1 Comment Written by Andrew Bonar on January 22, 2009 – 1:01 pm

Before you start advertising on Google, it would be a good idea to go through some common sense checks. I have been continually surprised to hear from clients that “Google Adwords is a waste of money,” when in fact, in my opinion, nothing could be farther from the truth. On talking to clients it often pains me to learn that some very simple research was not done before vast sums of money were spent with Google.

So before you ‘waste money’ on Google, follow some very simple steps to check whether you should go forward and how much you can afford to bid on a per-click basis.

Of course, before you start your advertising you will need a product. I will assume you have a product in mind already, In which case your first step will be to ascertain whether there is enough demand to make this viable. You could also off course go around this slightly different, first identifying a demand and then creating a product or service. However, for the sake of simplicity I am going to assume you have your product in mind already.

This could of course be your own unique product, my preferred method, or you could be an affiliate selling products or services to others, and many people have success doing this as well.

Here’s my top 3 checklist.

1. Do the Net Earnings Math

Work out how much you can afford to spend on advertising. To do this you need to identify:

<A> The price of the product

<B> Your commission or profit margin (this will be a percentage)

<C> Estimate of your CPC (cost per click) x100 (That is, use an assumption that 1 out of 100 people will buy your product. Thus, this number is 100.)

Here comes the math - don’t worry, it’s super easy:

A x B = P (Your Profit on the product)

C - P = Your net earnings per product sold (Cost minus profit)

This simple calculation is assuming the standard 1% conversion rate. That is, it will work if 1 out of every 100 people buy your product or service. Once you have run the campaign you can amend this accordingly for more accurate forecasts.

Make your initial estimates based on a 1% conversion and then see if the profit per sale is worth the effort required to do the marketing.

2. Identify the Demand For Your Product or Service

To gauge whether there is enough demand, there are a couple of tools you can use. We will discuss Google’s tool.

Using the Google AdWords Keyword tool (https://adwords.google.com/select/KeywordToolExternal), enter the description or descriptions of the product you wish to sell, and click “Use Synonyms.” This will give you a vast list of search terms people type in when looking for your product or niche. Use the Broad match type for now to get a feel for the numbers. (Use Exact in your actual campaigns to target your audience.) Finally, select Average Estimated CPC to learn how much you will likely have to spend per click. (As a side note, this number is a great way to search for high-paying keywords if you are building pages with AdSense ads!)

Is there enough demand to ensure that it is worth the effort required to market the product? Is the CPC too high to make a net profit? The level of demand for the product combined with the estimated profit per sale that you got ‘doing your math’ should be a fair indication of how much you can make.

3. Increase Your Converstion Rate

Testing is what separates the amatures from the professionals. Test, test, test! Keep testing. Use Google Website Optimizer to split-test your pages. Keep changing small details (like a single word in the header) to see which landing page version converts better. Think of it this way - you can spend more to get more traffic, or you can spend the same and potentially double your sales if your conversion rate goes from 1% to 2%! How about 5%? You can imagine the net earnings you can make by constantly testing and tweaking your pages.

Affiliate Marketers and Web Publishers

If you’re selling or marketing someone else’s products, you have to go through two hurdles - the visitor has to click through your landing page, and then actually buy the item on your merchant’s website.

Do all your research first. Search on affiliate marketing forums and see what the feedback is on your target website. Does the site perform poorly at converting visitors? How much support will you get? What are their bidding restrictions?

You must get in touch with the affiliate manager by email and phone to get a dialogue going. They exist to help you get the most out of your marketing. They may very well have additional materials, information or support for you, from their top-selling products to average conversion rates to future promotions. If they do not give this information to you, or do not even return your call, do not deal with the company, at least as far as using a CPC campaign

Keeping this top 3 checklist in mind will help you focus on your campaign and give you a better idea on how much money you will spend on Google Adwords and, more importantly, how much money you can make (or waste.)