Last year that grew to $43.7B.
It’s the fastest growing advertising channel in the world.
You’ve probably heard about Google AdWords (Google’s Pay Per Click or PPC advertising platform) and you may have even asked the question, “should you pay for search ads on Google?”
Some believe you should. Obviously Google does, since they get 96%+ of their revenue from online ads. And some believe you shouldn’t. Like eBay, who just released a study proving that Google Adwords doesn’t work for them, or the 170 million keywords they were tracking.
But the big question is whether you should pay for search ads on Google?
And that depends….
how much money and time do you have, and what are your goals?
If you want to get a lot of customers in a short period of time, paying for search ads might work for you. But they can be expensive, and when you stop paying for them the tap of potential customers shuts off.
Need a refresher on search ads + keywords?
You can buy advertisements that show up when people type certain words (aka keywords) in search engines.
The theory is that someone will see your paid ad before the organic ones below, so you’re more likely to capture someone who’s interested in what you do.
1. What are your goals?
Paid online advertising is lucrative – you can target someone who’s specifically looking for what you do, and track your results so you minimize the money you waste on marketing.
Beyond measuring your spend, what are your goals?
Are you trying to attract new customers? Capture returning ones? Beat your competition for local search results? Test the attractiveness of a new offer? Raise brand awareness?
eBay can help you
eBay just did a study to analyze what type of online search ads work.
1. Brand Keyword Advertising doesn’t work.
eBay found that brand keyword advertising, where you buy an advertisement of your company name that appears when people search for your name, isn’t effective.
A lot of businesses do this, but they’ve shown in most cases it has no short-term benefits. If someone is searching for your business, they know who you are. And without paid search links, most will click on the organic links of your business in the search results below.
We presented results from a series of large-scale field experiments done at eBay that are designed to detect the causal effectiveness of paid search advertisements…results show that brand keyword ads have no short-term benefits. - eBay, 2013
2. Non-Brand Keyword Advertising can work.
eBay showed that non-branded keywords (aka keywords that don’t have your business name in them) aren’t very effective for well-known brands, which doesn’t help if you’re a small business owner, but they also showed them to be, on average, ineffective for smaller businesses too.
You can read the details of their analysis here: Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment.
3. Paid Search Advertising works for getting new customers.
The study also showed there is a “small yet detectable positive impact of SEM [Search Engine Marketing] on new user acquisition and on informing infrequent users.”
eBay found that online ads can work really well to get new customers when you target uninformed users, or remind infrequent ones so you stay top of mind.
If you’re ready to determine more specific goals for your paid search campaign, Joseph from Search Engine Watch wrote a great post for you.
2. How much money do you have?
What’s your budget to achieve your goals?
Advertising isn’t expensive.
If you can show that every dollar you spend online generates x in sales, and you have the cashflow to sustain the campaign until you get your return, you’re set.
That’s a dreamers’ world.
In reality, it’s difficult to prove results from paid online ads, even though you can track how many people click them and become customers, because there’s a difference between “causation” and “correlation.”
There are serious challenges to correctly detecting the causal returns from internet advertising – the consumers may look that like good targets for advertising campaigns are also the types of consumer that are already informed about the advertiser’s product, making them the less susceptible to informative advertising channels.
In many cases, the consumers who choose to click on these SEM ads are loyal brand customers or otherwise already informed about a firm’s product.
Advertising may appear like it is successfully attracting these consumers, when in reality they would have found other channels to the firm’s website. – eBay Study, 2013
Causation and correlation aside, online advertising is becoming more expensive because more companies are doing it (Google reported a 42% increase in paid clicks, year over year, for the second quarter of 2012). As more people are bidding for keywords, competition drives the prices up, so they’re becoming more expensive.
The average small business owner spends $2,500 a year on marketing.
Considering you can pay anywhere from a few cents to over $100 per click, you don’t have a lot of breathing room if you’re learning how to do paid online campaigns to test keyword campaigns and strategies, and find the ones that bring you profitable customers.
Especially if you don’t have a lot of time because the landscape changes quickly – what worked 3 months ago might not work today, it’s an ongoing process.
Overall, paid search turns out to be a very expensive way of attracting new business…paid ads generate only about 25 cents in extra revenues for each dollar of ad expenditures. (For branded keyword searches, the additional revenues are close to zero.) - eBay Study, 2013
If you’re going to launch a paid search campaign on your own as part of your marketing strategy, start with a small budget that you’re willing to lose if it doesn’t work out, and build from there.
3. How much time do you have?
You can get immediate results when you pay for search ads on Google, unlike inbound marketing which takes 3-6 months to see serious results.
(While the results from paid campaigns are fast, when you stop paying for them you stop getting customers from that channel. In contrast, inbound takes longer to start working, but it can bring you customers for years to come).
Some small business owners do a mix of paid search ads and inbound marketing. They use paid ads to kickstart their traffic in the short term, while they focus on inbound and content marketing to grow their business in the long term.
But the real question about time isn’t how fast you need the results, it’s how much time do you have to invest to get those results?
If you’re like most small business owners, you spend 3-5 hrs/week marketing your business. That’s not a lot of time to develop a sophisticated online paid marketing campaign, so it’s not surprising that most businesses who spend money on AdWord campaigns have more employees.
I hope this gave you a better idea of what to think about when deciding if paid search ads are right for your small business.
One more thing to consider.
Roughly 5% of us use ad blocking software, so even if you create a great campaign, some of your customers won’t see you.
There’s an alternative.
You can earn your right to appear at the top of search results through SEO or “search engine optimization.” A great way to do this is via inbound marketing, which we’re obviously big fans of, as it’s a cost and time effective way to grow your business online.
So, what are your thoughts? Does Google Adwords work for your small business?
Want to learn more?
- Why Use AdWords? Here are 10 Reasons by Wordstream
- A Guide To Building Successful AdWord Campaigns by Google
- How Paid Search Differs Between Company Size by Search Engine Land