There has been a lot of research and literature suggesting that to succeed in Adwords you need to ensure you're in the top positions for your keywords. They reason that these ads get many more clicks than ads lower down the page, therefore are going to be much more profitable.
Some Wharton research is casting doubt on this heuristic however. The research, conducted by Wharton operations and information management professor Kartik Hosanagar, University of Texas professor Ashish Agarwal and Carnegie Mellon professor Michael D. Smith, found that ads located lower down achieved much better conversion ratios. Therefore, despite achieving lower click through rates than ads higher up, these ads earnt more money.
"We found that the ads that are in the top position get disproportionately higher clicks, but that they are not necessarily maximizing revenues" for those advertisers, notes Hosanagar.
They found that the percentage of clicks that led to purchases were higher for ads in positions 2-4 than they were for the ad in pole position. The researchers this result was due to two main factors.
- The browsers dilemma – They found that because the first ad attracted the most attention, it naturally attracted the attention of those that were merely browsing. Those with a stronger desire to buy therefore were more persistant and checked out a wider range of ads.
- Persistent comparison shoppers – The really motivated shopper is likely to compare a number of suppliers before purchasing. So if they have gone to the effort to do this, they will buy from the best site, therefore the positioning of the ad is of less important.
Online the relative cost of comparing an extra product is pretty small, so consumers will happily shop around and return to the site that best meets their needs. If all are roughly equal then they'll often buy from the latest site. So you can see that the ad placing has little impact for the serious shopper.
Take-away
So the message from the research seems clear. If you're a marketer using Google Adwords, your job is to evaluate the effectiveness of that ad in driving sales/leads/whatever. So don't get hung-up on how effective the advert is in generating click throughs, focus instead on how effective it is at sending customers your way. By all means ensure that your ad is working well by testing variations of the copy and keywords, but don't forget to give plenty of attention to tying all of this in with landing page optimisation to ensure you're generating revenue rather than simply filling Google's pockets.
To be honest with you, I'd always assumed most Adwords users would connect things up with their Google Analytics account and measure sales rather than click throughs. I can't really see why they wouldn't. Add in Google Optimizer and you cover all bases.
That's certainly how things should be done Dave. I suspect that many still don't practice this though.
With the cut down on marketing budgets it all comes to optimisation. I found it a good activity to play around ad wording and use "optimised ad rotation' option. You can pick the one that has healthy CTR but high convertion rate as well.