In the last 2 years, I’ve audited a lot of AdWords accounts. And, after reviewing thousands of accounts, you start to notice a few trends.

Unfortunately, one of my most consistent observations has been that AdWords is a great way to lose a lot of money.

Now, I’ve used AdWords to grow a client’s company from 25 employees to 250 employees, so I’ll be the first to tell you that AdWords can be an incredibly powerful marketing tool. However, a few common mistakes prevent most companies from realizing their AdWords potential.

So, why do most companies fail at AdWords? The answers are both simple and surprising.

1. Inadequate Tracking

The foundation of any good AdWords campaign is analytics. In fact, according to Hubspot’s State of Inbound report, companies that track their inbound marketing are 17x more likely to see a positive ROI than companies without good analytics in place.

Now, if you’re already effectively using an analytics platform like Google Tag Manager or Kissmetrics, this figure should come as little surprise. After all, you can’t improve if you don’t know whether or not something is working!

The problem is, only about half of AdWords accounts actually have tracking set up for their site and campaigns.

What is this craziness?

Unfortunately, this finding seems to be one that most companies experience with inbound marketing. Referring back to Hubspot’s report, only 53% of companies track their marketing ROI.

I won’t bore you with the math; but, if you run Hubspot’s numbers, the statistics are daunting:

Without good analytics, 97% of AdWords campaigns fail.

Not surprisingly, almost every single account I’ve audited that didn’t have a great analytics solution in place was struggling to turn a profit on Google.

Fixing the Problem

Fortunately, even if your IT expertise is limited, AdWords doesn’t have to be the marketing version of Russian Roulette. With a little bit of time and patience, you can easily set up conversion tracking in AdWords.

Tracking conversions in AdWords is really as simple as placing the right bit of code on the right page on your site. AdWords even generates the code for you, so you really don’t have a good excuse for not setting this level of tracking up for your campaigns.

Why stop there, though? If you’ve got a decent developer, you can implement Google Tag Manager in 15 minutes. Here are some of the basics you should be tracking. Of course, Kissmetrics is also a great way to get at the data you need.

Yes, setting up analytics is extra work, but it enables you to learn from your successes and your mistakes.

2. Keyword Drain

Here’s where things start to get really interesting. Looking at the 1,000 or so companies that had conversion tracking in place, I discovered that—on average—all of the conversions in an AdWords account come from just 12% of the account’s keywords.

Yes, you read that right—all of the conversions.

To put it simply, for every 10 keywords you bid on, 9 of them produce nothing! Absolutely nothing! And here’s the kicker – that useless 88% of your keywords eats up 61% of your ad spend.

Why does this happen?

Most companies take a shotgun approach to their keyword strategy. Yes, this sort of approach increases your likelihood of some keyword being on target, but it also means that your ads show up for less relevant searches and produce less relevant clicks that aren’t likely to convert.

Plugging the Drain

To figure out which keywords are draining your budget, open AdWords and—while viewing “All campaigns”—go to the Keywords tab. Open the “Details” drop down menu and click “Search Terms All.”

From there, export the report into an Excel file. Using Excel, you can filter your data to show only search terms with zero conversions. Sum the cost data to see how much you’re spending on search terms that haven’t produced any conversions.

As a rule of thumb, I recommend pulling at least 3-6 months of data to make sure you really have a good picture of which search terms are truly worthless.

Once you’ve identified your budget-sucking keywords, go back into AdWords and eliminate them!

3. Poor Landing Page Strategy

Another problem with the shotgun approach to AdWords is that it makes implementing an effective landing page strategy a daunting task.

Truth be told, nearly 90% of the AdWords accounts I’ve audited had a poor landing page strategy. In fact, 52% of the accounts were pointing their pay-per-click traffic to their homepage. And, of the 48% with a dedicated landing page, less than 15% were conducting landing page tests!

For example, if someone is looking for a new cat and types in “adopt a cat,” they might see the following ad:

Getting clicks—even the right sort of clicks—to your site, isn’t enough to make your campaigns effective. That’s just the beginning. Research conducted at Stanford has shown that a poor initial website experience can eliminate up to 75% of your potential sales; so, if your site doesn’t convert clicks into leads or sales, you’re just giving money to Google.

Making it Better

If you want to make money on AdWords, your customers need to have a consistent and compelling experience from keyword to ad copy to landing page.

To create this experience, you need to get granular. You need to dial in to the search intent of your target audience and then match your keywords, ad copy and landing pages to that intent.

With the shotgun approach to keywords, it’s very hard to create this level of granularity. Sure, dynamic keyword insertion can help; but, for most industries, DKI doesn’t give you the messaging control you need to match your searchers’ intent.

This ad does a good job of matching the searcher’s intent…until it sends them to this landing page.

Sure, the DKI algorithm put “Cat” in the headline, but the pug hero shot creates an immediate cognitive dissonance that leaves the user thinking, “Wait, what?”

On the other hand, setting up your ad groups with 5 (or less) very similar keywords allows you control what searches trigger your ads. Then, write ads that are highly relevant to those specific searches. Carry that relevance through to the landing page and you’ve just created a very powerful customer experience!

See? Much better.

With this technique, we often see a 50% lift to conversion rates on our first tests with new clients. And that’s before we start optimization testing…

4. Lack of Attention

Ultimately, the biggest reason that most AdWords campaigns fail is a lack of attention.

No tracking? Spend enough time in AdWords and a lack of conversion data will make you crazy enough that you’ll do whatever it takes to get analytics in place.

Bidding on the wrong search terms? Add enough negative search terms over time and you’ll eventually narrow your campaigns down to what really works.

Inconsistent customer experience? Test your ad copy and landing pages for long enough and you’ll end up with a really compelling click-to-close advertising cycle.

However, according to Larry Kim, only about 10% of AdWords accounts are optimized even once a week. Based on the accounts I’ve reviewed, 72% of accounts haven’t been touched in over a month!

If you don’t give your account enough attention, you are setting yourself up to fail.

The Fix

So, how often should you be optimizing your account? The best answer is that it depends on your traffic and budget.

For budgets over $10,000/month, you should be at least giving your campaigns a thorough review at least once a week. However, to really get the most out of your account, I recommend reviewing your campaigns at least 3 times per week.

For a new campaign, you need to be even more involved. I typically check up on the account at least 3 times per day.

As a general rule of them, the more time you spend in your AdWords account, the better it will perform. Of course, you don’t have to make major changes 3 times a day or week, but keeping close tabs on your account will give you the insight you need to really get great performance.

Conclusion

While most companies struggle to make AdWords work, most businesses can succeed by fixing a few common mistakes. Whether it’s setting up a great tracking program, eliminating useless keywords, creating a holistic landing page strategy or simply giving the account the attention it deserves, these problems can be overcome with a little extra effort.

If you feel like you’re struggling with one of these common problems, let me know in the comments below. I’d be happy to help.

About the Author: Jacob Baadsgaard is the CEO and fearless leader of Disruptive Advertising, an online marketing agency dedicated to using PPC advertising and website optimization to drive sales. His face is as big as his heart and he loves to help businesses achieve their online potential. Connect with him on LinkedIn or Twitter.