Who Are You Competing Against?

On any given keyword, there may be dozens of competing ads.

Only a select few will get clicked on by a searcher... and only one (if that) will get that searcher as a customer.

This is why it's important to know exactly who you're up against.  There are three main types of advertisers:

1.  Direct-Competitors.  These are the folks that offer the same or a similar product or service as you do.  For instance, if you sell every book under the sun, then a direct competitor would be Amazon.com.  

2.  Non-direct competitiors.  If you specialize in selling just business books, then Amazon.com may not be directly competing with you for customers.  However, it still may be competing with you for clicks.  Searchers don't know what you have to offer that Amazon doesn't if you don't tell them.  Thus, they may never get to your site.

3.  Affiliate marketers.  You don't need your own product or service to profit from AdWords.  You can sell other people's products using their affiliate or referral program.  You then get commissions for every sale you refer.  

Affiliate marketing is wide-spread and countless markets have a tons of affiliate ads.

Why are they important to consider?  Affiliates typically know a lot about AdWords because they may only get 50% of the initial sale, while others are getting 100% plus future backend sales.  If they don't know what they're doing, they're going to lose their shirts.

As a marketer, you should be on the lookout for them and study what they're doing.  

You can usually identify an affiliate by the URL they are advertising.  Affiliates URL usually have some type of identiying code to track the affiliates referral.  An example might look something like: 

http://www.promowebsite.com/?hop=affid

Affiliates also might send traffic to a review page where they are giving an apparent "unbiased" review of the product they are promoting.

Once you've identified your competitors for each of your keywords, you now have a better idea of what to include in your ads.  Study direct-competitors to uncover what you need to say to get the sale, non-direct competitors to uncover what you need to get the click, and affiliates to uncover advanced strategies to give you an edge.

In addition, think about what needs are not being served by anyone else.  If you were going up against Amazon.com as a bookseller, you might differentiate yourself by putting together niche book packages.  For instance, you might bid on the term "Business books" and then offer a set of them at a limited time discounted rate.  Amazon goes from a direct to more of a non-direct competitor.