This is the time of year when aspirations can cloud good judgment. "But there are SO MANY people searching for 'Christmas gifts' and we do sell Christmas gifts so shouldn't we at least be on the first page?!?"
Experience has taught us to try to talk our clients off that intellectual ledge. They don't always listen, and that's cool. True, every business is different and maybe what hasn't worked for the last 100 clients will work for this one...but I'd bet against it.
The person searching for "Gifts" has no flippin' idea what they want. By definition, the chance that any category-specialist retailer will have it is really really small. Conversion rates will be dreadful. Combine that with the fact that so many other lemmings can't resist the temptation that it might cost $2 per click to be on that first page and inefficiency is guaranteed. Worse, because so many people DO search for that it will not just be wasteful percentage-wise, but will be a LARGE loss as well.
Conversion rates reflect how well the advertiser's wares match the average user's intent when that user types in a particular phrase. The fact that some guys would LOVE electronic gadgets does not mean the electronic gadget store will do well on "gifts for guys." Some guys are more likely to want sports equipment, or tickets to a big game, or power tools, or music, or...the list goes on. Unless the advertiser sells ALL of those things, they're going to find "gifts for guys" on page one a really unfortunate place to be. I can hear our Google and Yahoo reps screaming as they read this :-)
We don't always succeed in talking people out of these tests -- sometimes the allure of those keywords-cum-bug lights is just too strong, and often it's the corner office driving the decision -- but we do feel an obligation to try. It seems to me that that's the job of an agency -- to use its experience to help their clients avoid train wrecks. We'd expect the doctor to advise us against hitting ourselves in the head with a hammer to stop a headache.