You might be aware that Google is the reigning king of the digital world, but did you know that approximately 95% of their annual revenue is derived from advertisements? Since the AdWords platform was first introduced in 2000, Google has grown from $70 million in ad revenue, up to $79.38 billion as of last year.1 This incredible growth is reflective of Google’s tenacious attitude towards innovation and thought leadership.

Throughout the 16-year history of Google AdWords, continuous optimization has been the driving factor behind ad format enhancements and capabilities. But at the end of the day, Google has one primary goal: generate as many ad clicks as possible. Let’s examine the latest update, and the implications that you must be prepared to handle.

‘Phrase’ Match is Officially Dead

For starters, let’s break down different match types: Exact, Phrase, Broad, and Modified Broad.2 Basically, exact match keywords would need to match the user’s exact search query (including plural variants and misspellings), phrase match keywords matching close variants of a user’s query, and broad match keywords matching broad variants of a user’s query.

In August of 2014, Google AdWords started the initial journey moving away from “pure” exact match keywords — keywords that needed to exactly match a user’s search engine query.3 But just a few short weeks ago, Google drove the proverbial nail into the phrase match coffin: close variants.4 They announced that “Close variants now connects more people with what they’re looking for”.

In short, this new update rewords and ignores function words within a user’s search query. Basically, they are morphing the functionality of exact match keywords into phrase match keywords. Exact match keywords will utilize sophisticated logic to trigger ads when a user searches for something that closely resembles the exact match term. Ultimately, this will eliminate the need of bidding on phrase match terms altogether.

Why Google AdWords’ Latest Update Will Hurt Your Dealership’s Digital Efforts Click To Tweet

How Will This Impact Your Digital Traffic & Strategy

Well, for starters, we can assume that if Google AdWords is expanding the reach of the exact match keywords, then we should expect our exact match impressions to rise. This isn’t all bad, in fact, it could be beneficial depending upon your specific business goals. Regardless, you will need to adjust your strategy to avoid wasting money on irrelevant clicks.

Google claimed that more impressions should be anticipated and advertisers could expect similar clickthrough and conversion rates, however early studies are reporting opposite results.5

A 10-day study showed a 38% increase in impressions from exact match close variant keywords, but also recorded a 35% decrease in clickthrough rate, and even more alarming, a 61% drop in conversion rate! Obviously, this is an extremely small sample size to make any bold accusations, however the initial data is not looking good. There is no doubt that Google offers a premiere ad serving platform, but at times it is truly apparent that their business goals do not necessarily align with your business goals.

What it Means for Your Dealership and What You Should Expect in the Future

Well, until you can update your digital strategy, it’s simple: you are paying more and getting less. You may be thinking “how am I getting less? The study above shows a 38% increase in impressions!” Ordinarily more impressions in advertising is a good thing, but what we can anticipate experiencing is a snowballing effect that will ultimately hurt our overall digital efforts.

Lower CTR = Lower Quality Score = High Cost-Per-Click = Fewer Clicks = Fewer Leads

Let’s breakdown what exactly happens when our clickthrough rates start to decrease. Expected clickthrough rate is a weighted factor in determining a keyword’s quality score.6 The keywords quality score will ultimately determine how much an advertiser pays for “buying” a particular ranking.

So, our impressions have increased dramatically, but not our clicks, which has caused our clickthrough rate to plummet. This, in turn, has caused our keyword quality score to drop as well (1-10 scale, with 10 being the highest). Keywords with lower quality scores have higher associated cost-per-clicks, so now we are paying more on average per click, stemming from our initial clickthrough rate dip. Because our budget is unchanged, and our cost-per-click has risen, we are getting fewer clicks than before. This drop in traffic immediately impacts our total leads: less traffic = fewer leads.

Let’s suppose that last month you decided to reallocate your digital budgets to focus on your new model inventory. You have a Jeep dealership, so some of your top models might include: Wrangler, Cherokee, Compass, Patriot, and Renegade. Because of the nature of the close variants update, your ads could now be triggering for many irrelevant queries, including “buy wrangler jeans”, “compass for sale”, “new patriot jerseys”, or “renegade motorcycles”. Obviously, these are some extreme examples, but there is no doubt that this new update will broaden the net on your keyword reach. You must adapt, and adapt quickly, or your precious advertising dollars will be at the mercy of AdWords’ disposal.

Developing a Winning Battle Plan

In any hyper-competitive market, it is crucial to refine your keywords, ads, and targeting to ensure that you are maximizing your ad spend. Regularly updating negative keywords is a mandatory element of any winning digital game plan. After this latest update, negatives are even more important than ever before!

Savvy advertisers should make it a habit of evaluating user search terms report. They should be updating their negative keyword lists, at a minimum of once a month, ideally several times a month. Even with negative keywords, there are different variations of negative match types, and each should be evaluated, tested, and implemented throughout your campaigns. Updates should always be reflective of the end user’s intent, with the end goal of driving the most relevant website traffic possible.

Another measure that should be taken is evaluating your current campaign and ad group structures. Is your sloppy structure costing you money? Do you have conflicting keywords across your ad groups and campaigns? Have you ever critically thought about what an ideal structure should be? I can tell you at J&L we have. Our digital experience comes with years of experience, across a multitude of different industry verticals, and we have built our current products on the backbone of our prior success. We evaluate the structure from the ground up, and design our campaigns to drive qualified AND relevant traffic to our client’s websites.

In Today’s Digital Landscape You Either Stay Afloat, or You Drown

Future Google AdWords updates are a foregone conclusion. Google is an innovation juggernaut, and they reached that status by constantly evaluating their products and enhancing them to meet their end goals. As a dealership, you must have a similar mantra. Stay hungry for improvement, and don’t stop moving forward.

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