Jan
05
2017
AdWords are old news
Years ago Google AdWords was great. Anybody could pay to have their ad listing at the top of search results, and in the company of vastly more reputable and well known businesses.
But that was years ago. Anymore, AdWords are a money hole that businesses can count on never seeing again.
Why?
The fact is that all but big businesses will see negative ROI with AdWords. Big businesses set aside huge budgets – sometimes as much as $500,000 per month – on AdWords because their customer acquisition costs are not click-dependent.
The effect is that the key-word space is greatly tipped in favor of large businesses.
But even for more specific key-word oriented businesses, the numbers just don’t add up. They all point to the fact that SEO is better than Adwords, and that you shouldn't use AdWords at all.
First,
94% of clicks go to organic searches
– which leaves only 6% of traffic going to paid searches. In fact almost 75% of clicks go to the first 3 organic results. I don’t know about you, but I while writing this post it occurred to me that I don’t even glance at paid listings.
So why do businesses still use AdWords?
- It’s easy set up and track.
- It can be gratifying to see your listing immediately appear up at the top of search results.
- You set your own budget and only pay when users actually click the listing.
AdWords’ counterpart SEO, to effective:
- Requires working with an marketing agency
- Takes time to see results
- Has a fixed price range that is higher than most businesses are willing to set aside for AdWords.
In others words, superficially AdWords appears less expensive and easier to set up.
But business cost is never a static number – it is always a ratio of expenditure vs return, or cost per acquisition (CPA). CPA is without a doubt the king metric. And if we are looking at ratios,
SEO’s cost-per-click is significantly less than AdWords.
Let’s crunch the numbers.
A business pays for AdWords and appears in 2,000 monthly results at $2 per click. 120 users (6%) click on the listing, and assuming a standard 3% conversion rate, they gain about 3 new customers that month.
Take SEO, which we will give a budget of $2,500 per month – ten times more expensive. With SEO techniques the business’ listing appears in the top 3 results, with 2,000 hits. 1,500 people (75%) click on the link, and at 3% conversion they gain 45 new customers per month.
To summarize cost in terms of cost per acquisition (CPA):
- Google AdWords: $240 / 3 new customers = CPA of $80
- SEO marketing : $2,500 / 45 new customers = CPA of $55
In this SEO is 30% less expensive than AdWords.
In real world situations, the actual number tends to be significantly higher. Let me put it this way, as a marketer I have found it extremely difficult to make AdWords remotely profitable. Which is why I don't practice it anymore. I have found effective SEO to be immensely profitable. Every. Single. Time.
Furthermore, we are overlooking an extremely significant fact:
SEO drives considerably higher traffic volume than AdWords
In our example, SEO marketing drives traffic 15 times better.
That translates to two all-important business delights:
- Much higher cash flow
- Much higher revenue volume
For businesses in the service industry, such as adventure tourism in Alaska, nothing could be more important than the increased volume of business. Most adventure services in Alaska have a higher price tag, often at least $1,000. In our example, AdWords would produce a $240 investment at $3,000 or more return. SEO would produce a $2,500 investment at $45,000 or more return.
And while for real world numbers for this particular industry would be closer than this, the differences are none the less dramatic.
We are also overlooking a side effect of the increased volume of SEO marketing, another all important business delight – especially in the adventure service industry: with dramatically increased volume, your informal network reach of
Mouth to mouth referrals is exponentially greater
It’s no secret that mouth to mouth networking has a cumulative effect. When videos go through this phenomenon online, we call is “going viral.” The cumulative effect is no less true when a business has much higher customer volume.
It works to the benefit of a business in several ways:
- Physically mouth to mouth referrals
- Greater social network reach
- Increased SEO result standing
To reduce the oh-so-many-benefits of the above three points to three words: endorsement, prominence, authority.
Appearing higher on a search engine result and having wider social network than your competitors is the equivalent of a 21st century golden ticket.
Google AdWords ideal is that small businesses’ listings can appear in the company of more authoritative companies. But this ideal no longer syncs with the reality that this technique does not pay out. In other words, AdWords is dated.
While appears to have a higher upfront cost, SEO is the current long term solution for significant business growth.
Haven’t invested in SEO marketing? I would highly recommend getting in touch with a business who does use it and getting feedback on how significant it has been for them. Their story may look strikingly similar to the example from above.
Whatever you do, don't waste money on AdWords.Invest in SEO marketing.
