We manage over a dozen Google Adwords campaigns currently and have the same challenge in all of them: getting ROI up to where it makes sense for using this powerful sales promotion tool. In some cases, the challenge is the length of the sales cycle, for others it can be the inflexible profit margin. We recently found this helpful article by Timothy Seward on Website Magazine. Lots of great advice in it for those who are curious about search engine advertising, and especially for those who have tried or are currently using it. -BG
As the CEO of an online marketing agency, I attend quite a few marketing conferences each year. There I meet a surprising number of people who have tried AdWords and given up, or are only dipping their little toes in the water. And the reason I hear most is that Google AdWords is overpriced.
The plain truth is that AdWords is indeed overpriced — if you aren’t doing it right. But it doesn’t stop there. A lack of AdWords success could be a symptom of a greater problem.
Because Google pits you directly against your competitors in a war for clicks, AdWords is a rough scorecard of the strength of your business and marketing model. If you can’t consistently afford the firstpage spots for your core keywords — and your competitors can — you are losing key battles.
Google processes more than two billion searches per day, holds 66 percent of the worldwide search market share and reaches 80 percent of global Internet users through their content network. In other words, this is a war you cannot afford to lose.
There are five common characteristics of advertisers we see fail — AdWords will always be too expensive for them. I’ve highlighted the reasons below. While reviewing these, take note of possible holes in your own marketing funnel. Even if you are presently successful with your AdWords ROI, there’s probably some room for improvement.
AdWords is overpriced for those with inadequate business models.
A business model is loosely defined as the way your business goes about making money. This encompasses everything from product offerings and pricing to follow-up marketing and customer service. Keep in mind that, with the Internet, everyone gets to compete on a national or even international scale. A business model that can do just fine locally will get annihilated nationally.
You need an Olympian-level business model if you are going to be one of the top five companies in your industry nationwide. This requires tremendous work to constantly refine your product offerings and backend systems. Successful advertisers are willing to break even or lose money on the initial product because their backend marketing system is so reliable that they multiply the revenue from every customer over the subsequent 12-24 months.
AdWords is overpriced for those with poor cash flow.
Even if you have the strongest business model in the game, you may be losing with AdWords due to an unrealistically conservative cash flow.
It would be wonderful if you could pay $100 today and get $200 of profit tomorrow. For some advertisers with one-time transaction products, this can be the case. However, many advertisers must be willing to go negative on their ad spend while waiting for the customer lifetime value to catch up.
It might take 6-12 months before recouping the initial advertising investment. This is particularly true for businesses with a long sales cycle or subscription billing products. AdWords success is often a cash flow game where the best funded get the upper hand.
So, when wondering how competitors can afford to pay those “ridiculous” prices in AdWords, the secret is, they can’t — at least not initially. They just have more cash flow than you. (It may also be that they are flat-out losing money. We’ll get into that later.)
AdWords is overpriced for those who don’t test.
Any inadequacy can be overcome through rigorous testing. As training strengthens the athelete, so does testing improve marketing.
Tools are readily available for straightforward datadriven tests. At a bare minimum, you should be testing ads and landing pages. Once a winner is discovered, another test should be soon to launch. Testing is a continuous process.
Be aware that you are not simply testing one ad or landing page against another. That’s an amateur’s approach. All of your top traffic ad groups and/or traffic sources deserve their own unique tests; as the “losing” landing page might actually work better for some of your traffic. You need to be data-driven at every level and set up your marketing funnel for maximum success.
AdWords is overpriced for those battling for top position.
As stated earlier, sometimes businesses can’t afford what they’re paying for AdWords traffic. It may be that the click cost for the number one position is higher than any business in the market can profitably afford. Bidding wars at the top can drive prices to unreasonable levels. This is sometimes referred to as “ego bidding.” Who wouldn’t want to be at the top? When companies are not tracking their return on ad spend, ego can take over — leading to crazy bids to stay on top.
At every point along your continuum of AdWords success, pay only what you can afford to pay, given your cash flow and margin constraints. This requires conversion tracking back to every keyword and ad group.
AdWords is overpriced for those with poor account structure.
