Last week, I was privileged to participate in a small lunch at Google's new New York offices with CEO Eric Schmidt, cofounder Sergey Brin, VP of Ad Sales Tim Armstrong, and selected others. The Google team shared their vision with three agency people, six marketers, and myself. They continued their tradition of soliciting feedback on our relationships with their company. Google has committed to making it easy for marketers to purchase and manage advertising that works. The team reiterated their focus on searchers' needs. By keeping the user/searcher experience paramount, all constituencies benefit. The mission statement begins: "Google's mission is to deliver the best search experience on the Internet."

Ad product changes are afoot. Some were discussed over lunch and in meetings with the sales team. The biggest will be phasing out premium sponsorships in favor of migration to an AdWord-driven system.

The decision is likely based on Google's user focus, coupled with the AdWords algorithm's amazing ability to balance the needs of the searcher, portal/publisher, and marketer.

Even if you now buy only premium sponsorships, AdWords is the future. Perhaps you're one of over 100,000 marketers using AdWords now. Are you getting everything you can out of it? There are many ways to set up and manage AdWords campaigns. Which techniques and strategies to employ depend on your goals and objectives. The more you know about the system's nuances, the better it will work for you.

AdWords underwent changes recently that allow access to more inventory and provide greater control over current listings. I'll cover the basics before introducing more sophisticated tricks and tactics.

AdWords: The Basics

Many marketers had their first experience with paid placement on Overture's auction model (perhaps back when it was called GoTo). On Overture, a CPC bid (fixed or auto) determines the position for each keyword in a campaign (subject to the Click Index exclusion for poorly performing ads).

In AdWords, position is indirectly based on CPC. CPC plays a role, but so does CTR. AdWords measures CTR at the various positions, normalizes the CTR to adjust for the positions, then multiplies the CPC by the CTR to determine the efficiency of an ad in comparison to other ads running (taking into account the position an ad was in when clicked).

The formula determines the appropriate average ranking. That means an ad with a greater CTR can be displayed in a higher position than an ad with a greater CPC. Essentially, appropriate, targeted keywords and copy that are accurate and compelling to searchers (i.e., they click) are rewarded. Using keywords and brand names in titles and descriptions can help improve CTR.

Ad Groups: The Power of Separation

This blended CTR/CPC method to determine position/rank is the key to several AdWords best practices. The first best practice tip is to separate keywords into different ad groups by similar core words. Separating ad groups makes tracking easier. The process of generating large, diverse campaigns with many ad groups may seem like lots of work. It is, the first time.

The following benefits accrue as a result of separation, rather than using a generic ad for a large group of keywords:

Better target the landing page without requiring a move (a sophisticated targeting method within ad groups for marketers ready to graduate to sophisticated campaign management for larger-spend campaigns).

Not using broad keyword matching and targeting by phrase allows use of that phrase in title and description, typically increasing CTR.

Creative can be written specifically for a small, focused group of keywords, improving relevance.

Understand costs at a more granular level to better determine campaign return on investment (ROI).

More effectively test creative, optimizing for not just CTR but also post-click conversion.

Be more specific using "negative keyword matching" or other match options besides "broad matching."
Power Posting

Still prefer not to set up lots of ad groups? Power Posting is an alternative.

Power Posting is an AdWords account tool to better control a campaign. Power Posting lets you specify additional information for individual keywords or phrases within an ad group. An ad group with 18 very similar keywords (optimizing well-targeted, effective creative) may be best managed down to the keyword level. Each keyword within an ad group can have a landing page URL (for tracking purposes) and a different price.

Execute Multiple Creative

Leverage Google's ability to simultaneously run multiple creative executions. As Google rewards good creative by rotating good CTR ads higher, it makes sense to test ads for CTR. The easiest method is to run two creative executions simultaneously. Depending on the volume of impressions for your ad group, it may take a few hours or several days for Google to test the ads and rotate them into results. Google rewards the better ad with higher position, even during a short test. You can see the CTR for each ad in the View/Edit Campaigns area. With 40-50 clicks on either ad, the difference should be sufficient enough to determine which ad will deliver a higher volume of clicks and thus provide an advantage.

But be careful. If one ad is written in a compelling manner (well-targeted, based on the keyword or phrase) but doesn't accurately describe what a searcher will find post-click, you risk a drop in conversion, ergo reduced ROI. So, increased CTR could cause a reduction in post-click efficiency and a resulting ROI drop.

Keep creative accurate, appropriate to the landing page and what's on offer when a searcher arrives. You might have creative executions that work with broader words or ones that are effective with very specific phrases.

Dynamic Keyword Insertion

For an extremely large campaign (thousands of keywords) with significant spending, investigate "Dynamic Keyword Insertion." This technique automatically inserts keywords into the title or description, resulting in customized creative for each word. We use it for several clients. For others, we use automated means to create static versions of ads that accomplish the goal of targeted custom creative.

Landing Pages and Content Ads

Take time during campaign setup to create the best possible landing page matches between ads and pages on your site. If an ad gets very high click-through, developing a customized landing page may make sense. Similarly, high-volume campaigns should be combined with landing-page tests. Changing landing-page conversion is a huge driver of efficiency.

Make an informed decision regarding the content portion of Google's network. Though appropriate for some advertisers, the inventory does not convert well enough to justify prices paid for others. For example, an article describes how John Marshall of ClickTracks found content-driven traffic a poor fit for his business.

If you're not using a tool or service that identifies content traffic, you can build systems in-house to "tag" visitors arriving from content sources. To do so, examine the referrer. Look for "pagead.googlesyndication.com." You'll not only see the ad was a content ad but also find the site on which the ad ran. By separating clicks with the page ad referrer from regular Google clicks and examining their conversion behavior, you can make an informed decision about the AdWords's opt-in process.

Content ads may be great for you, or not. Chances are you're not getting huge click volume from those ads. But, as the percentage of clicks from content ads increases, making the right choices regarding the opt-in decision will be increasingly important.

Google's AdWords are a powerful addition to a marketing campaign. Make them more powerful still with knowledge of how best to use the system to your advantage.

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