Episode #14

Google AdWords II: Ad Group Cost Forecasts with the Keyword Planner

Today I'll show you how to use AdWords Keyword Planner to guestimate the price of advertising. We'll do a back-of-the-napkin calculation for profitability of advertising by comparing Google Analytics per session value with the keyword planner's bid ranges for each keyword in each country. I'll also introduce the concept of the 'commercial intent' behind a keyword and how it varies. Then we'll use Ad Groups for grouping keywords together and demonstrate too how each additional click gets increasingly more expensive (by using data in the AdWords forecast tool). Ultimately we'll arrive at a best guess figure as to what to bid.

December 13, 2020

Show Notes

No notes available for this episode.


Transcribed by Rugo Obi

One of my biggest pain points, when I was starting on Google AdWords, was knowing how much to bid.

I was very scared of getting ripped off and I felt a bit like I was at a street market bartering for some goods I didn't know the price of in some faraway land.

Today I'll demo a workflow connecting the data we gathered in Google Analytics -like I showed you a couple of episodes ago- to the Keyword Planner.

And then guesstimating a good starting bid by figuring out what kind of profitability you expect to have.

In doing so, you'll become more familiar with the grammar of the Keyword Planner.

Hope you enjoy.

So far, I've demonstrated ways that the Google Keyword Planner allows you to explore the space of possible keywords and find promising keywords for you to start advertising on.

Another important feature that it has is to guesstimate the price of advertising on various keywords.

This data is not always provided, and especially when there isn't that much traffic to a particular keyword.

For example, we can see here that with "pcll conversion notes" we do get a rough estimate of the cost, 11 cents for the top of the page at the low end. That just means that you had a very efficient ad, and to your 20 at the high-end of the range.

But there is no data for the next one, "contract notes rules".

With what I'm demonstrating here, targeting UK law notes in Hong Kong, it's very very niche, and I don't think that's going to be representative of the kind of data that you're probably going to see when you're advertising your business.

Therefore, I'm going to expand the number of countries up here, such that we get more data and there's going to be more columns with that pricing information.

Okay, I've targeted a load of ex-commonwealth or British overseas countries. Let's see if that makes a difference.

Yes, it does. In particular, the main keyword I wanted information about "law notes", now has a pricing range, this is great news.

Now, let's use this information about the range of costs per click for this particular keyword "law notes".

So, I'm going to assume that my cost per click is somewhere in between those two, let's say 90 cents.

So that means that if I'm paying 90 cents per click, I want to be generating more revenue than that in order for the advertising to be worthwhile. The biggest danger in advertising is that you spend more money than you earn back.

Now, remember in Google Analytics we were in this "Audience > Geo > Location" report, and we saw the per session value, and on average it’s only 15 cents.

So, if I was paying 90 cents per click, and only earning an average of 15 cents, that would be a pretty bad deal.

Of course, the average is higher in certain countries as we can see here and many of those are the UK overseas territories or ex-commonwealth countries.

Considering that Hong Kong and Singapore make up the majority of the traffic in this case, let's actually search for them. Let's search for just "Hong Kong" and see what its cost is, or rather, what its per session value is.

So, it's only 22 cents, so this means that we will probably be losing money here, at least if we take this figure at face value.

The thing is, though, we shouldn't be taking this figure at face value. The reason why is because the majority of traffic that arrives on the Oxbridge Notes website has no commercial intent.

What do I mean by that? Well, a typical landing page for my website is a particular law case.

For example, here we have Furniss v Dawson. And someone arriving at the website was just looking up the facts for this case, and they go over here, read these facts, and then they're done with the website, they leave

The reason I make this content public is because a very small percentage of people might go and click over here to search for some actual notes, or maybe click this upsell thing at the bottom, but the vast majority of people don't.

Compare someone searching for the facts of a case on the internet to someone searching for actual law notes -the core product I sell- and the keyword that I want to target here.

I would say that someone searching for law notes has a far higher commercial intent relative to my business.

Of course, if the keyword were "buy law notes" that would be the highest possible commercial intent, but just "law notes" alone is probably a lot better than some random case facts.

We can back up this idea with some extra data.

So I'm over at Google Analytics in the "Acquisition > All Traffic > Channels" report and I've clicked "Ecommerce" as usual, and then we can see the various types of channels for traffic.

Now, in general, my average per session value is 15 cents, but if you scroll down to "Paid Search", which is basically just AdWords, you see that it's 61 cents. So it's over 4x more when we're going for that type of traffic.

Bringing that 4x multiple back to the Hong Kong per session value here, gives us 88 cents, which is roughly about midway in the range of cost per click that we saw over in AdWords. So already, we're doing a lot better.

There's also another dimension that we have to consider here, that of customer lifetime value.

So I know that in the UK at least, when someone buys from me, on average, they will buy from me about three more times over the ensuing years.

This may be somewhat true in the Hong Kong region. I say somewhat true because they may buy multiple notes for the same kind of exam, however, they mightn’t be able to buy notes for as many of the postgraduate exams because there's somewhat different system there.

So let's assume that my customer lifetime multiplier is 1.5 in the case of Hong Kong. So if we bring up the math again, that's going to be the 88 figure we saw before multiplied by 1.5.

So this is now my estimated value per session, and if my click is going to be about 90 cents, then I'm expecting to profit about 42 cents on each individual session.

I'm back over in AdWords now, and I'd like to move forwards and take these keyword ideas to the next stage. So, I'm going to keep it kind of simple and just choose the keywords that I initially started with, rather than expanding it out.

So the key thing I want to do now is to group my keywords into what are called "ad groups".

So, conceptually an ad group is literally just a number of ads, a small number. For example, three ads, it could even be one ad that are targeting a certain set of keywords or a certain demographic or whatever targeting option you choose.

Over on my website, I have a number of major categories of notes. I have the GDL law notes, then I have just regular law notes. This corresponds to something called LLB, and then I have some LPC notes.

Now, what I'm going to do is create an ad group for each of those major categories, i.e. an LLB or general Law Group, a GDL group, and an LPC group.

So I'm going to start with the general one, with the "law notes" keyword, "law revision" keyword, and "law case summaries".

So you can see these three keywords selected here, and now I'm going to put them into a new ad group and I’m going to call that "LLB Law".

These are all going to be broad match style keywords, I'm going to go into some detail about that in a second.

So remember to click "add keywords" to actually finalize it.

Now I'm going to do the same thing with the LPC notes. I'm going to create another ad group and also the same thing with the GDL notes.

Now let's go and make sure that those groups were actually created. And we can see here sure enough that there’s the GDL law, LLB law, and LPC groups.

For some inexplicable reason, Google has changed the location on this page to Germany, even though it was a bunch of other countries like Hong Kong on the other page. So it's important that you constantly keep an eye on this and change it to what it should be.

So I'm going to change that off-camera now.

I’ve now gone and updated the locations here and you can see the data is changed.

I’d like to talk you through this particular piece of data, it’s very important.

So it says here that your plan can get 18 clicks, that's over the next month, the time range’s also changed here, for a 4 euro and a 1 euro max CPC.

If I click on this, it brings up a very interesting graph. What this graph does is show you how many clicks I'm going to get, depending on how much I bid for each click.

So for example, if I bid 7 cents per click, I'm going to get five clicks over that time period. If I bid 26 cents, I get 14 clicks.

So the main thing to notice here is that each additional click becomes more expensive, and at some point is kind of sub-optimum to keep going. Like I get 19 clicks if I bid 1.5 euros, and I only get an extra click if I bid 4.10 euros.

This graph ties into the principle that I talked about in the previous episode, that advertising gets increasingly more expensive as you try to bump up the volume of people you want to reach.

An important thing to keep in mind when looking at these kinds of graphs is how Google's auction system works.

Basically, you end up paying not what you actually bid, but something that's a function of how much your best competitor has bid.

A consequence of this is that if you bid the 4.10, you're not going to be paying 4.10 for every single click. You're probably just going to have to pay something along those lines for that last click. The other clicks being, you know, the prices along this particular curve.

So how should you determine what your max CPC is?

Well, the upper limits of it should be what you expect to earn per customer, and in my case, it was 1.32 or something.

So if I add that in, we get kind of an upper limit based on my estimates, which of course, could be way way off. But you know, you have to start from somewhere.

If I were to bid max amount, then all the money that I generate through these extra sales would just go into paying for advertising. So that's not really worth my while, so I'm going to lower this down to a figure like 80 cents and then see what happens.

I can now use the data here to predict how much extra revenue I'm going to be bringing into the business through this advertising campaign.

So I have 18 clicks here and then -let’s make it for 12 months- and then I expect to earn 1.32 revenue per particular click.

So, this is leading me to expect that I'm going to earn 285 euros of extra revenue per year with this advertising campaign.

That’s not really great, but then again with Google AdWords, if you create something today you can easily have it running for 10 years and I've had that happen in the past.

So, it might be a reasonable investment when you take that into account.

Based on what we've seen so far, a key piece of complexity has been hidden from you.

That's all I've got for today.

See you next week.