05/29/2024
My PPC (Pay Per Click) Journey & the Dramatic Rise of Ad Costs
Has Your Cost per Conversion Increased Dramatically Over the Last Few Years?
When I first started running PPC campaigns back in 2000 (yes I know 2000 is a long time ago), I was using a search engine called GoTo.com. Google’s PPC program didn’t actually start till a few years later. GoTo later turned into Overture, which was eventually purchased by Yahoo.
It was the wild west of internet marketing back then, and at the time, I was trying to find ways to market my new internet startup, True Foods Market, a natural foods online shop.
I read an article about this new marketing approach where you could choose keywords and pay for every click. Since I had recently added about 1000 products to my online store, I decided to add the names of the products as the phrases to bid on.
At GoTo.com, the interface was very simple. You added keywords, selected the bid amount, created some ads and let it run. The minimum bid at the time was $0.01, so that’s what I chose for all phrases. If only I could have seen the future, I would have been drooling at the thought of getting $0.01 clicks on a large number of my key phrases.
At the time, $0.01 clicks got me quite a bit of exposure and I had orders pouring in soon after launching. In some cases, the phrases I bid on were obscure phrases and I remember being at the top of the page for phrases such as ‘pomegranate juice’ and ‘buckwheat hulls’ while only paying a penny. Of course, I was lower on the page for most of the phrases, but I still got clicks.
Over the course of the next several years, my business grew in terms of revenue. Click costs also increased but I had established a large customer base and had customers in every state and probably 30+ countries. In 2003, my revenues approached $500K. Sounds great? Right? Well not really because I lost about $100K that year and I struggled to keep the business afloat for over a year. Managing an inventory business with 1000 sku’s was difficult (for a new business owner) and I wasn’t on top of the finances like I should have been. I was working mostly ‘in’ the business and not spending enough time ‘on’ the business.
The amount of emotional turmoil I went through was overwhelming. I tried to make it work, but I was frequently going through bouts of depression. I remember calling my mother one time behind the warehouse with tears streaming down my face and hearing the concern in her voice as she tried to comfort me. I remember another time where I just didn’t go to the warehouse and one of my employees had to come to my house to get the key to get in.
I was getting too far behind and had gotten cut off from 2 different suppliers and 2 different shippers. By the first quarter of 2004, I was using the last supplier and last shipper that I could use. Then I got the notice from the 3rd supplier that I could no longer order. That was it. I was finished. I made the uncomfortable call to the bank that had my SBA loan to let them know I’d be shutting down and filing for bankruptcy. The business assets would go to the bank, however, the bank allowed me to negotiate the sale of the business to a friend’s company.
Fortunately, I was able to keep the drop ship portion of the business at the time, which was about 10% and all of my inventory was shipped to Logan, Utah. I also got a job at Prosper and managed SEO & PPC marketing there and was an internet coach for 5 years. Things started to turn around financially and over time, the drop ship business grew profitably until 2010 when I sold it on Flippa for about $75K.
Through the years, I went deep into SEO & PPC strategies and started taking on clients who needed those services. I loved seeing the results that clients had and as things evolved, so did I.
My focus has always been on maximizing the number of conversions while reducing the costs of those conversions. I’ve learned from marketing conferences, newsletters and even other experts in the field, but my biggest teacher has been the feedback from what works and what doesn’t with many clients over many years.
However, within the last few years, I started noticing that the cost per conversion across several accounts in Google Ads would rise quite significantly even without significant changes. In the past, there was more consistency. Once I applied my optimization techniques, I could bring the cost per conversion down to a reasonable level and for the most part, it would stay there. But over a short period of time, I saw costs skyrocket in a random, haphazard sort of way. That consistency I was able to develop was gone!
But I discovered a clue as I was working on one of my clients accounts. I was looking at the search terms report, which shows the actual phrases that were used and I noticed that there were literally thousands of ‘close variant’ phrases that the ads were being shown to. And here’s the clincher, the match type was exact, not phrase and not broad.
In the past, the match types were respected. An exact match was an exact match. A phrase match was a phrase match. And it was only the ‘broad’ match type that could expand into oblivion. In fact, it has been standard practice by many marketing experts to not use broad match because it was difficult to ‘control’ where your ads were shown.
There was also another match type called broad match modified. I loved using this match type because I could choose the words to be included. I could use the + sign to designate which words must appear somewhere in the phrase. This provided a higher level of control over phrase & exact match, but not as loose (and irrelevant) as regular broad match.
Respecting the match types was and is important for marketers! If marketers can’t control which key phrases the ads get shown to, then their ability to optimize is lowered significantly.
So, as a marketer who remembers looking at a search term reports and seeing that match types were respected in the past to now seeing that even exact match phrases could be broad matches, well it changes everything and that is one of the reasons why costs per conversion have risen and why even experienced marketers have had difficulties in reducing ad costs per conversion.
At some point, they also discontinued broad match modified. Of course, if exact and phrase matches can expand as broad match, why would they need to offer broad match modified?
To be honest, Google is a company that is out to improve its bottom line and by showing the ads to a much more expanded keyword inventory (beyond what their client have asked for), they make more money, plain and simple. So I can certainly understand why they have done this from their point of view. What I have noticed is that the larger the budget for the campaign, the more that ‘close variant’ category of phrases expands.
To put this in perspective, let’s say I am bidding on one exact match phrase. That doesn’t mean Google is only showing your ad when that phrase gets searched on. It is more of a guideline for them and when reviewing search term reports, I have seen hundreds and even thousands of ‘close variants’ stem from that phrase, some relevant and some completely irrelevant. The match types are not what they were in the past.
In addition, the ad structure itself changed and a new procedure was implemented that forced marketers to no longer use static/fixed ads. In the past, it was called Expanded Text Ads and it went away so that only Responsive Ads were available. So what was the difference between the two ad types? The first gave marketers exact control over what was displayed and the other gave Google control over what was displayed. Responsive ads are not fixed ads. They are a conglomerate of many lines of ad text options that could be used and Google gets to use its data to figure out which sections of the ad should be shown.
Optimization of ad copy is another way in which marketers can bring costs down. One ad performs at one cost and another ad performs at another cost. In the past, optimization has been easy. Just pause the one that performs worse than the other. But now, this optimization process has been turned on its head because how does one know which ad performs best if the very nature of the ad itself has changed to be a conglomerate of multiple options? One can obviously see which ad conglomerate performed best, but your ability to control the exact phrases to use in the ad is no longer available like it was before. An ad is no longer an ad.
The results of these aforementioned changes have resulted in giving Google the ability 1) to choose the phrases that your ads are shown to and 2) choose the exact ad copy of your ads
The way in which marketers were able to optimize their Google Ads has fundamentally changed.
And it has left a lot of marketers scratching their heads wondering what to do. Imagine being a welder, a doctor, a lawyer or anyone with a specific skill set and then realizing that their skill set no longer worked? Yikes!
I am not here to bash on Google nor say whether the changes they made were bad or good. I’m just stating the facts as a marketer who has been around for a long time and has seen how the ad platform has evolved.
The good news is that our team has figured out how to navigate these changes! One of the ways is how the campaigns are structured. The campaigns won’t perform well unless they are structured correctly. The 2nd way is to utilize the Exclusions feature more extensively than it was ever used before. These two techniques bring back the ‘control’ to the marketer so that the key phrases you are bidding on are funneled correctly to the campaigns and ad groups that you have set up. You have to be watching that search terms list non stop. The extensive buildout for exclusions will happen over a period of time. We have to funnel the key phrases correctly. Only then can we optimize what’s working and what’s not working.
In addition to the above, there is a format that can be used with responsive ads that gives a higher level of control. Its not full control, but it is much better than throwing tons of random phrases into one of those ad conglomerates and hoping for the best.
And if that wasn’t enough, keep in mind that there are a gazillion levers and settings that can be adjusted one way or another. One little incorrect adjustment and your whole campaign goes down the toilet!
But the changes within the google ads account is only half the battle! The other half is what happens after they click. Your landing page should be optimized as well. If you hire a PPC agency and they don’t have anything to say about your landing page, then run! You could have a great setup in Google Ads to drive relevant traffic, but what’s the point if the conversion rate is so low on the landing page that you lose money.
You’ve got to have a landing page that is set up in the right format to convert. And landing pages need to be split tested as well so that you are always finding ways to improve the conversion rate of the visitors.
So, if you are a business owner and you’re trying to save money by not hiring an agency to manage your PPC ads, I would say ‘please reconsider’.
If I were with you in person, I would look you in the eyes and with all the seriousness of someone who was trying to warn a friend of imminent danger, I would say, “Bro, don’t do it! You Will Lose a LOT of Money! You have about a 1% chance of getting it right, if I’m being optimistic. Even seasoned marketers have to keep adjusting till it works.”
Friend, we are no longer in the year 2000 with 1 penny clicks. Anyone could have done what I did when I started and had success at generating a positive ROI. Now click costs are through the roof, competition is steeper and Google is more concerned about their bottom line than yours. That’s the reality!
As someone who has found a path through this quagmire of complexity, let my team and I use our expertise in lowering your ad costs while increasing your leads & sales. We’ve done it for others and we would love to do it for you!
Contact me for more information!
