Observe the competition. Write a script to track ads of your targeted keyword list.
Record competitor ads for several weeks. Note changes in ads. Analyze ads that changed. If the ads are not changing, this could mean they are working. Don't stop with weeding out the nonworking keywords. Experiment with new keywords. Learn of any new competitors. Learn what their keywords are.
Don't be afraid to gradually lower your bid prices to see the effects on your CTR. A poor CTR usually means bad ad copy, bad keyword targeting, and bad timing. You can easily create several versions of your ads for your campaign. Use that to your advantage. Learn which ads are converting and which are not. Learn which words are being used in the ads that work and in the ads that do not. In general, the higher your CTR, the lower your average cost-per-click will be.
If you have stiff competition on AdWords, you may want to examine other PPC platforms. Yes, search volumes may be lower, but less competition and more keywords of interest could compensate for the lack of volume. If you score a successful campaign with ads producing clicks and, ultimately, profits, you may want to consider replicating the campaign across the other platforms especially Yahoo! and Microsoft. Replicating your winning formula is smart marketing.
Spend your money wisely. You can tell how many competitors are bidding for your keyword simply by clicking on the More Sponsored Links link in Google. If fewer than eight competitors are competing for specific keywords, in some cases there is no reason to pay more than the minimum. Google gives preference to better-performing ads.
Start with the lowest bid and see what position your ad is averaging. Increase your bid a bit and see whether there are any differences in your CTR. Stay away from high bids. You don't need to be located at the top of the ladder to achieve a good ROI or a high CTR. People who are serious about finding what they are looking for will skim through all of the ads, especially if the organic results are not giving them what they want. Pay more attention to your ad copy and your landing page copy.
The total number of clicks does not say much regarding the number of targeted clicks. Think like your potential visitor. Make sure the keywords you target are specific enough and are those you would use to find a particular product, service, or piece of information. Provide answers to your site visitors' problems. Make that obvious in your ad copy. Make your keywords actionable and straight to the point. Make your ad copy be perceived as the answer to their question. Utilize common misspellings to capture cheap clicks.
Google Content Network or Google SERPs
The Google Content Network comprises all participating sites showing Google ads. Using the Google Content Network is not good in all cases. You would be better off to start advertising on Google's results pages first.
Placing ads across the Google Content Network brings in many variables that you do not need to deal with, especially if you are just starting out. Google ads can appear in all kinds of places that may be detrimental to their respective CTRs. Imagine a news portal site with thousands of unrelated keywords. What Google shows on such sites is not overly predictable.
If you are targeting small exotic countries, you may do better by using the Google Content Network than you would by using Google SERPs (for specific keywords). If you are not sure where to place your ads, run them on all platforms and take corrective action for poorly performing content sites or platforms.