PPC Money Management and Blackjack

by damonp

in Adwords / PPC,Featured

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So much of online advertising, PPC advertising especially, is about optimization and money management.

Step 1: Put the biggest budget and most time into the campaigns with the best chance of making the most money.

Step 2: Cut your loses on ALL losers after a respectable research stage.

Step 3: Rinse and repeat with new keywords.

Under no circumstances should you leave on or turn back on an ad/ad group/keyword that has shown over time it does not bring traffic at a profitable level. If its selling 30 sales a month, but costs $25/sale in clicks for a $50 item, you’re probably not making money and you’re definitely not making enough for the effort.

Before you turn that ad back on, do something to change it. Give it a chance to do better, because you have proof how bad it does as it is. Audit the keywords and try to tune the niche more closely to the ads or take another look at the landing pages to see where they may be out of line with the message of the ads or the niche of the keywords.

Why Blackjack?

Any blackjack book based in statistics or card counting will show you some method to know which hands you should bet more money and which hands you should fold to minimize your losses. The percentages are very different one way or the other. If you play perfect statistical blackjack you can minimize the house’s advantage to less than 0.5%. The best in any house game. The mechanics of the hands are so simple anyone can learn to play them perfectly with a little practice. The thing that separates the men from the boys is knowing when to go big and when to stay home.

Money management is the key to winning at PPC marketing as well. Without a campaign budget management plan, how do you choose how much to spend on each campaign? Through the right metrics and research, you can identify the most probable winners and losers out of all of your campaigns and keywords. Once you begin to allocate your advertising budget to those campaigns where you have the best possible odds, you will start to see you ROI increase dramatically.

If you are spending $100 a day on a specific campaign and you identify the following key metrics after a week of sales:

Campaign A accounts for 75% of your sales (5/day)
Campaign C is using 30% of you budget but only 7 sales so far (1/day)

Simple intuition would tell us to spend a larger part of the $100/day on Campaign A and less on Campaign C, if not turning it off altogether. For example if we allocate our budget as the chart below, we put a larger budget behind the campaigns that convert the best, giving the best potential return on investment.

Campaign % Sales
A 60%
B 35%
C 5%

The only reason I would keep C on in this case is that this is only after one week of data; we may not have the full story yet. After the first few weeks of weeding out non-converting keywords, researching new keywords and adjusting bids to try to minimize the losers, do we abandon campaigns altogether. Many times, after a little optimization the campaign may prove to be a winner even if it doesn’t bring in tons of traffic. If the niche is specific enough or filled with longtail keywords, the campaign may chug along with a few steady sales a week with almost no budget (less than $5 a month).

Rinse and Repeat

You can see in this simple exercise, we didn’t even get technical with our keywords or re-write ads or test landing pages. We simply looked at our previous week’s PPC advertising results, scratched our heads and made intelligent decisions about where to spend our money so that it would do us the most good.

A real-world example could take into account everything from what you had left over from last months sale (ie. want to move quickly), time of year (holidays and other seasonal sales), to literally anything that effects your bottom line.

The best thing about this PPC hack is that it can be repeated over and over, literally compounding benefits every month and it takes less than thirty minutes a week.

Now Back to the Blackjack Table

If you are playing three hands at once in blackjack:

8-9
9-5
9-10

The dealer has a 9 showing. Where do you want your biggest bet?

Most blackjack books will instruct to hit on anything below a 17 when the dealer shows a 9. The 8-9 is 17, but there are 24 cards in the deck that best this hand: 9, 10, J, Q, K and A. 24 out of 52 cards… that is better than a 50% chance of your hand losing.

With the 9-5, the dealer has 36 potential hole cards that beat the hand. Nearly 70% chance for you to lose.

The 9-10 beats everything but an ace for the dealer’s hole card on one draw. Pretty good odds. 4 out of 52 cards possible, gives the dealer less than an 8% chance of winning with only the hole card. That means better than a 92% chance of you winning.

Now which hand would you place the biggest bet on?

But we were taling about PPC…

This is one of the most simple, yet missed skills to running winning PPC campaigns. It can take some time to be able to see your campaigns from a birds-eye view so that you an evaluate them realistically. There are many factors and multiple levels of involvement in managing campaigns, keywords and content all required for successful PPC marketing.

Google is also similar to the casino in that they will take your money (ie. show your ads and charge your account) day and night as long as you care to pay, whether they are making you money at all. Your ads are always making Google money. They have an infinite budget because there is always someone behind you trying to get their ad shown too. Don’t try to beat Google or your competitors on shear budget. It’s not possible with Google and not optimal for beating the competition. Brains over brawn.

In a perfect world we could create a specific campaign optimized for every product on our site. How long would that take? How much would it cost?

Even with budgets five times as large as the biggest I’ve ever encountered, I wouldn’t advise planning to build a campaign in one fell swoop. You don’t build it organically that way. You don’t get any feedback along the way. The whole PPC campaign would be built from one snapshot of information instead of over months of trial and error. Is your holiday traffic the same as your June/July traffic?

If you can make it a monthly (if not weekly) task to re-budget and re-organize your campaigns according to performance, your ROI will greatly benefit from making the best use of your advertising budget. If you can’t find the time, check out our PPC Managment Services. Ask about our ROI Guarantee!

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