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There is a client we have worked with for a long time who has a Google AdWords campaign that has not performed as well for parts of this year as it has in the past. In general, 2009 was somewhat of a difficult year due to increased competition for paid search traffic and poor economic conditions. In other words, there have been more advertisers chasing fewer customers. And this particular client definitely experienced the effects of that.

After trying many different strategies (account keyword expansion, keyword contraction, higher ad positioning, ad split-testing, etc.) we’ve finally stripped the account down to the barebones.

We’re now only bidding on four keywords. I’m really not a big fan of bidding on so few keywords. It’s the whole “eggs in one basket” thing. But in this case, looking backward, I can see that if we had concentrated our client’s budget on that very small set of keywords, our performance over the last year would have been substantially better. We bid on many, many more than just four keywords. Throughout the year, we bid on fewer and fewer. And finally, this month, we’re down to the final four contestants.

Should we go down to a single keyword? In theory, if you place all of your budget on the number one performing keyword, then all else equal, you will maximize the performance of your paid search account, up to the point where you run out of traffic. So there’s one problem with this strategy. It is best employed in a limited budget situation.

If you have $10 thousand to spend, but bidding on a single or very few keywords only soaks up $1 thousand of your budget, there are likely many more opportunities you could be exploiting by spreading your budget around. But if you only have $1 thousand to start with, then spending the entire $1 thousand on a single keyword makes sense if it provides the best return on your investment.

Another problem is that keyword performance does tend to fluctuate. If you’re all in on a single keyword, then if conditions change and that keyword’s performance declines, your overall account performance will decline right along with it. So in our case, I don’t see us dropping to a single keyword. We will stick with the four keyword basket, but you better believe if we start to see a trend of declining performance, we will open up some other keywords.

I guess the core lesson here is the importance of allocating your budget so that more of your budget is consumed by keywords that provide the best return for your advertising dollars. The only way to do that is by carefully examining your historical keyword performance. One caveat is that keyword performance can be affected by where your ads are positioned, so your analysis will be most accurate if your ad positioning is relatively steady across keywords.

Paid search management sometimes requires some imagination, and it definitely requires a watchful eye. Work Media have a lot of experience doing this stuff, and we’re pretty dang good at it. We would welcome the opportunity to work with you on your search engine marketing. Contact us at 888-299-4837 or email info@workmedia.net.