What is the AdWords Daily Budget, how does it work, how much do I pay – and how much will I earn?

Every campaign is governed by it’s own Daily Budget, an amount of money you are willing to spend with Google every day the campaign runs.

There is no minimum amount, although it’s sensible to buy enough clicks per day that will stand a chance of creating a meaningful conversion event (lead, sale, enquiry, phone call, download) on your website within a reasonable timeframe.

Or it could take you ages to find out whether your website converts at an acceptable rate.

The value of the conversion is, of course, totally down to what your website is selling.

And the amount of clicks you can buy is dependent on how much each click costs.

If the average cost per click (CPC) is £1.00 and your daily budget is £10.00, you can buy up to 10 clicks (10 visitors).

When your daily budget is used up, your ads stop showing until the next calendar day, as determined by the schedule settings on your campaign.

How much you pay per day will vary – some days slightly less than your daily budget, some days slightly more.

But Google guarantee that, over a 30-day period, you will never be charged more than 30 times your daily budget.

If they overshoot, you get a credit back on your account.

So this puts you completely in control of how much you want to pay Google per month.

And why it is so important to know your numbers and make sure that what you spend comes back with friends attached.

In this game, he who knows his numbers – wins.

The formula we follow is simple: "Traffic + Conversion = Profits"

Once you get more money back than you put in, how much money are you going to put in? (Answer: "all of it").

Then the concept of "budgets" goes away.

For most advertisers (and marketers) that’s incomprehensible.

But if you want to know more, just get in touch

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Our Chief Economist, Hal Varian, explains the AdWords Ad Auction and how your max CPC bid and quality score determine how much you pay for a click on Google.com.

So you put your AdWords bids up to raise your Ad position, and your AdRank (position) actually falls – what’s going on?

Google’s Chief Economist, Dr. Hal Varian, demonstrates eloquently how AdRank and Click prices (CPC) are computed, and why Quality Score and Click Through Rate are so important whenever your keyword triggers your Ad to enter the Ad Auction.

The video is insightful and revealing, watch it in full at the bottom of this article.

And I now (as of today) also believe the point Dr. Varian makes about increasing bid prices and actually appearing in other auctions with lower positions as a result, although I didn’t when I first saw the video.

This afternoon I’ve just been doing some advertiser research, which involves typing a keyword, seeing what ads appear, and going through all the pages of search results carrying ads for this keyword (tents) – there were about 140 advertisers (UK).

I noticed several things, some of which I’d seen before, but which now “seem” to gel and make a bit more sense against this backdrop.

Firstly, to confirm I had actually reached the end of the advertiser results, I noticed the See your ad here » link which shows when all ads have finished, before starting over with the top AdRank ad again (rather than More Sponsored Links >> which indicates additional ads to come on subsequent pages).

When I was going through each page, sometimes I would see the same advertiser ad that I had seen on an earlier page, but now in a lower position – a different auction, presumably triggered both by me (since I refreshed the search by going to the next page), and by other users who are all searching just like me.

Some advertiser ads also had disappeared from the auction when I had visited their website, and then gone back a page to the results page carrying their ad which I had previously seen and clicked through on.

(Perry Marshall’s observation of the “search and search again” phenomenon where ads quickly disappear and change position if you repeatedly refresh your browser may also be implicated in this auction discussion).

What I think we need to consider are several points:

1. Quality Score which governs the AdRank position is computed REALTIME for every search (i.e every auction) and is therefore potentially variable, because of broad keyword expansion, CTR, different ad text being split tested, restricted campaign delivery, ad optimisation and rotation, exhausted budgets, time of day, scheduling, advertiser competition etc.

2. Since we’re talking realtime, you’ll only ever acquire data that pertains to a tiny snapshot of the whole auction activity over an instant of time – the next search that happens, or if you refresh your browser or go to the next page of results, and the auction has already changed.

3. So the best data you can ever acquire is going to be a series of averages over a specific time period, and the longer the better to avoid glitches. So it’s overall trends you need to follow, rather than snapshots which could go up and down quite a bit.

Maybe the only way to ensure maximum consistency and Impression Share (for an individual advertiser) would be to be in the happy position (with full comprehension of profitability of course) of being able to set a huge daily budget guaranteed to buy every click on the market (and then some), a high bid price to ensure consistently top position in the auction, accelerated delivery, for exact match only with a single ad.

I wonder if anyone’s ever been able to do that? (I bet they have). I’d love to see those reports!

Seems to me that sometimes we actually can expect “too much” transparency from Google, and that they have a highly automated machine which even *they* cannot fully explain all the results from, or offer reporting or tools which can help us dig deeper.

They are still developing and refining it after all. I cite the Ads Diagnostic tool which is a great (fairly) recent functionality, but why should it be a painful, time-consuming and bug-ridden process which you can’t run as a scheduled report? I expect (or hope) that will eventually appear, as many things eventually do (remember when we could not even schedule our campaigns? I go back more than 5 years with all this…)

So AdWords sometimes seems to me to be a bit more like Quantum Mechanics than we would actually prefer (by observing the experiment, you actually participate in it, and alter it without meaning to), and that sometimes we may need to go a little easier on our opinion of Google – after all, there’s no other system like it!

And this video by Dr. Varian *graphically* demonstrates how critically important Quality Score is in governing your Ad position (AdRank), and Cost Per Click.

So, not only is it important to optimise your AdWords performance through

• bid price management to individual keyword level (yes – all of them, and it’s easily done)
• “Peel and Stick” into ever smaller ad groups (I have Campaigns with thousands of Ad Groups, and they get up to 100% CTR)
• Ad Texts targeted to keywords in Ad Headlines, description lines and display urls

but now, Quality Score has to be targeted for optimisation also, and that involves your website and landing pages too.

Remember “Traffic is for Show, Conversions is for Dough”. If you’ve got a “concrete website” – you’re in serious trouble…

The top Quality Score of “10″ is now on your weekly optimisation “to-do list” …

Comments and feedback most welcome…

Start making AdWords – WORK

Contact me today.

Read more Testimonials

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How to tell at a glance how much competition there is for your keyword search terms.

The answer: "It Depends"

Some marketplaces are fiercely competetive, like the "make money online" example above, with over 4,000 people slugging it out to make some kind of a sale – you don’t want to try and play in that game unless all those folks have paid you already…

At 11 ads displayed per page of results, that means you’ll have 380 pages to read through to find the last ad.

Since most of us read only (at most, maybe) the first 3-4 pages, that means ads below position 50 or so will *never* be read.

It’s a fair bet most of these unwitting dupes have already been separated from their money and have bought a dream they’re trying to promote on someone else’s behalf.

They’ll never make it work though, and as fast as they give up, more pour back, keeping the bid prices high and the competition just as stiff.

Then they’ll give up, and claim AdWords is "a scam".

So, if you want to know just how many advertisers are promoting something where you’d like to be, and whether it’s a battle you feel confident fighting (and only if you really know your numbers, should you) then simply scroll down to the last ad on the right hand side of the page, and click More Sponsored Links >>

The truth will be revealed…

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AdWords – otherwise you just wasted money and time trying to get traffic for untested keywords, and on an untested website.

Everybody seems to think that getting "free" traffic from natural or organic rankings in Google, by using Search Engine Optimisation (SEO) techniques is the best thing to do.

Yet nothing could be further from the truth. They are completely complimentary.

Firstly, SEO is not "free traffic" – you still have to invest time and money either figuring it out for yourself, buying software tools to help, or hiring someone (and there are a *lot* of shady organisations out there preaching this, so be warned, and be careful!)

Next, if you have not tested your keywords, your ads and your website’s ability to convert a visitor into a profitable action – what on earth is the point?

You can’t guess this stuff, you have to track, test and improve on it first. Only AdWords can give you instant, targeted traffic on demand to try things out with to see what works, and what doesn’t.

Yes – organic rankings *are* the final destination, but ONLY when you know they have value (or can achieve them in 6 minutes with no effort – see the header graphic for this article).

Finally, no web page (not "website", there are only web pages to the Search Engines) in the world can be optimised for every possible keyword out there, and AdWords serves to plug the gaps that SEO cannot completely address.

And if you can (profitably) occupy TWO positions on Google’s prime Real Estate, rather than just ONE – whyever would you not?

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Comments by Howie Jacobson and Bryan Todd

“David Rothwell is one of my most reliable sources for what’s working in the AdWords trenches. I can count on him for “AdWords Answers” without hype or fanfare – just the straight scoop that makes money for his clients – and my readers.” Howie Jacobson, PhD Author, “AdWords For Dummies” www.askHowie.com (2nd Edition now reprinted Sept 2009)
“David Rothwell keeps me on my toes. He knows AdWords inside and out, he knows what his clients need and want, and he’s always on top of the latest news. He asks the tough questions, and he’s always got solid answers when I ask the tough questions of him. I am always pleased to refer clients to him because he is a professional who serves his customers outstandingly well.” Bryan Todd Co-Author “The Ultimate Guide to Google AdWords” (with Perry Marshall)

There’s a lot of scams, smoke and mirrors, and creative material available on how to work from home with your own business.

But some is genuine, and there really are people you can trust, and valuable skills you need to learn about and acquire.

Having a website is the first, followed by getting visitors – traffic.

AdWords didn’t exist yet, so I started to learn about SEO, Search Engine Optimisation. I bought a software program and started to read and practise.

I created some websites and started to actually get rankings, visitors, and clients. I still get a small amount of recurring passive income from these.

But I did make some serious mistakes along the way, like optimising a website for the wrong keywords!

I still have several first page rankings for these, even though now I realise they are not "money keywords" – keywords real people, looking to buy, are using.

Then, along came AdWords, and I tried it. I could get my ads up on the front page of Google in minutes – Wow!

Then, mysteriously they would disappear into oblivion.

In these early days, if your ad got lower than 0.05% clickthrough, it was disabled, and you had to *pay* Google to reinstate it.

Then of course, it would happen all over again.

I couldn’t make it work, and it was proving costly and unproducive. So I put it aside for a while. This was December 2003.

Some months later, I accidently stumbled on a literally life-changing book.

It was "The Definitive Guide to AdWords" by Perry Marshall. It opened up for me a whole new world, and I learned more than just AdWords from it.

Anyway, the internal workings of AdWords suddenly became clearer, and I started to really understand how it worked.

Being an ex-engineer (very much like Perry) means I like to take things apart, understand how they work, put them back together again and if possible, improve the functionality too.

This is just what I do with my AdWords Audits so I can improve existing campaigns.

So the more I studied it, the more addicted I became.

Particularly as AdWords allows you to endlessly experiment with that most fascinating, enigmatic and frustrating of things – People!

Every AdWords ad you write is a psychological experiment. Some succeed, others fail. But all the data you generate is critically important.

What works, what doesn’t. Gradual improvements, sometimes huge.

After a while, I was confident enough to offer my services to others who were at an earlier stage.

My very first client was a lady in Houston, in Real Estate. I had to figure out how much to ask her to pay me, and how to accept payment!

And it’s grown from there. I now have more than 80 client accountsand I work with AdWords all day, every day, in some form or other.

This website is my way of documenting what I have learnt (and continue to learn – AdWords grows and changes all the time) and offering my experience to others.

Read it and enjoy.

Please comment, or go to the Helpdesk and ask questions if you have them.

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I was too experienced and too expensive to get back into an IT career at that time – so what next?

Some major lifestyle changes were ahead, even possibly the loss of our house and maybe relocation to a less costly area to live. We are in the South East of England, which has one of the most expensive costs of living in the country.

So Lynne started to look for work again, and started private teaching part time.

We had to slash our living costs, so out went any unnecessary expenses like take-aways, eating out, entertainment and much more – that’s a whole story in itself.

I started to offer IT and Telecoms Consultancy, since this was a continuation of my former abilities.

We invested a large amount on a Microsoft Certified Professional course so I could bring my technical skills up to date.

But – how to get clients?

I’d always been interested in the Internet, was a Google user, and had published some web pages on our Corporate Intranet, which I enjoyed doing.

So I realised I had to make a website of my own, and figured out how to get a domain name and build a rudimentary website on it.

Then as we all do, I waited. And kept on waiting. Nothing happened. What’s going on?

I tried a different approach. I bought a listing of 1,400 or so local companies with an appropriate profile for my pitch -part-time on-site IT support.

It worked – just barely. I got one client from over 1,000 prospects. One. Conversion rate = 0.1 %. Not very good. But the course began to pay for itself.

We had to diversify. I did what every marketer has to – research.

Find a market, and reach it with something they need, something different to the others out there.

And on a shoe-string budget.

The big thing in demand around here, for a local business, is something that saves time for professional people who are both out at work all day long.

I know, because that’s where we’d been before.

I started a Domestic Cleaning service. We’d used these (and sacked one) before and knew all the requirements to satisfy your clients, which was actually difficult to find.

So we were able to position ourselves just as our clients would need – reliable, consciencious, flexible, customer-driven.

The marketing was some simple fliers printed up in Publisher, cut up small and delivered to our neighbourhood by hand.

But we didn’t pay for anything we didn’t have to. In fact, we ensured we got paid to do our own distribution.

We delivered telephone directories wherever we could and put our fliers in too!

In the fine weather, it was actually very enjoyable and we saw more of our local area than we ever would have otherwise.

And we got clients. Soon, with Lynne’s teaching, my cleaning, and some IT suport work, we were safe from losing the house and relocating.

I also took on some business development work for an old college friend. Then Lynne got a full time teaching job again, and I could turn my attention to developing a different sort of business, online.

So, where does Internet Marketing and Google AdWords come into all this?

Read the next part:

"How to Work from Home – Genuinely"

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Director of IT Europe, Informatica Software: 2001

My final position in full-time employment, a casualty of the dot-com crash and 9/11 which sealed the fate of many IT professionals at the time.

More than 300 people were chasing IT jobs every day.

So I decided not to anymore.

European Information Services Manager, KLA-Tencor Corporation: 1997-2001

Bringing order from chaos!

Merged two company IT infrastructures, grew from 125 European staff to 350, and from 4 sites to 12 – it was a blast! (literally too, ask Doug Mountford!)

Information Services Manager, Hewlett-Packard: 1995-1997

The most frustrating company I have ever worked for.

Subsequently acquired Compaq Computer.

UK Systems Manager, Olivetti UK: 1991-1995

A wonderful company to work for, great at product creation, but poor at marketing, left with much regret after my product line died a natural death and I needed frash pastures.

Subsequently acquired by Getronics

Product Manager, Softsel: 1990-1991

Subsequently acquired and became Merisel

Pre-Sales Analyst, Concurrent Computer Corporation: 1988-1990

Manufacturer of proprietary ("you’re dead, honey": The Terminator) real-time operating system computers, clients included UK MOD, financial institutions (inc. Allied Irish Bank), and flight simulation manufacturers (inc. Rediffusion Simulation).

Apochryphal marketing department statement at that time: "We don’t have to apologise for Unix" (remember that one?)

Originally owned by Perkin-Elmer Data Systems (a huge company which ironically was involved with the early versions of Unix).

Later was allowed to be "bought out" by Masscomp Computer – what a joke!

European Technical Support Manager, Plexus Computers: 1984-1988

Early, highly progressive and innovative manufacturer of Unix-based (Version7, before System3, Before System5) multi-user systems based on North First Street, San Jose, California.

Founded by Bob Marsh and Kip Myers.

I set up and ran the UK and European hardware technical support operation, which was a successful profit-centre (as any support operation can and should be).

I am *very proud* (albeit at the time, frustrated) to remember being part of this company.

Other names remembered were:

• (UK) Neil Cooke, Glynn Barratt, Neil Rowlands, Mike Neil, Steve Spencer
• (USA) Mike Smith, Enrique Vargas

Prior to this:

• Senior Workshop Engineer, Computer Field Maintenance (CFM): 1980-1984. Subsequently acquired by Granada Computer Services
• Audio and Television Engineer, Telefusion Ltd: 1976-1980. One of the major national UK TV rental companies of its time

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Lots of people dream about starting their own Internet-based Business. I was not one of them…

It was December 2000. I was European IT Manager for a billion-dollar American company serving the Semiconductor industry. I had been with them nearly 4 years and had a blast.

I had standardised and expanded our IT infrastructure from 4 sites to 12 across Europe, and our company staff had tripled.

I had set up a European Helpdesk service with 4 team members, and I was earning a decent salary, enough so that my wife Lynne, who is a Teacher, could stop work to spend more time with our first child.

In January of 2001 I was hired as Director of IT Europe for a low 6-figure salary by another American firm, to help them achieve similar growth in line with their aggressive European expansion plans.

By May of that year, I was out of a job, my department downsized in the wake of the dotcom crash.

After 9/11, my offical career of employment in IT was over. I have never worked as an employee since.

In fact, I have now worked longer for myself than any other company I have worked for, since my first day of employment at age 16, straight out of school in 1976.

In those (more enlightened) days we had Apprenticeships, and I was learning my trade both in the workplace, and at further education on a full and part-time basis.

I was training to become an Electronics Engineer.  It had been my passion for years and I was always making electronic circuits, even designing and etching my own circuit boards.

I started off as an Audio and TV Engineer, then by a lucky break got into Computers and the world of Digital – very different to analog.

Along the way I worked for computer systems manufacturers like Plexus Computers, Concurrent Computer Corporation, Olivetti, HP, and had experience of Unix servers, IP networks, Client-Server computing, Windows PC’s and application software.

I had experience of engineering, technical support, and sales support in all areas of the channel, from Manufacturers, Distributors, Resellers, End-Users, Corporate and Government customers, and internal company staff.

When I took over European IT single-handedly in 1997 I had to transition to IT Strategy, Budget, Supplier, Project, Infrastructure and Staff Management responsibilities.

Without realsing it, I was effectively running my own business, since what I wanted was always what the company needed – cost-effective IT systems that enabled the company to do it’s work at profit.

When I was laid off in 2001, I then had to try and make my way in a landscape where every IT job was being chased after by 300-440 people.

After a year, I’d had enough and decided that the time had come to do it all for myself…

See the next entry to come:

"What are you going to do now?"

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I’ve been working with it for over 4 years, and am still amazed by it’s power, subtelty and reach.

But there’s a lot of Hype, Myths, Bad Information, and Poor Working Practices out there, and that makes me very cross.

So this website has been built to dispel those myths and give people clear, usable, useful information on how to get "the best advertising possible" (as Google puts it).

This website was built with the popular Blog and Content Management System (CMS) WORDPRESS. Wordpress is FREE, Open-Source software.

The theme is a new, FREE resource called "Branford Magazine".

If you’d like a website like this one, just contact me for more information.