Google’s UK advertising revenue has overtaken Channel 4’s and may soon approach ITV’s. Around £900m c.5% of total ad spend each year. And most of it comes from SMBs that would never consider a 15 or 30 second slot on TV, but can use AdWords very effectively.

However, AdWords is not just any advertising. Like the web itself, it is one of the most powerful direct marketing tools. For direct marketing, read profitable, controllable marketing with known results.

When you compare AdWords to local press or radio advertising, or even the “inconvenience” of setting up and controlling direct mail or door-to-door sales campaigns, it’s no wonder it’s become so popular. There is no minimum spend per period, you can turn it on and off, set the profitable goals you want, and only pay for results. What’s not to like?

Like all direct marketing there are 7 golden rules:

1. Understand the cost per lead and the cost per sale you can afford based on the lifetime value of the customer, that is, the value [cash flow and profit] to you from a customer for the duration of the customer relationship rather than a single sale or time period
2. Test, test, test and trace, trace, trace everything
3. Reinforce success and eliminate failure
4. Understand and target the audience/list (search your keywords correctly for what people are really searching for, not just your great-aunt’s best guess)
5. Make real offers to your known audience: the offer is more important than the product and the creative, but less important than the keywords: what is your best offer? Put yourself in the customers’ shoes and think what they think: “what’s in it for me?”
6. Describe your product and price well: This may not be all in the ad, but it needs to be on the landing page (the page that users click on from an optimized ad to achieve the desired action from the potential customer)
7. Think about your creative tone and refine it.

The concept of AdWords is simple. Create ads that Google displays alongside regular search results. Your ads appear when someone searches for keywords that you’ve told Google you want to associate with.

The confusing part about AdWords is that Google doesn’t charge a fixed price for ads. Instead, the more you bid compared to others who have bid on the same keyword, the more likely your ad will appear near the top of the sponsored links. BUT, Google also looks at how many people click on each of your ads.

This is great for them as it maximizes their income, but it means we all have to work harder than in a simple auction.

For example, if you set a max bid of 25 cents for the word widget, and the next highest bid is 50 cents but they have a click-through rate (CTR) of 15% and they only have a 5% CTR of who wins Google plus?

For every hundred impressions, you give them £3.75 and the competition just £2.50. But it doesn’t stop there because your CTR and CTR can vary based on your page position or time of day or day of week and should be compared to all of this (and more, like your total budget) for other advertisers as well. . . So Google does a lot of calculations and we have to do the same. By the way, Google rarely charges you your maximum bid, but is ‘happy’ to maximize your income!

Since you can’t directly control click-through rate and position, managing AdWords is very challenging and can be time-consuming. And if you don’t manage your AdWords campaign effectively, you could be wasting a lot of money.

So it’s all great, but how do you make it work? Well, here are 10 key things to think about:

1. Decide your budget and maximum cost per click. Never commit substantial funds until you know the basic results.
2. Decide where to display each campaign – understand the difference between search and content networks
3. Research your keywords in detail – understand what people are really searching for and look at keyword matching options
4. Bundle similar keyword topics into manageable numbers
5. Make sure you think about the offers and calls to action you have and constantly test them to find the best result by product, service, group of keywords, etc.
6. Be sure to constantly test the contender against the champion in your real ad to improve results.
7. Make sure your landing pages tell the whole story and are ‘easy to do’ ie fill out the form, make the purchase, etc. with the minimum of inconvenience. Consider applying for Google Website Optimizer. This allows you to test website content changes on your pages to determine what will be most effective in getting conversions. You choose which parts of a page you’d like to test, and Google will run experiments to help determine what content on your site users respond to best.
8. Google Analytics tells you how visitors found your site and how they interact with it. You can compare the behavior and profitability of visitors who were referred from each ad and keyword. Track your detailed results daily with the analytics tool. Understand the goal and funnel process to get more leads, sales.
9. Think of AdWords Editor, which is a free app you can download to manage your account on your PC instead of through your browser. If you have a large number of campaigns or keywords, AdWords Editor can save you time and help streamline your workflow.
10. Decide if you or your company have the skills and time to optimize your AdWords campaign, or if it’s better to get professional help.