Yes, angel and demon, love and hate of many web site owners and developers. Probably trying to stop spam, Google developed a system starting from internal PageRank formula that makes a lot of people feel aggrieved. Having at this point a lot of experience in SEO and adwords, I will try to share some basic facts I encounter within this field, even if that means for me putting my neck directly on the wolf’s mouth.
I run into several cases where Google misinterpreted SEO factors and penalized sites that had not any guilt, this is the side effect of hyper-controlling the Web.
Adwords
I could feel it on my own skin, that if your keywords are not targeted adequately on PPC, Adwords will crush you. Some guys suggest that instead of joining Adwords to do SEO for your website, which allegedly it will give you traffic for long time. This is partially true, because at a certain point Google will change algorithm and take you out from a good SERPs positioning. Besides, if your site is new you are like doomed, because even if denied, the google sandbox exists and it might keep you there until it take the crap out of you.
It is true that if you have a decent new site Google would send you traffic on long tail keywords, but wave goodbye to 2 keywords search phrases before you site get a decent internal PageRank (which is told to be applied to pages, but this is a myth, the domain name bear the weight).
If you apply some methods to Adwords properly, it can be a huge boost for your traffic and referral success. Adwords can bring instant traffic to your website, which can be very advantageous if you have a brand new web site and you are not getting enough traffic yet.
For beginners especially I don’t recommend marketing the index page (home page), but they may want to consider advertising some other purposely built pages. It can be very profitable if you are advertising a product or service that converts well and you have a good comprehension of how to use Adwords.
ROI
The formula for ROI is as follows (keeping in mind that the “revenue minus cost” in the top line equals profit): Profit/Investment. For any campaign where the advertiser’s goal is to get a conversion, whether it be a sign-up, a sale, or something else, the ROI should be greater than 100% – which simply means that for every dollar spent on adwords, they’ve made a profit.
Adwords offers a free ROI calculator, which allows you to determine the optimal spending level and return on investment for running an PPC advertising program.
There are several ways to calculate ROI, but for PPC probably the best way is to start from CPA (cost per acquisition), which allows to get some figures to be transformed in percentage. Based on this percentage, you may calculate how much each click brings to you.
If your goals don’t have values, you won’t be able to calculate the return on your investment.
Keywords
Keywords are very important in adwords because they are ad triggers and they may determine the relevancy of the ad related to users search query. Keywords have an impact on landing page quality, through a relevancy score that’s assigned. CTR, landing page quality and ads relevancy are the main factors determining keywords QS. If you don’t understand very well the importance of QS, you better give up advertising on google. Roughly saying, QS is google finding for keeping out unprofitable ads, a kind of PR for ads, which is expressed in AR (ad ranking). AR will determine ad position on the page.
As a general rule for QS, delete poorly performing keywords and optimize keywords to bring in convey more qualified leads. Identify which ads are performing and which aren’t. Refine your Keywords. Use word combinations and phrases that describe your business. Utilize exact and phrase keyword matching options. Use the AdWords Keyword Tool to generate negative keywords. Eliminate unrelated keywords, broad keywords (here are some tricks, because broad match has its role), one word keywords. Use brand names and product parts. Add misspellings. Create new Ad Groups to improve exposure CPC Adjustment & Conversion Results Fine tune your bidding strategy. Higher bids for converting keywords. Lower bids for general & non-converting keywords (or better, take them out). Check your keyword’s ad position. After a new campaign has been running for about a month check the percentage of (CTR) of all expressions of keywords in each ad group in the tab “Tags” index. Your income is determined by the interaction Alternative fruitful between keywords of the ad and landing page, all three work together in a good relationship.
These are general rules, but in fact, if you don’t know how to maintain or the heal QS for some keywords, you better find some others. Remember that you can lower QS for any keyword, which will lead to about 300% increase of the first page bid for each QS unit. You see, here only the experience might help you to keep it on the right track.
Landing Pages
Landing pages are perhaps the most important part of your online marketing strategy and now that Google is factoring in the relevancy of your landing pages into the Quality Score of your Google Ad Groups, creating landing pages is more important than ever. An effective landing page is a crucial component to help you convert browsers into buyers and to get your pay-per-click ads in Google to rank above your competitors. Each new landing page has a unique URL so that you can point all the traffic from each of your Ad Groups in Google for example to the respective landing pages you have just setup. You can use Google Analytics custom reports to segment data in many way..
Conversion
In my understanding there no direct relation between CTR and clicks and conversion rates. For higher positions, there seems to be higher CTR, as well as lower conversion rates for these upper positions. For inferior positions the CTR rates drop, but the average conversion rate goes up (this is very important!). Also you may find that in a lot of cases the clicks have nothing to do with actually displaying content to the clicker so conversion rates have no direct correlation to clicks, clicks are only directly related to fees you pay google. Compare keyword conversion rates and ROI and see how different search result positions perform for each keyword.

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My first comment. Found your blog a couple of times inadvertently. Yours is one of those blogs I could start reading and not know when to stop.