Google AdWords - Is it too expensive?
Marketwatch.com wrote about a couple of businesses advertising in the US who claim that Google adWords campaigns are becoming prohibitively expensive. These companies are planning on reducing their online advertising budget this year.
One of the companies is ebags.com. They sell suitcases and handbags online and last year spent somewhere between $5 and $8 million dollars on advertising of which 75% went to Google. The “soaring cost of Google adWords” was attributed to increased competition driving up the price of keywords. Google displays paid ads in an order determined by how much each advertiser has bid for a keyword in conjunction with a quality score given to the advertiser by Google. Ebags.com say that for each keyword they now pay roughly 45% of the cost of the product. This is eating into their profit margins and becoming too costly.
So, the news doesn’t appear to be good and marketwatch.com, a stock market site, covered the story believing that if more advertisers follow suit then Google’s share price will suffer.
But is it true? Not in Australia it isn’t, in my experience.
- I’m often surprised at the lack of competition for targeted keywords in what are considered to be competitive online industries. I recently set up a campaign for an online fashion business and the cost per click averaged 16 cents in the first month. It’s nowhere near the 45% of the product cost claims featured in the article.
- The travel industry is one of the most competitive online and keywords are more expensive but still averaging well under $1 for the campaigns I run.
The most expensive keywords I buy are those for my own search engine marketing business. These are search terms such as “online advertising” or “pay per click”.(edit: no longer true)
- There are some absolute bargains to be found all the time. I don’t want to give current examples but I’ll give one from a month ago. A major golf tournament (PGA) took place last month at the Hyatt Coolum. I was the only advertiser bidding on search terms such as PGA and PGA golf. There were 16,000 searches for the PGA tournament in one month and this phrase was extremely relevant for one of my clients who had tournament packages and accommodation on his website. The cost per click was 7 cents.
I suspect the marketwatch article is anecdotal rather than based on any meaningful stats. In any case if advertisers drop out of the market for particular keywords in particular regions then the price gets cheaper for those remaining until it’s cheap enough to lure back previous advertisers. And so it goes. We’re nowhere near this situation in Australia though.
Posted in Google AdWords Advanced
January 28th, 2007 at 7:47 pm
Adwords is not only too expensive but the trafic it brings is really bad.
I would not recommand it at all. Not to mention the number of click fraud issues on Google lately.
January 29th, 2007 at 12:57 am
Hi John,
If the cost per acquisition is more than your profit margin then I agree it’s too expensive. There are a lot of variables though:
• average cost per click
• click through rate
• conversion rate
• profit margin
All of these variables can and should be tested and changed on an ongoing basis to affect the outcome.
If the traffic is bad then you’re not qualifying sufficiently. The best ways are by using a combination of keyword exact matches and broad matches with negatives. Eg if you don’t want to attract people looking for free stuff then put “free†as a negative. It’s also good to qualify as much as possible in the ad text.
You may have done all this and still got a bad result. What industry are we talking about? What experience have you had with click fraud?
Cheers,
Christine
January 29th, 2007 at 12:50 pm
I have a really bad experience with click fraud.
Not only that, everytime I sent an email to report it, nobody dared to answer.
Click fraud is such a big issue this days, and I think adwords is way too expensive and very negative.
If you advertise on adwords, get ready to loose a lot of money and get a small ROI.
A lot of advertisers has the same issue with PPC and a lot of them are complaining about adwords.
Not to mention about the parked domain google has and buy to get traffic, this is the real click fraud! And it’s called distribution fraud.
Google is only interested in getting more clicks on each ad to make their money, not to distribution quality click.
Imagine getting clicks from a domain that has nothing to do with your services, that is ridiculous and this is the truth on google adwords.
Here’a an excellent blog:
http://www.apogee-web-consulting.com/blogger/2007/01/distribution-fraud-is-real-click-fraud.html
And that’s not all. Look at this now:
Let’s see another fraud issue with google. I am on Myspace and I type the keyword “music”. The google adwords show up like this:
http://sads.myspace.com//Modules/Search/Pages/Search.aspx?fuseaction=advancedFind.results&searchtarget=tms&searchtype=myspace&t=tms&get=1&websearch=1&searchBoxID=HeaderWebResults&searchString=music&q=music
Now pay attention to one thing, you can click on anypart of the blue table, you don’t have to click on the ads, just like on the blue table, then you will see that someone is being charged for that.
This is ridiculous, this is junk traffic and this should be forbidden.
Nobody wants to pay for that, this is exactly why I think google is not worth it and I would not recommand adwords to anybody.
And to end my post, I do not trust google at all.
January 29th, 2007 at 8:48 pm
John,
I was mostly talking about Google Search, that is ads showing when someone has searched in Google. You are talking about Google’s content network, ads showing on websites that have adsense.
I’m not in total disagreement with you. I generally opt out of the content network when I set up campaigns. If I do opt in then I’ll set it up as a separate campaign. In other words 2 almost identical campaigns, one for search, the other for the content network. I’ll bid lower for the content network and keep it running only if the results show that it’s worth it.
Google’s default setting for an adwords campaign is to opt in for both search and the content network. It would be better for new players if this was more transparent.
I’m with you on the blue box behaviour although the majority will still probably click a specific ad rather than anywhere in the box.
I don’t trust Google either. Why would I? They’re providing a product that I’ll use as long it suits me (or my clients).
June 6th, 2007 at 7:54 pm
[...] For example, quite a few people came to my blog because they searched, in different ways, on the topic of adWords being expensive. It’s interesting to know this and I can take action by writing more on the topic or addressing it in a frequently asked questions section. [...]