What is the iceberg effect?

The Iceberg Effect happens when the search terms your ad appears for are much larger than your PPC keywords list. Read on to learn more about why it happens and how to fix it.

Pay-per-click (PPC) ads are excellent tools for generating growth. However, picking the right keywords is the difference between success and failure. Get them wrong, and your ads won’t deliver a return on investment (ROI).

One of the reasons your campaigns can fail is called “The Iceberg Effect.” We’ll explain the phenomenon below and what you can do about it.

What is the Iceberg Effect?

The Iceberg Effect happens when the keyword terms you bid on target too many searches. Let’s use an example:

Let’s say you run a Mac computer repair service. Some keywords you might bid on will be things like “computer repair” or “hard drive repair,” etc. However, the Iceberg Effect can happen when users search for the term “computer repair,” but they intend to find a store that will fix, for example, a Dell PC.

When they click your ad, but they aren’t looking for Mac repair service, two things will happen:

  1. You pay for the ad with zero chances of a conversion
  2. The customer is given an ad that is not relevant to them.

This situation is unsatisfactory for both parties.

Even the sales platform (e.g., Google Ads) doesn’t exactly win. Sure, they generate sales revenue from the ad, but the customer is frustrated because they’ve been served an irrelevant item.

 

How ad platforms target keyword matches

Ad platforms like Google and Bing Ads target search terms in a particular way. Often, what you are paying for isn’t just the keyword but other associated terms. When these terms are reflective of your product, that’s great. You get lots of relevant traffic.

However, when they’re not, you’re paying for traffic that won’t convert into sales or leads. Therefore, you’re wasting money and driving down your ROI.

 

Goals for keyword bids

When you’re bidding for keywords, you have a few goals. One of the most important goals is alignment between what users input and what terms you use. Ideally, you want this ratio to be 1:1.

However, unless you choose EXACT search term matches, you risk paying for ads that won’t convert.

So, you might think that the solution is only to bid for exact keywords. However, going down that route means you will only get clicks for the precise term. And that means you’ll miss out on people who will convert but just don’t use that exact keyword.

It’s a complex issue to solve.

And this is the iceberg. Above the water are the keywords you’re bidding on. Below the surface are the terms your prospects use to search for your product or service — alongside words that people who are not interested in your product will input.

 

What is the problem with the Iceberg effect?

Customer acquisition costs (CAC) are rising. Ads are becoming less effective. Unless you have an unlimited budget, your spending is something to keep an eye on. And let’s be honest, no one has an unlimited sales and marketing budget.

You can’t achieve a good ROI if a large portion of your budget is spent on the wrong users. When you’re trying to justify ad spending to the C-Suite, it could make for some uncomfortable conversations.

So, if you’re interested in keeping your costs low, keyword matches are something you need to consider.

 

Keyword matches

On Google Ads, there is an option to reduce your icebergs. As we mentioned above, you can use different match types:

  • Exact
  • Phrase
  • Broad

Depending on how tight your target is, you will get more interest. However, as we say above, when you widen the net, there is a bigger chance of catching irrelevant users.

The tighter the net, the higher your conversion rates. The wider, the lower your rates.

So what’s better for your business:

  1. Tight targeting of fewer prospects?
  2. Broad targeting of more prospects?

With 1, your ad costs are lower, but so are your sales.

With 2, your ad costs go up, but so will your sales.

 

How SKAGs can help

Single keyword ad groups — SKAGs — are one potential solution.

Pick out some single keywords and use them for each ad group. Instead of having 15-20 words in each group, you use a single keyword and create several terms inside that group.

Then, within that group, you can start using negative keywords to eliminate the irrelevant terms.

Yes, the process takes more time. And yes, it’s a bit more involved. But it gives you the best of both worlds: wider targeting but with an element of precision.

 

How do icebergs affect Display Ad campaigns?

One of the best aspects of Google Display Ads is the ability to segment your audience. This feature will help you target your ads to more relevant prospects.

Some of your options include:

  • demographics
  • habits
  • interests
  • previous contacts with your brand
  • keywords they’ve been searching for

Again, narrowing down your focus here is good and can help ensure that your keywords match with audience search terms.

Just like getting your Search Ad terms right, this can help you:

  • Find relevant users
  • Increase your click-through-rate (CTR)
  • Boost ad return on investment (ROI)

What about social media campaigns?

Social media ad campaigns, like Facebook and Instagram ads, are also vulnerable to the Iceberg Effect.

Again, it’s a difficult balancing act. You can narrow your target based on AND-OR criteria. (e.g., your target audience should have X interest + X demographic). This option can help you exclude specific people and improve the ratio of target keywords with search terms.

Of course, while adding extra criteria should improve CTR and ROI, it can also mean that fewer people see your ads. Instagram uses similar criteria, which means your social ads on the platform have the same issue.

What marketing teams need to think about here is that by narrowing your target, you can also increase your cost-per-click.

Summary

The Iceberg Effect is a problem with PPC ads. When you target users with keywords, there are other search terms that ad platforms use to ensure you get enough clicks. However, not all these terms are perfect matches, leading to clicks that will never convert.

Tightening up your related search terms is a good idea. Using SKAGs and negative keywords can help, alongside more precise audience targeting. However, be careful not to take this too far, or you’ll drive up your CPC and lose some relevant clicks.

Overcoming the Iceberg Effect is about experimentation. Start by making your ads as simple as possible and adding complexity as you go.

 

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