Back in early November I wrote a short post titled When Pay-per-Click (PPC) is a Bad Idea. As of this morning, about five months later, this article is still the most popular page on my site. One of two things is likely the cause: 1) many small companies are considering investing in Pay-per-Click and having doubts, or 2) many small companies are already investing in PPC, and second-guessing their decisions. This followup post will hopefully address both situations. Just so you know, the small company I currently work for falls into category #2. Here is why.
This past week I sat down with three members of the marketing team to review our Pay-per-Click stats. Our PPC approach has always been pretty straightforward—for the past few years we have been running eight different PPC ad sets per month, for eight different products. The budget for each ad set is $500 per month, for a total monthly Pay-per-Click spend of $4,000 (8 PPC ad sets x $500 per month = $4,000). Although we have always been able to monitor both Clicks and Spend, at the beginning of 2009 we added the ability to track actual purchases (Revenue) made from PPC ads. This was our first meeting since revenue tracking was made available, and prior to the meeting we had no reason to believe our Pay-per-Click ads weren’t working. Following is a summary of our findings for Q1:
- One ad set was running at break even ($1,400 in revenue from $1,500 spent); and
- Combined revenue for the other seven ad sets was approximately $400 TOTAL.
To put it another way, as a company in Q1 we wasted just over $10,000 on Pay-per-Click ads that weren’t resulting in sales. At this point, the decision was simple: we left the one PPC ad in place (the one that was breaking even) and redirected the remaining $3,500 per month into other marketing efforts.
After months of analyzing and researching this issue—along with the painful and expensive lesson outlined above—I am more confident than ever that Pay-per-Click advertising is simply not a good idea for small companies. Not only is it mandatory to have the technology and the know-how to measure each dollar of revenue generated (not an easy task for a small company), but as I mentioned in my November post, Pay-per-Click is not a good value. The fact is, the entire pricing model is based on competitive bidding, which means PPC is the one marketing method where companies can be absolutely guaranteed to pay market value for each and every click. And once you factor in competitors, tire kickers, college kids working on research papers and people who click on things because they have nothing else to do, companies actually pay slightly LESS than market value for PPC traffic. Small companies need to spend their time looking for opportunities to generate the most traffic at the LEAST cost, not market rates.
And finally, if the information above doesn’t convince you that Pay-per-Click dollars are wasted dollars, check this out: it’s a Heatmap of the Google Home Page from EyeTools.net. Note the “F-shaped” hot zone at the top left-hand corner. Unless you’re willing to pay a premium to have your PPC ads show up above the first search listing (the hottest zone on the Google Home Page) there is a good chance most people aren’t actually seeing them. Which means any ‘branding’ benefit you might be getting from having Pay-per-Click ads displayed in the sidebar are probably fictional as well.
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Author: Eric_Rudolf (68 Articles)
Eric Rudolf is Director of Marketing for one of the fastest-growing professional development and training companies in the world. Eric's work has been republished and Retweeted by The Rainmaker Report, The Social Media Guide, WhyPR, Elite Tech Jobs, Microsoft Small Business, and others. If every job paid the same, Eric would restore old houses or shoot pool for a living.
April 1st, 2010 at 6:29 am
Hi Eric,
Some interesting thoughts here – I feel that your main issue, and a very common one, is spending money without tracking the results!
Once you did manage to put this in place you could easily see where the issues were with your campaigns. In a lot of cases it pays to have a professional company looking after your account – working on making improvements & tracking the results. However, don’t work with anyone that only reports on “hits” or “traffic” – always report on ROI (and how that fits into your business).
This isn’t just a shameless plug
but I do feel strongly that your experiences may put other people off trying PPC. This is not to say it works for everyone – you need a good offering & website too!
Cheers
Ben
April 1st, 2010 at 2:03 pm
Hi Ben:
Thanks for taking the time to write. My biggest concerns about PPC are the same concerns everyone else should have:
1) PPC is not a good marketing “value” for small companies, because by definition with PPC and its keyword bidding process, companies literally pay Market Value for every click. In order to achieve significant growth, small companies need to find marketing opportunities where they are paying significantly LESS than market value.
2) After you factor in the researchers, college students, bored web surfers, competitors and potential employees who click on PPC ads every day and have no intention of buying anything, PPC actually costs several times MORE than the market value referenced in #1 above. I read a study a few months back which conservatively estimated that 85% of all PPC clicks were either fraudulent or unintended. After almost 10 years of sitting on both sides of the PPC fence (as an advertiser and an Affiliate marketer) I have no doubt this number is accurate.
Thanks again for writing. Sorry we don’t agree—but it’s still fun to debate it
- Eric -