Editor’s Note: This post has been updated with fresh links and new content. 🙂
Original Publication Date: April 19, 2016
I don’t like writing doomsday-style blog posts. But it’s past time for a Google Ads strategy wake up call.
Yes, I know, PPC campaigns aren’t usually a life-and-death issue. But lots of managed PPC accounts out there are seeing their return on investment (ROI) dragged down into the icy depths, yours included… and you probably didn’t even notice.
Like the Titanic, there’s a reason you can’t avoid the iceberg. (But unlike the Titanic, it has nothing to do with a navigation system from 1910.)
It’s because you aren’t controlling what’s happening beneath the surface.
You can, though, if you keep reading.
What Is The Iceberg Effect?
The Iceberg Effect happens when what you see above the surface in your PPC accounts doesn’t match up with what you can’t control beneath the surface.
In other words, your ratio of what you can’t control vs. what you can control is askew.
Let me explain with an example.
Here’s a simple Google Ads Search network campaign.
Depending on the keyword match types you’re using, the keywords you bid on are not what you’re paying for.
Your search terms are what you’re paying for.
And if your search terms don’t match your keywords, then you can’t control them.
What “Paying For Search Terms” Actually Looks Like
Take a look at this screenshot:
If you take a close look at the Keywords in the right hand column, you’ll notice that each Search term in the left hand column is completely different.
There’s no equal match.
In fact, the Search term to Keyword ratio in this specific scenario is 132:1.
What this advertiser thinks he’s paying for is a click from the keyword “file for bankruptcy.” Instead, he’s paying for different Search terms with insanely different conversion intents.
Just look at the terms this campaign was getting charged for:
- bankruptcy attorney orange county
- bankruptcy attorney
- filing bankruptcy for llc
- how much does it costs to file bankruptcy
- bankruptcy attorney reviews
- filing bankruptcy for student loans
- buying a house after bankruptcy
- what is chapter 7 vs 13
Do you think all these Search terms convert at the same level as the ‘file for bankruptcy’ keyword that was being bid on above the surface? (Hint: they don’t.)
This is The Iceberg Effect. And it’s wrecking your Google Ads strategy.
The Iceberg Effect is the ratio comparing what you can’t control (the Search terms) to what you can control (the Keywords). Your goal is to get that ratio down as close to 1:1 as possible.
If you don’t, then your discrepancy is too high.
Different Keyword Match Types
As you probably could have guessed, the size of your “icebergs” will vary depending on the Keyword match types that live beneath the surface.
- [Exact Match] = Smallest iceberg
- “Phrase Match” = Bigger iceberg than exact match
- +Broad +Match +Modifier = Bigger iceberg than phrase match
- Broad Match = Biggest iceberg and bigger than all other match types
As you progress down the list of match types above, your audience (and your iceberg) grows because of the extra impressions your ads are earning.
And it doesn’t just stop with the Search network.
Your PPC Ships Are Already Sinking
Okay, so you have an idea of what The Iceberg Effect is. In a minute, we’ll talk about how to fix it and how you can make your Google Ads strategy iceberg-proof.
But before we do that, let’s look at how your Display campaigns, paid social ads, and other forms of PPC can suffer from the same issue.
The Iceberg Effect in Display PPC Campaigns
When it comes to regular Display campaigns (like in Google Ads, for example), you have a lot of tools and options to add multiple targeting layers that will define your audience.
In my webinar with Kissmetrics, I mentioned that the Display targeting options you have are like the layers of a burger (was I hungry at the time? Most likely).
The more layers you add, the bigger your Display burger gets, but the smaller your audience gets.
So even if you add multiple layers to your Display campaigns, your automatic placements (below the surface) will most likely be bigger than your predetermined targets (above the surface).
You may have noticed that in the examples above, Gmail, YouTube, and regular URL placements add up the ad dollars spent.
And perhaps you wouldn’t even bother looking deeper since the cost per conversion is within your goals across those placements (all conversions are around $4 or less).
But what if those Automatic placements all performed differently on the end-sales side (the point where you’re actually making money)?
The Iceberg Effect in Facebook Campaigns
Just like The Iceberg Effect is prevalent in Search and Display PPC campaigns, it’s actually worse in PPC campaigns on social platforms.
To take an example from Facebook, you have the option of targeting in an “AND” or “OR” fashion.
You either keep increasing your audience size or you keep reducing it by adding more and more targeting requirements.
But either way, you’re adding multiple requirements that all have simple performance metrics above the surface but perform differently below the surface.
So this is where you should consider separating out your campaign targeting without making your audience segments too small.
In Facebook right now, you’re only able to break down the demographics of your targeting to see how they perform individually. You can’t do that with Interests targeting or other targeting criteria that you’ve set.
Now that we’ve looked at Facebook ads, let’s take a quick look at Twitter.
The Iceberg Effect in Twitter Ads
With Twitter, the same Iceberg Effect can accumulate over time.
You’ll need to create a big enough audience to get traffic, but once you’ve established yourself, you’ll want to start chipping away at the iceberg that’s beneath the surface to make your PPC performance more effective.
Luckily, just like with your Google Ads strategy, you can break down bigger targeted audiences on Twitter into smaller bite-sized pieces so you can get your iceberg ratio closer to 1:1.
The “Universal” Iceberg Effect
As you’ve already learned, The Iceberg Effect is the negative effect of advertisers not breaking things down into simpler terms.
But regardless of which PPC platform you use (Search, Social, Display, Video, etc), there will always be universal icebergs you have to consider too.
These universal icebergs include…
Geography: Where you visitors are physically located. Each state within the U.S. will perform differently, and each city within each state will perform differently.
Device: The devices your visitors are using all perform differently in regards to conversion rates and cost per conversion.
Day of week: Depending on your industry, each day of the week can perform remarkably different than another.
Hour of day: Each hour within the day performs differently. You’ll find that certain hours of the day are better at targeting compared to others.
One more thing to keep in mind as you break down your Google Ads strategy across your PPC campaigns. Changes in conversion rates (from conversion optimization tests), impact predetermined bidding rules you may have set for the universal icebergs above.
The Iceberg Effect in Sales
To take it one step further, your SaaS or lead gen marketing efforts are even more misleading than what you might think.
Take the Keyword performance example below:
On the surface (and depending on what type of conversions you’re tracking), Keyword 1 is performing better than the other Keywords, since it has the lowest cost per acquisition (CPA).
But if you look at the sales rates, things change.
From what you see inside your PPC account (the visible part of the iceberg), your keywords might all be doing great, but below the surface, only a few keywords are actually making you money.
With this in mind, it’s vital you start looking into what actually makes business sense.
By slowly decreasing the size of your iceberg, you’ll be able to spend less money on advertising, improve your sales funnels, and (hopefully) take your ROI higher than ever.
How To Iceberg Proof Your PPC Campaigns
If you want to decrease the size of your icebergs (and gain more control over your PPC accounts), then you’ll want to decrease your Search term to Keyword and Automatic placement to targeting discrepancy.
This means making smaller ad groups with smaller targeting criteria.
To accomplish this, you’ll want to generate Single Keyword Ad Groups (SKAGs) by extracting Search terms and creating individual ad groups for these keywords.
The more granular you can be with your PPC campaign build outs, the better. This will help bring your Search term to Keyword ratio closer and closer to 1:1 so that, eventually, no iceberg will appear in that ad group.
And this isn’t just so you can control what’s beneath the surface in a better way. Your new granularity will fundamentally improve your entire Google Ads strategy: Click-Through-Rates, Quality Scores, Cost-Per-Clicks, and most importantly, your Cost-Per-Conversions.
Eventually, your Search term report will look like this, where your top Search terms match your Keywords:
In addition to SKAGs that you can create on the Search network, you’ll want to focus heavily on exclusions in your other PPC channels and campaigns (Social, Display, and Video).
Once you start looking at which demographics or interests that aren’t performing well, then you start adding them as exclusions or create smaller audiences that don’t include targeting criteria that isn’t performing well.
Your PPC campaigns might already be performing well, but that’s only until your icebergs get too big.
By looking underneath the hood of your PPC campaigns, you’re quickly able to see how your current campaigns could be performing so much better, without much effort.
Keep chopping away at your icebergs and you’ll eventually reach the “safe harbor” of sustainable conversions, which looks a lot like the golden coast of New York City Jack and Rose were headed for.
Have you had PPC success by reducing the icebergs in your ad campaigns? Let us know in the comments below!