Paid Search is Too Expensive. Not!
Over the past year I’ve seen a whole bunch of articles regarding the rising costs of paid search advertising, primarily as more mainstream advertisers come onboard and drive up click costs. Some of these articles focus on the percentage or real dollar amount of the increase in average click costs and describe about how this huge “inflation” in paid search means that the ROI (Return on Investment) of paid search isn’t as good as it used to be. The implied, or in some cases stated, message being that paid search is too expensive to be cost-effective anymore.
While there’s no doubt paid search advertising costs have gone up, I think it’s important to understand a) where we started from and b) how this fits into the overall online advertising landscape today.
You may ask yourself: “How did I get Here?”
Paid search click costs have gone up from where they started because they had no where else to go. For the first few years after GoTo.com began offering paid search advertising in 1997 the minimum bid was a penny, and since it was a brand new medium with few advertisers, you could be #1 for lots of search terms, for just that – a freaking penny per click! In 2000 when I was managing the paid search campaign at PlanetFeedback I was #1 for most of my terms and driving a couple hundred people a day to the site at an average cost of 4 cents. Paid search bid inflation has hit some industries harder than others; even today I have one client who is only paying an average of 8 cents per click to drive targeted visitors to their site.
In the past paid search was like fishing in a barrel, it was hard not to reel in a big catch of visitors and be successful at it because the costs were so low. Even if your site wasn’t very well designed, your boss was obsessed with being #1 for a certain term regardless of cost or both; you could still generate decent results without a lot of effort. Now that the effectiveness of paid search (and Google’s subsequent awesome financial results) have been reported to no end and hundreds of thousands of advertisers have entered the fray, it is tougher to get the same kind of gaudy results we did in the halcyon days of penny clicks. That being said, if you have clear performance goals in mind (such as a specific acquisition cost target) and manage your paid search campaign with those in mind, you can still achieve great results, though it does takes more work than in the past.
You may ask yourself: “Where is that great online ROI?”
So paid search costs have gone up and the ROI isn’t what it used to be seven or eight years ago, the real question advertisers should be asking is: Where can I get the best bang for my buck right now? Check out this eMarketer artcile from February with the results of a recent survey of online advertisers by ad:tech and Marketing Sherpa and you’ll see that when asked what form of online advertising provides the best ROI, paid search was #1 for the second year in a row. (Search engine optimization (SEO) was third by the way, so remember that the next time someone tells you they do SEO but can’t afford a paid search campaign).
It’s important to note these results aren’t hype from Google or Yahoo’s CEO, but unbiased reporting from the online marketing professionals like me who are responsible for producing results for their clients. Right now I’m managing paid search campaigns for almost all of my clients for one simple reason - it continues to produce the best ROI. When something comes along that consistently produces better ROI, I’m all over it.
Rob Bunting
Czar, Cincinnati I-marketing Group
513-481-5689
