AdWords Flaw Could Cost Small Business Millions

I have a different kind of Google blues. A recent spike in traffic in a client's account, which I had initially suspected was due to click fraud, exposed a serious flaw in the AdWords system. The problem occurs when a local business structures an AdWords account to adequately target a local audience as described in the Google AdWords Learning Center:

Some Internet Service Providers (ISPs) assign their users an IP address that masks the user's location. This excludes these users from seeing region- and city-targeted ads.

To reach these ISP users, we recommend you also create a nationally targeted campaign with region-specific keywords and ad text to capture additional traffic. Here's an example of a used car dealer in San Francisco that has created both region and city and national campaigns.

Campaign 1: Region and City
Location Targeting: San Francisco
Keywords:

• used car
• used truck
• car dealer
• buy pre-owned car

Campaign 2: National
Location Targeting: United States
Keywords:

• San Francisco car dealer
• San Francisco used truck
• San Francisco used car
• buy pre-owned car in San Francisco

It's the "National" campaign that causes the problem. Google's expanded matching algorithm is broken. I'm calling this flaw "contracted matching" as the AdWords system takes a broad match like /san francisco used car/ and displays an ad on a search for /used car/ (I'm using / instead of " to avoid confusion with phrase match). Ironically, it's a high Quality Score that contributes to the problem. Here's was Google's explanation of the 3396% increase in impressions for a single broad match keyword phrase that included region-specific keywords but was being displayed nationally for searches that did not include any region-specific qualifiers:

After reviewing your account with the technical specialists, we have found that the most likely explanation for your increased number of clicks in [snip] is that ads in your [snip] Campaign were in fact showing on keyword searches that did not include local terms because of the expanded matching system.

When you use broad matching keywords, expanding matching is enabled and your ad can appear on variations of your keyword. As your quality score improves, the number of expanded variations that your ads are eligible to run on increase. The large increase in clicks that you experienced in [snip] was due to the fact that the AdWords system allowed your ads to appear on additional expanded matching keywords due to good performance in the past.

Think about that. An improvement in quality score meant further expanded matching. When you take a keyword phrase like /san francisco used car/ and "expand" it to /used car/, that's NOT expanded matching. That's "contracted" matching. Imagine the impact this would have for any small business who creates a national campaign per Google's directions. Just to give you an idea, one of these broad match keyword phrases (that had 4 keywords in the phrase) saw a month-over-month increase in clicks of 980% and a cost increase of 1042% on an impressions increase of 3396%. Since the ad was targeted for a local audience and most of the clicks originated from national searches, there was no corresponding increase in sales. This is a serious flaw in the Google AdWords system that could cost small business millions!

In a followup post, I'll explain how I worked around this problem. Subscribe to the Apogee Weblog feed, if you don't already. ;-)

Apogee Tags (byo w/ TagBuildr or the NEW TagMuse tool): adwords, learning center, local advertising, small business, google ads, ad campaign, search engine marketing, sem, quality score, expanded matching, broad match