Amateurs Drive PPC Prices Through Roof


It's unlikely you'll have missed many a report this last week or two on soaring PPC prices. USAToday has yet another piece on the amazing growth of Search ad revenue for GOOG/YHOO.

I was talking to a friend i'd consider a veteran of online marketing today, though i don't think he dabbles in PPC half as much as organic search, and he said (minus swearing and obcene abreviations..) "PPC guys pay waaaay to much, they have no concept of ROI".

Seems harsh, but I think the dig was aimed at the amateurs. PPC is *easy* to do, but not easy to do well, and some large firms, and some smaller companies and individuals are almost certainly driving the cost of PPC. Or at least that's how the theory goes.

As you know, im not much of a PPC guy, so you tell me, are amateurs driving the cost of PPC beyond reason?



>> are amateurs driving the cost of PPC

True & particularly after Google introduced the active/inactive bid concept this is getting really annoying.

Nothing new here

Back in the day it happened with (Overture) as well, this is nothing new, just another phase in the same old cycle of online advertising.

Even poorly executed it's

Even poorly executed it's still less expensive per lead than print.

Big Budgets

Are the problem because many businesses have been pouring money into poor ROI channels for agess, what seems like way too much to the more advanced online marketeer is likely heaven for the TV/Radio advertisers.

>pouring money into poor ROI

>pouring money into poor ROI channels for ages

Exactly. Those PPC bidders I'm familiar with can afford to be "sloppily carefree" with bids because they are seeing excellent returns versus other media advertising. That said, a few of them are showing concern over the upward spiral of PPC as more of their competitors enter the market.

Amazing one guy in our

Amazing one guy in our company did not have proper tracking set up and has been paying $60 per submitted form. We tuned most of ours and pay about $7.

It's not just the amateurs.....

I'm sure amateurs play a small role in driving up prices...but I don't think it's just the amateurs that are to blame.

I regularily inflate bidding in certain markets to push out the competition. I can afford to take a loss doing it for a month or two and most of them seem to be unable or unwilling to weather the storm for that long.

Commenting on the USA Today story

"The most expensive phrase — "Chicago personal injury attorney" — sells for about $50, Lavinsky says. Lawyers are willing to pay to attract clients. A year ago, that keyword combination sold for $30, Lavinsky says. "

Too funny. He may want to check that again - as of a couple weeks ago I cancelled that ad campaign....and it never made it up to $50 - at least not for me:-)

High prices = more customers

Customer acquisition is another reason to bid up to #1.

Have you ever looked into purchasing a quality customer list? Not cheap.
I used to sell bracelets a few years ago and had no problem bidding high - up to $5 per click for a $150 item. I made lots of sales with little or no profit, but would more than make up for it by contacting these customers on Mother's Day or other holiday's.

So, lose a little money now in order to have the best kind of customer in the future - One who you know will make an online purchase, you know what they like and *they* already trust you since you did a good job with their first purchase.

How much is a pre-qualified customer worth to you?

Great Point

Great point Nebraska, I tend to look at things like life time value of a customer when building my models.

If anything, a huge portion of the PPC market is still under priced.

Marketing vs lead generation

In my niche, some of the competition is from the established folks who simply pay whatever price is needed to be on the front page. It's not a case of measurable ROI, it's a case of 'marketing'. It's treated as stupidly(? - IMO) as many folks used to with print media. They're doing it for exposure rather than $X a click = $Y per lead. I know what click through costs are on some of these ads and there's no way their leads are profitable. Yet still they are.

Yes, in addition to that I've got a million bottom feeders coming in and out of the market every day to, compounding the situation.

It will always be there

Branding that is. You are correct in the fact that some companies/people will pay whatever they have to to get in (or close too) the spot they want. A lot of large companies actually set aside a porttion of their budget for branding - i.e. unmeasureable marketing activities.

Marketing departments

I've found it's oftens muppets in marketing departments to blame that need to spend a certain amount each month, and they HAVE to do it or their job is on the line.

Yeah, I've seen it all, too

I've had a lot of smart PPC clients, but also seen quite a bit of, ahem, interesting PPC tendencies. I have to remind myself that while I can counsel and strongly urge certain courses of action, at the end of the day I'm bound by the three laws of PPC-otics:

  • 1. A PPC strategist may not do something illegal or irreparably piss off G! or Y! or, through inaction, allow illegal or severe-pissy things to happen.
  • 2. A PPC strategist must obey orders given it by his client except where such orders would conflict with the First Law.
  • 3. A PPC strategist must protect its own existence as long as such protection does not conflict with the First or Second Law.

So yes, I've had clients (even Fortune 500 clients) successfully insist upon Branding-only campaigns... paying whatever it takes to be in the top three for a set of terms (often because "My boss will kill me if he types in 'generic foo' and he doesn't see us at the top!). I've also had clients play a game of 'chicken' with competitors (sometimes with good results, sometimes not).

But I also agree with Nick's observation that amateurs may well be the driving force behind huge PPC cost increases. Here's why I think non-experts are particularly vulnerable:

  1. A lack of understanding of AND aggressive approach with negative keywords. Most folks, for instance, don't realize that on AdWords, Google doesn't do stemming on these, so you must add plurals and such!
  2. A lack of awareness over the scope and ease-of-running-awayness of AdWords Content Match costs, particularly if the client is just highly focused on keywords.
  3. A poor understanding of the huge reach of AdWords broad matching or YSM's advanced match.
  4. A complete obliviousness to the pervasiveness of, ahem, adult searches ("What do you mean, we can't use "American girl" [name of a clothing store] as one of our keywords?"), including foreign slang ("How about 'rubbers' to sell our boots?")

Thankfully, my clients usually trust me when I tell them one of their requests is a Bad Idea(tm), but every once in a while it takes one really awful insistence on their part (resulting in a nasty, nasty PPC bill) for them to wake up to PPC reality. And the main point is... companies that DON'T have an experienced PPC advisor have to learn about all the pitfalls firsthand. Ouch! (for them, and for the rest of us who must deal with their inflated, if even just temporary, competition)

Branding and measurability

I agree much of this will be inexperienced people with a budget to spend but some might actually know what they are doing. Like anything don't knock it until you have tested it. Most marketing tactics can be measured if you are clever and creative enough about it. There is a lot to be said for branding. A customer is more likely to purchase when they recognise the merchant. In the offline world there are many DM campaigns that are done in a way that will just break even (usually just better than) or even make an initial hit, knowing that down the line it will pay off. This is why you might get a greeting card on your birthday etc with no direct offer (although I would regard that as a voucher/SP/RAF opportunity). Online is no different to the years and years of offline marketing. The mechanism has changed but best to tweak what works rather than throw it away.

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