Realtor-Marketing.com, National Realtor Marketing Resource

Today we will take a look at one of the things Google AdWords beginners often find confusing. Then I will explain why this initially complex concept is actually great for you the advertiser. Realtors who learn to use this secret can potentially save hundreds of thousands of dollars a year in advertising.

Why do you almost always end up paying less than the amount you bid on keywords in Google AdWords? The reason for this is that with Google AdWords you only pay 1 cent above the advertiser who bid below you. So if for example you bid $1.0 per click on a keyword and another advertiser bid $.50 per click (and you are the only two advertisers) you would only pay $.51 per click to be in the number 1 spot.

There is also a big secret that is the key to getting lower per click prices even if new competitors are starting to bid on the same keywords.

The secret is your Click Through Rate (CTR) which is a major component of Google AdWords Quality Score (Your quality score is made up of multiple components that actually determine you CPC for a position. For now we will focus on CTR but will cover the quality score in a future article.)

Your CTR is much MORE important than how much you bid on a keyword.
The CTR is the percentage of people searching who actually click on your ad. So if for example 100 people search for your keyword “San Diego Realtor”, your ad will show 100 times, and if only one person clicks on your ad, that’s a 1% CTR.

As an example let’s say I have a 1% CTR and I’m paying $1.00 for the number 1 position on the keyword “San Diego Realtor”. Let’s say you have a 2% CTR for the same keyword “San Diego Realtor”. You will probably only have to pay $.51 per click (your Quality Score would actually determine the true cost per click that you would pay but CTR is a very large component of your Quality Score) to get the number 1 position and knock me down to the number 2 position. This basically means you were twice as relevant as I was so you only had to pay half as much as I did! The implications of this are huge; if you understand this concept you can kill your competition.

So why would Google do this? From their perspective they are rewarding the more relevant advertiser which makes their users happy and they are making more money. They make more money because if your ad at $.51 gets clicked twice every hundred times its shown Google earns 1.02 and if my ad only gets clicked once every hundred times shown they only earn $1.00.

When you achieve a high CTR you can pull your bid prices down, maintain your same position, and increase your traffic. The difference can be quite amazing. Here’s an example of two ads that are ALMOST IDENTICAL but one got nearly TEN TIMES the CTR as the other:

Notice what happened: All that I did was add the word instantly and the CTR jumped from 0.25% to 3.1%!

That means that the ad on the right gets more than TEN TIMES as much traffic and I could pull down my bid prices and get that for the same amount of money as I was paying before. Think about how much money this will save you every month and how much that will add up to at the end of the year.

This system based on CTR doesn’t apply to Yahoo’s (formerly Overture) PPC advertising system as with Yahoo the highest bidder always gets the number 1 position. This is why Google AdWords is vastly superior to Yahoo CPC program, if you are a smart marketer.

It is beyond the scope of this blog entry, but there is a simple way in Google AdWords to apply this secret to constantly reduce your costs and increase traffic.

If you are a Realtor that isn’t using AdWords yet you can very cheaply.