Savvy marketers know the value of a brand. It’s the reason a bottle of Tide costs twice as much as generic detergent that works just as well. Companies receive a brand premium, not because they have shown that their product is better, rather it’s based on the belief and or perception that it’s better. But online advertising is different. Because you can clearly and quickly measure returns (unlike in the detergent example), Pay Per Click (PPC) advertising should be a completely performance-based product. Nevertheless, Google clearly commands a brand premium for its PPC services—and customers are paying up, even when they can see no clear return on their advertising investment. This does not make good business sense.
What company would keep paying a PR firm or marketing consultant each month without seeing clear results? Savvy business owners should give their paid click business to any channel that produces a positive return on investment consistent with targeted margins. The “glam” factor that makes advertising worth more when it is associated with, for example, the Super Bowl, simply does not apply to pay per click advertising, companies buy search traffic because they have something that they want to sell to you today.
Consider the case of an affiliate website I work with which receives a lot of traffic around a key product, which we will call “widgets.” The site organically ranks in the top five on Google for a variety of terms related to widgets. When users come to the site, they read about the widgets and get links to buy widgets from retailers. It’s extremely targeted. You would think widget retailers would want to enter into PPC relationships with such a website, but they’re more likely to insist on a performance-based or affiliate relationship and even balk at paying a cost per click that is 50% less than Google. Companies continue to overlook the advantages of these smaller websites on a pay per click basis even while forking over money to Google, simply because they see their competitors there. This is the kind of herd mentality that will never produce a competitive advantage in the marketplace.
So why does Google get a free ride? I recently had a prospective client whose choices shed some light on the subject. The client was paying tens of thousands of dollars a month to test a PPC campaign with Google as part of a new online marketing program. We suggested that they also consider an affiliate marketing program, which would have an upfront cost of about a quarter of their monthly PPC spend. But they were resistant to the upfront cost. What they didn’t realize was that they were measuring the cost of the affiliate program against the cost of managing the PPC program—they weren’t even taking into account the huge costs associated with the Google program itself. What was fascinating was that the fiscal oversight was so much more lax on money going to Google than on money going to consultants—even though the money spent directly on PPC was not producing any tangible results and was about five to ten times higher. The fact that Google PPC was a service and not a person or a firm to be held accountable was clearly affecting the budgeting. From my perspective, money is money, and it should go to the channel that can show the best return on investment, whether that be a person, a firm, a service or a product.
I am convinced that that if Google PPC were an individual or a consulting firm rather than a service, it would get fired much more often. The brand name is getting Google off the hook for all the wrong reasons.
What You Can Do
The bottom line is that companies need to get over the thrill of traffic volume, which PPC can provide, and start to measure real performance—in conversion to sales. It’s nice to be able to turn on the floodgates, but if your web visitors aren’t buying, it’s a temporary high. Before committing your online advertising dollars, do a careful analysis. You may find that better ROI can be achieved through channels with less competition, ones less susceptible to price manipulation and that have higher barriers to entry. Options include improving your organic search ranking, building an affiliate program (for retailers) and finding lesser-known sites that rank highly for content related to your key search terms. (You can do this though online tools such as SEM Rush, www.semrush.com.)
You should know exactly what a click is worth based on the channel it comes from, so you can adjust your allocation and spending accordingly. Only then will you be able to take advantage of opportunities based on actual performance, rather than perceived value. Once you’re done, I suspect you might find it’s time to re-evaluate your business relationship with Google.