Just over a week ago Google announced that it’s beta testing a very interesting concept – dynamic AdWords ads – a new feature that will allow online business owners to create dynamic ads based on their inventory by using Google’s organic web crawling technology.

There are a lot of e-commerce and transactional websites online that are constantly adding new products to their stock lists and a well managed PPC campaign would reflect this by adding each product, where appropriate, to the campaigns.

However Google’s new feature proposes to do this for you by dynamically generating an ad that correlates to the products on your website. Therefore Google will pick the headline of the ad based on the search query and ad text based upon the most relevant landing page.

When an ad is dynamically created it then enters the usual ad auction, unless you already have an ad set up for the phrase that has been searched for.

If the concept truly does work and perfectly marries relevant searches to products then this could be a very exciting addition to paid search and according to Google’s pilot test, it has worked to increase clicks and conversions by 5-10% for the majority of the advertisers.

In order to control which products and web pages have dynamic ads, advertisers can specify whether they want it to be their whole website or they can narrow it down to chosen categories / pages containing particular words / pages containing chosen strings in their URLs.

You can also choose to add these controls as negatives as well as the usual keyword negatives to try and control which products Google creates the ads for and to prevent them doing so for out of stock or redundant products.

In terms of reporting it is very much the same as the usual AdWords reporting but Google will show you the searches that generated clicks, the destination pages suggested as landing pages, the headline of the ad created as well as average CPC, CTR and conversions etc.

It is obviously hard to comment on exactly how well it works without testing it myself but I would be slightly nervous about allowing Google to dynamically create ads and would worry that the costs could get out of control if not managed correctly.

Google is probably hoping that advertisers will put their faith in the system and allow it to create ads for all products on their site’s and obviously if it works correctly and the advertisers products are shown to people that are searching for them then that’s great but how will Google control CPC for different priced products?

This feature is most likely to appeal to those businesses that do not know much about AdWords and paid search as they will able to set up an account and essentially let Google do the work for them, but this could be very dangerous as Google is obviously the one cashing in when users click on the ads.

We all know that Google wants its search results to be as relevant as possible so there is no denying that it will do its best to create relevant ads but relying on automated software has its risks and nothing can beat an human perspective.

A real person is always going to be better at making decisions about which products to advertise, keywords to bid on, maximum CPC bids to set and analysis of the results as they can consider ROI, whereas Google will not be taking that into consideration.