Pay-per-Click (PPC) for Small Companies: Still a Bad Idea

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  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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