What's the deal with Google AdWords?

Google AdWords is awesome, if not a little scary. I say that because if you’re doing it right, it has the power to drive new business day in, day out. If you’re doing it wrong, you can haemorrhage money like it’s going out of fashion.

This will give a initial over view of how Google AdWords works for the average business. So just quickly, (to make sure we’re all on the same page) the most popular way to use Google AdWords is to show at the top of the search results in Google when someone searches for a product or service. Just like this;

Here is an outline of the way Google AdWords works for thousands of businesses across the UK...

Google charge a small fee every time someone clicks on those adverts, which maybe around £0.20p - £0.30p per click (but vary quite heavily depending on many factors).

The Sale

When someone clicks an advert for a bunch of flowers on Google, and then makes a purchase for £30, Google will charge for the florist for the click. However if each click costs approx. 25p, and say 9 people clicked the advert but decided not to buy, before the 10th person finally purchases the flowers, the Google cost of sale to the florist is £2.50.

The Profit

So, if the florist sells the flowers at £30, but cost them £15 to buy, then they have a gross profit of £15 (Sorry, I know that’s obvious but bear with me, as we’re breaking it down). Then out of the £15 GP, we take the £2.50 that has gone to Google, leaving £12.50 profit to pay for everything else… and a little left over, hopefully! This is where we need to consider the cost per acquisition, (CPA) and in this case the CPA is £2.50. The CPA can make or break a business. If a good Google AdWords campaign can get that CPA down to £1.50, then we’re doing well. The flip side is that due to lack of conversions/purchases the CPA can run away, and it may even cost the florist £15 in Google clicks, just to get the sale… Not good business. This is where we help businesses make the most of their online marketing budget, and stop them wasting money!

The Data

There’s loads of data to be taken from a sale like this, but it’s much better to build up data for at least a month or two, this way we can get more of an average overview, and start to see patterns. We can see things such as the time of day that people are most likely to buy, which areas buy the most flowers, when people are more inclined to click the adverts etc. With this data, we can then make some changes, for e.g., if no one has ever bought from the florist on a Wednesday afternoon, and 80% of the sales are made on a Monday morning, we want to be pulling the Google budget from Wednesday afternoons, and ploughing it in to Monday mornings, spending the budget in the most effective way possible.

This is an initial introduction to Google AdWords, and if you already knew all of this then I doubt you would have read this far, but if you didn’t know and this explains a little more about how it works, then great. If you wanted to know anymore you can email me, or call us. We’d be more than happy to help!


Mark Picton

As one of the founders of SONDR®, Mark specialises in managing the online marketing and web services for our clients throughout the UK and Europe.