated over the 5 year span as they have both increased more than triple its original benchmark. Most of Google’s revenue increase in the earlier half of the segment is largely attributed to increased advertiser involvement and consequently higher CPC. The latter half (of the 5 years) we believe not so much.

According to a WSJ Online piece that syndicated last December, the number of new Adwords advertisers has slowed over the past few years due to a global markets being tapped of new enrollments. It also suggests that Google’s push for local markets will fuel the search engine’s future needs for new advertisers but only a small fraction of local businesses are advertising online today.

From what we’ve seen of both national and local markets, hiked CPCs are posing a huge barrier to entry. Google’s updates Quality Score index has evolved into a highly CTR (click thru rate) weighted calculation incorporating not only real-time CTR but historical CTR as well. New advertisers have it hard to penetrate the marketplace. When a local or non-local business starts up a new Adwords account, there are typically inflated CPCs for some time until a weighted CTR can be calculated over time. This means new advertisers have to endure if they are going to succeed on Adwords.

Meanwhile, the same quality score issues and hiked CPC is causing havoc in advertiser accounts. It’s slower to notice in legacy accounts that have been active for years. They seem to grandfather in a lot of old time quality score and even CPCs from the past. But the upward trend is ever present when viewing a date range of average CPC data.

So what the heck is happening?

In a nutshell, there has been a huge pendulum swing from profit once being distributed to businesses but that is now directed to Google. Google feels if they make more of the lions’ share, they can be more profitable and businesses will think they are fighting their competition. Guess what? Google is right. Businesses will think that but they will really be losing hand over fist to Google.

Remember, if you are already in a competitive business, there is a huge likelihood the barrier to entry into your industry is a 1000 foot brick wall. There is no new competition. No one wants to bid up more than they have to. Ego has left the building and being number 1 in the sponsored links just isn’t worth sacrificing the Friday nights at Applebee’s.

What can you do about it?

There are lots of things Adwords managers can do about it. Here are 10 things to gain back profit from Google.

1. Make sure you’re not paying more than you have to for clicks.
2. Aim to improve quality scores.
3. Trim the fat. This puts more pressure on advertisers to trim on ad spend that doesn’t return revenues. Use negative keywords.
4. Improve Conversion Rates.
5. Eliminate advertisers clicking who aren’t looking for your product or service.
6. Make sure your website abandonment rate is down.
7. Don’t spend large percentages of ad spend on keywords that can’t produce data fast enough.
8. Test ads for CTR.
9. Allocate budgets to higher profit campaigns.
10. Don’t neglect your campaign. If you don’t have time, you’re not alone. Hire us. That’s why we’re here.

So in our business, the client has passed the dilemma onto us. How are we to manage client expectations with lower conversion costs while increasing the sales revenue?

The trick is to create a separation between strategies that lower conversion cost by lessening exposure levels and strategies that lower conversion cost by weeding out unnecessary ad spend costs.

Ways to lower conversion cost by lowering exposure levels (Lowering Levels of Return):

1. Decrease bid and ranking.

2. Delete or pause keywords, adgroups, and campaigns that do produce some conversions.

3. Add stricter match settings to keywords.

4. Turn on conversion optimizer to lower conversion cost.

5. Turn off search or content networks that convert.

6. Lower producing campaign budgets.

7. Implement position preferences.

The above should be last considered for the purpose of lowering conversion cost.

Ways to lower cost per conversion by weeding out wasted spend and increasing conversion rate:

1. Running Search Query Reports and adding in negative keywords to qualify buyers.

2. Optimizing your adgroups, keywords, ads, and landing pages for higher conversion rates.

3. Optimizing website pages for higher conversion rates.

4. Delete or pause keywords, adgroups, and campaigns that produce no conversions.

5. Turn off networks or network segments that do not convert.

6. Find irrelevant placements in content network. (use site exclusions)

7. Lower CPC by improving quality score.

8. Have competitive pricing.

You might say, “Great! That’s 15 ways to lower conversion cost.” It’s common that advertisers don’t make the above separation between strategies. In fact, we find its more natural to start doing the things that lower conversion cost the fastest. However, it is problematic when you attempt those before trying the techniques that cut wasted spend and increase conversion rate. When that happens, the only result is lower exposure and inevitably lower sales revenue. You’ll need to exhaust the later resources first and then use the other techniques if the conversion cost remains clearly at levels that are unprofitable.

Don’t be pressured into lowering conversion cost the faster, easier way. Take your time to cut the wasteful spend first so it will be easier to infuse growth into you advertising campaigns later. Once you have lowered conversion costs for your unprofitable keywords, it’s time to restore the growth trends back. Below describes that technique in which this is done.

Increasing the Sales Return through Conversion Cost Strategies

Here’s the kicker. This is the part that every advertiser forgets. Only software remembers to do this. It’s the flip side of the coin; the missing link that, if not facilitated, will lead only lead to lower sales volume over time. This is the opposite force that encourages growth. It is actually done mistakenly when you initially start bidding on keywords. Its by mistake because you haven’t looked at conversion cost yet. You mistakenly bid up your keywords only for the purpose of increasing your ranking sales. Now you’ll do it for the same reason but know when to stop.

When analyzing what do do with conversion costs, it is necessary for advertisers to determine a tolerable conversion cost that when achieved, there is considerable profitability.  This is commonly known as Target CPA (cost per acquisition). This is the target marketing cost that when added to COGS (cost of good sold) and subtracted from total revenues, leaves considerable profit. Determining what a reasonable profit margin is will vary between products and services.

Once the target conversion cost or CPA has been established, its important that you increase the bid and ranking as quickly as possible to bring the actual cost per conversion up to the Target CPA level. Here the advertiser recoups lost margins because the return then becomes exponential. More exposure an ad sees at a profitable level, the more profit it can generate. This is why its imperative advertisers choose a happy medium between low profits/high target and high profits/low target.

As soon as advertisers do this, they maximize the profit margins and reverse the trend for lost sales. They stabilize the downward sales trend and reverse the pattern with growth in revenues.