This post was created to answer a question on our Facebook page and provide insights about advertising on Google.
Do you guys help clients with googleads? Also, do you think googleads are a good idea? In your experience, do they work to generate income for businesses?
Cathryn Anne Warburton
We started answering the question directly on Facebook. We quickly realised it was an opportunity to show our readers the correct way to determine if advertising on Google is profitable.
First, a couple of concepts;
- Google AdWords is Google’s advertising system.
- Google charges per click*. And Google AdWords users are free to select the maximum CPC (cost per click). Nevertheless, Google provides a suggested bid for every keyword.
The Question: Does advertising on Google work to generate income for businesses
The Answer: It depends
The answer to the same question 12 years ago would be; yes, it definitely does.
But, now in 2014 it’s not that simple… It depends on variables like conversion rate, CPC of selected keywords and value of visitors on the website.
Advertising on Google is changing
As Gary Vaynerchuk says “Marketers ruin everything”… watch this 56 seconds video.
Let me explain that…
When marketers find a good advertising vehicle, they use it over an over again. Then the vehicle stops being as effective.
For example, in 1999 some marketers were able to get 90%+ opening rate on email marketing. In 2014 a 1% opening rate is amazing.
Getting back to Google AdWords. Simple economics rules apply here, more demand brings higher prices.
More and more people are using Google AdWords and it causes the CPC to be higher.
For example, the suggested bid for “web design” today 15th Aug 2014 is $19.57AUD, but it was possible to pay a couple of bucks for the same term several years ago.
Even Google has recognised that clicks are down 15%. Habits are changing.
On the other hand, Google AdWords is evolving too. Their tools are regularly being upgraded and their targeting features are constantly being improved.
In our opinion, Google AdWords is still one of the most influential players on the online advertising world.
How to find if Advertising on Google is a good idea
The very first step is to calculate the value of a visitor on your website.
For example, a website receives 1000 visits per month, and 10 (1%) of those visitors become clients.
Let’s assume the average product a client buys is priced at $300. Then, the monthly sales would be $3000 ( 10 x $300 ), which means every visitor is worth $3 ( $3000 / 1000 ).
If the CPC (cost per click) for a keyword is less than $3, then it’s a good idea, otherwise it’s not.
In our experience, some businesses have grown their client base significantly using only Google AdWords. But some of them have reported that advertising on Google is not as beneficial as it used to be years ago. Still profitable though.
Quick recommendation for small pockets
We would recommend using long tail keywords, which are more likely to generate quality clicks at a lower CPC than more general and extremely competitive keywords.
* Google offers additional bid strategies, but the most common is CPC.