11 tips to reduce your cost of advertising on Google today

11 tips to reduce your Cost of Advertising on Google today!

CPCs on Google Search have soared since the ad platform became available. It’s paramount for advertisers to reduce their cost of advertising. An e-commerce advertiser who pays $3.30 per click to reach new customers, with an average basket of $75 needs to achieve a 4.40% conversion rate to at least cover their media spend. The high cost of ads reduces our capacity to experiment and simply runs the business into the ground in the long-term.  

Ads ROI Calculation

Playing the game

Google’s goal is to maximize ad spend. In the first half of 2019, advertisers spent $57.9 billion on U.S. digital advertising. In B2B markets, the costs per conversion are generally much larger than B2B markets. You are quickly paying $1000 dollars per Marketing Qualified Lead in B2B markets.

Over the years Google has optimized its interface, added some helpful and some hidden features to simplify campaign management and introduce automation. These features are typically enabled as default and many advertisers don’t notice them. In our work with clients we regularly audit campaigns setup that have some of those “deadly” features active. This is just one example of how Google Ads have become a minefield for advertisers – still extremely powerful, but a couple of false settings can drive the campaign to the ground. Therefore the setup and management require even more knowledge and precision than ever. 

I’m sharing a list of the most common pitfalls and practical tips on how to play the ad game with Google so that you can lower the cost of your ads. 

1. Avoid dynamic ‘lookalike’ audiences in remarketing

Audiences can be created manually in Google Ads and Google Analytics. Google offers powerful features to set up and manage audiences – they are particularly useful in targeting users at various stages in the sales funnel or giving extra control with bid management on the display network. 

Typically remarketing audiences are small at the beginning or for smaller brands. That’s why Google sets up “lookalike” audiences automatically for you and to offer you more reach. It’s tempting to enable them. E.g. in the case of one of our customers who had an own audience of ca. 10’000 users, but Google identified another audience with up to 500’000 similar users.

Similar Audiences on Google Ads

Enabling these audiences is controversial because it fundamentally changes the goal of the campaign from remarketing to push activity, which is closer to lookalike audience targeting that we know from Facebook. We were able to quickly establish that Google’s lookalikes don’t work well, perhaps their user data to identify similar users isn’t as powerful as Facebook’s?

Remarketing is key in B2B markets to convert leads into sales-ready leads faster. You want people to consume a lot of content fast to improve conversion rates, also known as content binging.

Start with your own remarketing audiences, use your own dynamic audiences to make the targeting more tailored. Automatically created similar audiences should be considered a luxury feature, used with care and diligently managed.

Extra resource: What is Programmatic Advertising and why is it important

2. Keyword matching – avoiding broad match

This is a classic. Broad match is the default keyword matching settings and I constantly meet advertisers who fall into this trap. There is really no situation when you should use broad match – let me explain why. Broad match gives you little control over what keywords you’ll be targeting – broad matching a ‘woman’s hat’ could also trigger your ads for ‘ladies shoes’ and even less relevant terms.

How’s this possible that so many people still do it?

Google is optimizing the interface to increase your spend – think of Google Ads as any other e-commerce shop offering clicks and impressions. Automation and machine learning algorithms run behind the scenes to make it easier for you to purchase. Naturally, Google automatically selects broad match when adding keywords to the account – this gives Google the biggest opportunity to achieve a wider audience while spending your budget. 

Broad Match on Google Ads.

Never use broad match, use modified broad match, phrase & exact match instead.

3. Negative keywords 

Selecting the right keyword matching method isn’t everything. Negative keywords are essential to filter out unwanted impressions, particularly when you use modified broad match or phrase match. Ensure you have a clear strategy to continually add negative keywords. They will not only reduce your overall cost of advertising but also will improve your overall CTR and conversions. 

Monitor search term report and continue adding negative keywords.   

4. Ignoring automated recommendations

We have already established that Google’s main goal is to get you to spend more money. Your job is to protect your budget. You need to develop an intrinsic distaste for all recommendations received from Google. Let’s look at one example. 

Automated Recommendations on Google.

In this case, Google warns me that my optimization score isn’t optimal and by the click of a button I can implement all recommendations. Resist the FOMO and implement none of them or only those that fit your overall strategy. 

Let’s look at some individual recommendations to prove my point. 

Google Search Partners

Google’s pitch: Enable search partners in all campaigns to show your ads with search results on hundreds of partner sites. What’s more, Google achieves “Better performance: Get more clicks from your expanded reach”.

The real meaning: Enable search partners and we’ll spend your additional budget on some other sites where we can offer you low-cost clicks. Google search partners generally achieve much lower performance than Google Search. I’d only recommend activating it when your campaign is well optimized already and you maxed on your visibility on Google – perhaps you could do it for a couple of top-performing campaigns as a test. Also this decision shouldn’t be taken lightly – your performance on Google search partners has to be carefully managed and regularly evaluated because it offers less control and low transparency.

Another recommendation concerns Dynamic Search Ads (DSA).

Google’s pitch: Dynamic Search Ads use content from your website to automatically create a relevant headline and select a relevant landing page based on the search terms of potential customers. Creating a dynamic ad group enables Dynamic Search Ads for a campaign. You may see these estimated weekly increases in searches your ads may show on if you create Dynamic Search Ads. Learn more

The real meaning: You let go the control of which landing pages are promoted with some automatically generated headlines. Google crawls the site and pulls content to match it with possible headlines – you only provide ad descriptions. As default, Google doesn’t set a limit for your CPC and enables automated bidding.

If your current Google Ad campaign is niche and your website is large, DSA can really generate a lot of traffic and increase your spend. DSA will certainly create ads that you wouldn’t think of doing – some might be awesome, others maybe not so. 

Decide strategically if you want to use DSA ads – it delivers a lot of traffic with limited work from you. One strategy could be to apply DSA to one of the categories and set your bids to ensure the traffic you generate is profitable.

I like using DSA only when the following conditions are met: 

  • Large website with hundreds or more SKUs and product pages 
  • Core campaigns are achieving ROAS above target – limited leverage possible
  • Overall underspend situation
Dynamic Search Ads.

Beware that the aim of all recommendations is to increase your budget, only apply those that you fully understand and you know that they make sense for your strategy. 

5. Ignoring the account manager’s recommendations

Over the years we worked with a number of account managers at Google, we also took over some accounts set up by Google employees. Often customers are proud that they got their campaigns set up by experts at Google for free! It’s not a big surprise that Google’s main objective is to increase your ad spend and those campaigns are optimized to do so. Would you put your profitability in the hands of those who just want to spend your budget? It’s your money and you need to protect it. 

We use Google’s team in some special cases, e.g. industry-specific research and accessing data that you can’t get from the public interface. Also in larger campaigns with an annual spend of $1m+ they would be more helpful because you might find out about new advertising products earlier. Google’s audits of large campaigns are more likely to find something that you missed. 

Avoid recommendations of the sales team at Google, even though they appear to know more than you do. Stay in charge and on high alert when dealing with Google directly.

6. Ignoring agency recommendations

Google’s Partner program is one of the key success drivers behind Google’s expansion. All partner agencies are essentially trained to sell Google’s products. Large agencies receive so-called kickbacks on some advertising products (e.g. YouTube) – meaning the agency earns extra commission on your ad spend. This isn’t typically transparent and it’s on top of the agency fee that you pay. 

Look for independent agencies with in-depth knowledge of Google’s products, but who are working to achieve your goal. Avoid agencies that are too “googly”, they are likely to have sales targets set by Google and will invest a lot of effort to increase your ad spend. A good strategy here is to benchmark Google vs. other channels, particularly outside of the search category Google simply doesn’t outperform other media. E.g. Facebook native ads are much more powerful than Google Display Ads etc.

Avoid “googly” agencies, work with independent agencies who are open to all channels and possibilities. 

7. Retain control of ad suggestions

All the ad suggestions that I mentioned above get automatically applied unless you opt-out of this feature. This is probably the most sneaky – as expected Google does not recommend that you retain control of your money. 

Ad Suggestions “On”.
Ad Suggestions “Off”.

Make sure you do not automatically apply ad suggestions and retain control of your budget. 

8. Exclude categories & placements on Google Display Network (GDN) 

Placements and category exclusions are a ‘must-have’ of every Display campaign. Start with the category exclusions because that’s the biggest drain. As expected, most of the exclusions are not applied as default. Do you really want to show your ads on sites that fit some of these odd categories?   

Content Exclusions on Google Ads.

On top of the category, exclusions make sure you also review and exclude placements on a regular basis, particularly larger campaigns that will attract impressions on a lot of questionable sites.  

Ensure you are aware of excluded categories and placements when investing in Google Display Network.

9. Exclude app advertising on GDN

Exclude Apps on Google Ads.

As a default, your ads will also appear in various apps, including games and kids videos on YouTube. In 99% of cases, they lead to unwanted traffic as a result of accidental clicks. You want to make sure these are excluded.

Exclude unwanted app traffic – what’s more you can create placement exclusion lists and add them to your shared library so that you can use easily apply them to future campaigns. 

10. CPC limits

Ensure you set CPC limits regardless of your bidding strategy. Once again the default setting has no limitations. I haven’t seen a case yet, where I’d be open to paying an unlimited amount for a single click. We’ve seen huge savings on campaigns by simply setting CPC limits.

Set limits for your Cost Per Click. 

11. Smaller less popular target locations

The price you pay for Google Ads is a function of the CPC calculation in the end, in simple terms it’s based on the supply of inventory and advertiser’s demand. Most advertisers focus on the largest agglomerations and cities. Consider looking at smaller, less popular locations. I’ve tested this approach in Germany, targeting approximately 50 cities with a population between 100-300k. Most of these cities are ignored by other advertisers, who focus on campaigning in the top 10 locations in the country. This approach means less competition for our campaigns and subsequently a much lower cost of advertising.

Look for cheaper audiences and similar strategies to keep your costs low.

The Outlook 

As CPCs continue to increase and Google adds further optimization and automation to its interface it’s essential to always keep your guard up and protect your budget. Google’s new feature releases create a perfect smokescreen and only those streetwise advertisers who understand the underlying reasons will continue to deliver a good performance. What’s more, it always feels good to outsmart a giant such as Google. Let me know in the comments what you think my recommendations and if you have other ideas on how to reduce ad cost on Google.

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3 thoughts on “11 tips to reduce your cost of advertising on Google today”

  1. Thanks Luke! Let me add an interesting information nugget: Prices of Google advertising started to drop…

    …Google’s prices do not raise anymore, the pricing power erodes generally and clicks on search for example get cheaper and cheaper.

    See e.g. businessinsider.com/google-q4-ad-juggernaut-2019-2:”Google has seen cost-per-click (CPC) rates decline…Though Google has historically struggled to explain CPC declines, one of the driving forces behind both the uptick in clicks and the decline in CPCs has been the shift to mobile.”

    Doesn’t mean prices get cheaper in all verticals, but the trend is here. Feels like a warm summer shower.

    1. Hi Aurel, thanks for tuning in.

      Unfortunately, these announcements are simply Google’s propaganda I’m afraid.

      I suspect the answer is in GDN. Google is adding a lot of poor quality inventory to the GDN, from various publishers and apps where no one wants to advertise, the overall CPC will be going down as a result of these cheap clicks.

      My study was mostly focused on search and there CPCs have been increasing. There is plenty of evidence that supports this, e.g. Wordstream are benchmarking it on a regular basis, I encourage you to look it up.

  2. I don’t find any evidence for “soaring CPC on Google Search”, neither on Wordstream nor anywhere else.

    What I found on Wordstream was:

    “The average cost per click…across all industries is $2.69 for search…These average costs have increased very little over the figures we found a couple of years ago (when the averages were $2.32…).“ Source: http://bit.ly/2G8T7HF (last actualized 9/2019). Massive sample: “14,197 US-based WordStream client accounts in all verticals (representing over $200 million in aggregate Google Ads spend)”.

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