On Friday, July 15th all Google advertisers got the email message entitled Google AdWords(TM) Announcement: Keyword Evaluation Changes. Now, I dont know about you, but whenever I get a message from Google concerning Adwords, everything else seems to take a backseat.

So weve decided to give you a heads up on what you can be expecting in the future, how you can expect these new changes to effect your advertising efforts, and what you should be doing to make sure that you can compete after theyve been implemented.

First, here is a brief summary of the changes so you understand what exactly is going on:

1. Keywords will simply be active or inactive, instead of Normal, in trial, on hold, disabled.

2. There will be a minimum bid for each of your keywords based on the keywords Quality Score which, in turn, will be based on your ads click-through rate. The higher-relevant, more targeted, ads will have higher Quality Scores and lower minimum bid amounts. The less-relevant and less-targeted keywords and ads will have higher minimum bids. Now the difference from Googles old way of doing things is that you can now activate your keywords no matter what. Before, it was up to Google. They would simply place your keywords on hold, and you didnt have a choice, but try to optimize your ad. Now, you can get that keyword to run, regardless of its quality scorebut youll have to pay a much higher price per click.

What does all of this mean for the advertiser? Well, it means a few things, and it would be foolish to say that these changes were all good. They are definitely all good for Google, and that is to be expected.

1. Google says that they believe these changes will result in higher-quality ads. Maybe this is true, and maybe its not. What is true is that the educated advertisers will save money under the new rules. People that know how to group ads and get higher CTRs will have to pay less for the same ad rank as those advertisers that do not know such techniques. Thats a good thing for small advertisers who spend time organizing their Adword accounts.

2. But on the flip side, it also means that big advertisers with big budgets can now come in and write ineffective ads and get good placement. Notice above, we didnt say that this change was all necessarily good for small advertisers. What is true is that small advertisers will have to become more educated to compete. Big advertisers care about branding. They want to have the number 1 ad slot, and most of the time, they dont really care what it costs. Now, in the old days, if their ad wasnt getting clicks, the ad simply wouldnt get shown (good for the small advertiser). But now, they can just pay more to have their ad shown. This was a good move by Google to get a lot more money in their pocket.

3. Conversion rate becomes the key. If your site converts, you can afford to pay more per click, in turn, you can compete. If your site doesnt convert, youll be eliminated by the big advertisers and/or the smart advertisers. Thats the bottom line. The first step is not getting the traffic to your site like so many teach. But conversely, its getting your site in a position to support the clicks.

Here are 3 action steps you can work on to make sure that you will be competing in the Adwords game for some time to come. We realize that each of these steps can be broken down into months of work, but dont let yourself get caught up in too many details. Just focus on these three things before you start getting too in depth with changing your Adwords accounts around, give each of them a quick rehaul, and make sure you know your numbers.

1. You need to get educated and learn the system. Grouping keywords, writing good ads, keyword selection, its all equally important and will play a large role in the future of your Adwords campaign.

2. Youll also need to get your site converting well enough to support these clicks. Otherwise youll lose money very quickly. The formula is [number of sales made / visitors to your site]. On the internet you should realistically be aiming for about 1%.

3. Finally, you need to determine the visitor value of your site. This will tell you how much you can afford to bid on clicks. The formula is [dollars made by your site / visitors to your site]. Plan on bidding about 50% of your sites visitor value.

So, in summary, if you want to compete in the Adwords marketplace in the future, you need to take action, actively monitor your account, and know your numbers. Your goal is to run a profitable business. If you focus on the three action steps above youll know your place in the market, youll be ready to compete, and youll make money using the new Adwords system.