Also, Google Adwords will often bump you up a spot or two if you have exceptional clickthru rates. So, you can bid for a #3 spot, but get a 10% clickthru rate and end up ranked #1. It's a great deal, and there's no point paying for the top spot if you can get it for free.

Finally, a top-3 position will put you 'above the fold' in most users' web browsers. They'll see you the moment they search, and while the number 1 position may have a better chance of getting clicked, my experience is that the top three spots on any given search engine get very similar clickthru rates.

Adjust, Adjust, Adjust: A Corallary

This isn't so much a rule as an overarching concern - don't set up a pay-per-click campaign and then forget about it. You need to monitor your ads on at least a weekly basis. Why?

• Someone might outbid you.

• Or, someone might have dropped out of the top spot, meaning you can reduce your bid and keep a #3 rank.

• Search patterns may have changed.

If search patterns change and your keywords are searched less often, don't immediately alter your campaign - wait at least a few days to make sure you aren't seeing a statistical 'blip'. But keep an eye on things, always, or you might end up spending money unnecessarily. In my experience, a well-designed campaign needs to be 'tweaked' every few weeks.
 

A Quick Case Study

Planning and running a functional pay-per-click campaign is an art form. Here's an example of one Google ad (modified to protect the innocent) that we edited for a client. Their original adwords spot read:

Low Cost Bicycle Parts
Order online today

These ads didn't perform well - their ranking, clickthru and conversion rates were very, very poor. Why? Three reasons: First, the ad is far too general - someone searching for a bicycle part on Google will most likely search for the specific part, not for sites that sell everything. Second, the ad doesn't make any strong value proposition - anyone advertising on Google can very likely take my order online, today. Finally, the ad doesn't optimize for the search terms used to find it.

The result? They were paying about $1 per click for a #1 rank, with 800 clicks per day and less than a 1% conversion rate and an average profit per order of $6. No chance of making any profits with that kind of performance:

1% clickthru rate
1% conversion rate
800 clicks per day
800 clicks * $1.00 per click = $800 cost per day
.01 * 800 * $6 = $48 profit per day

Not good at all. Here's how we changed it. We developed four ads, each focusing on a single keyword combination or group: