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We've simplified our keyword status system.
Your keywords will now either be active (triggering ads) or inactive (not triggering ads). Quality remains the most important factor in your keywords' performance. Each keyword will now have a minimum bid that is based on the quality of your keyword and ad text. If your maximum CPC doesn't meet this minimum bid, your keyword will be listed as inactive.
What you should do differently:
If a keyword is listed as inactive, improve its quality through optimization, delete it, or raise that keyword's maximum CPC to the minimum bid indicated. (Raising the bid will re-activate the keyword.) If your keyword is active, you don't need to do anything.
I guess it is a question of how Google is working to determine relevancy; is it via CTR and actual conversion, as they claim, or is it an editorial review (i.e. we looked at your campaign and despite the fact that the numbers aren't there, we don't believe it will do well or is relevant so we will increase the minimum)?
My understanding is that it is based on a formula related to CTR and conversion as primary drivers. If that is the case, the only way to make meaningful judgements is to use statistically valid data sets (i.e. not 2 or even 10 impressions).
If it was an editorial call, and I dont believe it is or has ever been claimed by Google to be so, there is not enough manpower to review every keyword/bid/ad copy/landing page combination to make that judgement. Even if there were, observation is a bad judge of eventual performance as anyone that has conducted direct marketing tests can tell you -- what appears to be the best "offer" or copy is often not.
>2) Terms that are subject to minimum bid amounts can
> never be reduced, even if the ad gets a very high CTR.
> So, for example, I had ads that were penalized with the
>MBP (Minimum Bid Penalty), and after raising my bid and
>paying the premium, I generated enough impressions to
>achieve a good CTR, 6-10% and good position. I tried to
>drop my bid to get more favorable ROI and....inactive.
>Even with a high CTR, dropping the bid below the MBP
>level will deactivate it. How is this about quality or
>relevance? I can reactivate the term by deleting it,
>adding it to a new AdGroup and using the new copy.
>Sometimes it gets penalized, sometimes not.
I see just the opposite. After I generate enough impressions with good CTR, the MPB goes down significantly. I have a campaign where MBP has gone all the way from ~$1.00 to $0.03 after ~1000 impressions were generated with 2%-3% CTR.
Another factor I believe that G can/does use is past behaviour of the account, eg general convertability and relevance of the ads. If you have no history or a poor one, or you flap about trying huge poorly-targeted keyword lists, then G won't run your ads (much). Note that it still seems to run them infrequently to test if you know something that it doesn't!
It's like building up a credit record with G, and is designed, IMHO, to deter destructive short-term behaviour which hurts G's reputation, users and publishers. "Buy new and used dead popes here!"
I know that with new keyword lists or accounts, the ads will often run less at first, or so it used to seem. Not sure that is the case with the new system.
My keyword lists tend to be pretty targeted. For this client, a couple of thousand keywords were broken into 45 different adgroups with 3 copy rotations to start. I have been breaking the adgroups down into smaller groups and testing copy in a champs and chumps format with the original "winner". Overall, CTR is 7-8%.
As far as relevance, do a search for "small children" or "yellow men" and you will see some of the largest Google advertisers with some interesting ads that are, apparently, not being stopped or run less despite being pretty irrelevant. Of course, we don't think this has anything to do with the spend level they have, right?
It is still working, but the minimum bid thing still chafes me because it has made some previously performing keywords more expensive or simply unprofitable. Plus, I don't feel like much has been communicated (surprise, surprise) about how it works.
Kind of frustrating when you need to explain to a client what has changed.