Mastering Google AdWords - Losing Money to Make Money

Google AdWords is a powerful pay-per-click (PPC) marketing tool that can boost your business by increasing the number of leads or sales generated through your website. Even if you are an affiliate marketer, you can use PPC to drive affiliate sales by sending traffic to your own website to presell the prospects.

However, PPC can be a very expensive and costly marketing tool if you do not utilize it the proper way. Many who are new to PPC advertising are too focused on their ad cost and get nervous after spending a few hundred dollars and are not seeing a profit. This may lead one to pause or terminate the entire ad campaign.

More experienced AdWords users know that sometimes it is necessary to lose money in the beginning in order to make a profit in the long term. Let me explain. One of the features of AdWords is the determination of your minimum bid price and ad position based on the quality score. Among the factors that are taken into consideration when calculating your quality score is the click through ratio (CTR) of your ad.

Now obviously, if you are bidding the minimum for a new campaign without any previous history, your ads are going to be showing up near the bottom of the page. As a result of the low position, your ad may not be seen by many people and thus not get many clicks. Many reported tests have shown that ads in top position get more clicks than ads at the bottom. What this means is that you have to start bidding more per click at the beginning of a campaign in order to build up a good CTR and increase your quality score.

By doing so, you are probably reducing your profit margin or even seeing a loss at the beginning of your campaign. However in the long run, you will see that your minimum bids will go down and you can start slowly lowering the bids for your keywords. The time it takes for a campaign to start turning a profit varies widely depending on the market you are in. Sometimes it can take weeks or months before you reach profitability. However, if you are not seeing any conversions after a few hundred clicks, you should re-evaluate your landing page and your sales message.

A savvy PPC marketer is always testing, tracking and evaluating the results of an ad campaign. If you know that you can get conversions from your landing page based on other types of advertising, then when you set up your AdWords campaign it is wise to start bidding more per click. By sacrificing profits early on, you may see that your campaign will become more profitable in the long run.

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