Posted on : July 30, 2016
Adwords is certainly NOT the emerging search engine ad platform it once was, offering endless opportunities for growth and profit. In fact, it’s quite the opposite. Google has become so good at cinching out advertiser’s profits by steepening competition and by forcing advertisers into programs like Shopping which are more difficult to manage.
In the last 5 years, our team has observed a major paradigm shift in management from everyone being the enthusiastic opportunistic PPC marketer to one of these three types of managers. Which one are you?
Type 1 – The “I’ve Been Doing Adwords for 10 Years and Frankly Don’t Care About Google’s Changes Anymore” Type
Type 2 – The “I’ve Got It Where I Want It and Don’t Want to Mess It Up” Type
Type 3 – The “I Understand Adwords is Evolving and Need to Stay on the Cutting Edge of Change” Type
As the “wild wild west” days of search advertising are long gone, so are the majority of the Type 3’s. It’s hard to imagine, but even though more companies plan to invest in PPC this year, the majority of them will not see the expected growth rates that should accompany those investments.
It’s not that Adwords or Bing Ads services don’t hold the same opportunities to grow, its that many advertisers are not flexible enough to adapt to what those services are now requiring and doing what it takes to grow.
But that’s only part of the problem. There are a number of reasons why businesses aren’t growing on AdWords. For starters…
Reason #1 – They are not connected with their data and where their profit comes from. I mention this first because I feel it it is the root of most problems that advertisers face. As advertisers are grossly disconnected from the actual performance levels within their accounts, they fail to make decisions which would allow them to grow. Sometimes, this disconnect comes from the difficulty to measuring ROI/ROAS (like when revenue happens offline) and then sometimes it comes from not digging far enough into the account to extract the data. Regardless, the effect is that advertisers can not know how to appropriate their ad spend correctly, so they keep throwing more money at the campaigns hoping they receive more revenue. This can work but rarely helps improve the overall return. That is why we hear advertisers say they got sick of spending more on Google because even though they made more revenue, they didn’t make more profit.
Reason #2 – They don’t keep an eye on their competition. This one I would call a sleeper problem for advertisers. When you hear someone tell you they have slowly been losing revenue and profit over the last few years or even months, it can be from several things. Often you’ll find that website changes or poor decisions in their PPC account are the cause of the downturn. But these are usually more noticeable as the advertisers correlate the time period for those changes with the changes in performance. Competition, on the other hand, is sneaky. There is no launch date for competition nor can competition be seen in the Change History report. Keeping a steady eye on competition can help you make decisions that keep you in the long position. Watching how they bid and write ads is only a small part of it. Their product pricing, their coupon codes, their shipping rates, their delivery times can all have a profound impact on your business. Of course, this doesn’t mean that you should just try to mimic or undercut them at every opportunity. Today’s shoppers are savvier than ever and will ultimately find the best value. Play to your strengths by staying on top of your competition and showcase what will drive more sales.
Reason #3 – They don’t adopt new services. I would say by now, most eCommerce advertisers have opted into Google Shopping and Remarketing, though far fewer have capitalized on the true potential of these services. Even if an advertiser opts into Shopping campaigns, he or she might not do so to the level their competition is, which leaves them clammering for more impressions and clicks. Since the removal of sidebar texts ads, the CTR wins have gone to those allocating budget to Shopping ads. For non-product based companies, campaigns which allows phone calls as the conversion point could be proven valuable. As per above, the Type 1 advertisers will get hung up here while the Type 3’s will make huge strides forward.
Reason #4 – They don’t prioritize how their ad dollars are spent. These next two issues are found more within the management of Adwords and Bing. Advertisers try to spend money on what will drive the most revenue or number of conversions. Often, there is a difference between what drives more revenue/sales and what drives more profit. If they throw more money at the account, they might make more sales. But given the additional marketing expense, they won’t make much more profit. Sometimes advertisers mesh a range of products (in the same campaigns) which inherently have varying degrees of profit. Then what happens is the most commonly searched products or keywords get the ad dollars first, leaving the most profitable products/keywords to pick up the leftover budget.
Reason #5 – They focus more on how to cut cost vs driving total net profit. This is also within the management style of the advertisers and tends to lean on the imperfections within the human psyche. Many people are conditioned through their life’s experiences to save money wherever they can rather than to invest money to receive a higher reward later. As the Cutting Cost vs Increasing Profit outcomes of poor management (some examples which were mentioned above), the conditioning is repeated. An example I famously use here at the office is: You can lower the conversion cost down so low that you are the most profitable you can be per sale. That is great, unless you find that you’re now only getting a few sales a month. On the inverse, you can increase your sales so you are driving the most revenue possible. But if you are not making any profit, you have done it all for nothing. The trick here is balance. It’s paramount we execute on a deliberate strategy to maximize profit and not one that just focuses on lowering costs or maximizing revenue.
Reason #6 – They don’t incorporate auxiliary marketing channels to improve conversion values. With so many marketing channels available these days, it’s hard not to drown in all the to-dos. For every one sale a company runs, there is typically several days of preparing site banners, remarketing creatives, emails broadcasts, coupon codes, etc. Each business model will have a different marketing strategy. Taking advantage of the less expensive marketing resources to accentuate the PPC expenses will prove fruitful almost every time. Our best clients incorporate email marketing, chat to conversion, social sharing incentives, and other non-PPC related services to support their PPC. Without these services, any advertiser could be making 30-60% less than they currently are. The good news for you is that if you are not implementing additional strategies, you have a huge opportunity to do so and grow!
Please don’t take this with a grain of salt. We are on the verge of a very interesting period. The ad technologies are evolving faster than ever. The majority of sales stand to go to the bigger providers who have the money to adapt to this change. In order to survive this wave, you’ll have to drive value in ways your competition can’t. Standing still can and likely will crush you. If you are a non-believer now, wait a year and read this again… Or get on board to not only survive but to win!value in ways your competition can’t. Standing still can and likely will crush you. If you are a non-believer now, wait a year and read this again… Or get on board to not only survive but to win!