The Value of Google Adwords

The Value of Google Adwords

Many companies have tried Google Adwords at one time or another and there are varying opinions on the value of this service. There are some that will argue that AdWords is a waste of money while other companies drive nearly 100% of sales through their AdWords campaigns. How do you determine if Adwords is something your company should be doing?

First of all, Adwords should NOT be looked at as an expense…you should be making money from your Adwords campaign. And this means that if you are spending $15K a month on Adwords you need to be selling enough of your product or service to cover that $15K, plus management fees for whoever is managing those campaigns for your company. Let’s take an example:

Company A sells products on their website and

1) Spends $15,000 a month on pay per click ads through Google Adwords
2) They pay an outside agency $2500 a month to manage this for them
3) They make a profit of 25% on everything they sell

They need to sell $70,000 worth of products from their Adwords campaign to break even every month. The profit on $70K worth of products is $17,500 which would cover their $15K ad spend and $2500 management fees.

Now, they should not expect to immediately reach these goals as it takes some time to optimize an Adwords Campaign but after a few months Company A should really be close if not above this goal. If they have been running an Adwords campaign for over a year and selling less than $70K worth of products a month from Adwords then why are they running this campaign?

There are scenarios where taking a loss on Adwords might make sense:

1) Building your brand – if your company just wants to get their products into as many hands as possible. Often new companies simply want to get their products into the market as fast as possible and are not as concerned with ROI at this point. Having 30K people using your products is more important right now than making a profit off of each sale.

2) Referrals – if your product has a strong referral rate then you need to factor that into the ROI of Adwords. If your company receives a referral for every 5 products sold then that needs to be factored into your ROI for your pay per click ads. Don’t ignore the value of referrals from products sold through Adwords that you otherwise would not receive.

3) New Campaigns and/or products – don’t expect to see a strong ROI right away from your Adwords campaigns. While this does happen, every product and industry is different and it takes some time to optimize a campaign

Let’s look at some reasons why your company might not have a strong ROI on its Adwords Campaign:

Your company has chosen to manage the campaign in house instead of using an outside agency with the experience and knowledge to properly optimize your campaign. It’s not necessarily a bad thing if you want to manage your own campaign but it’s a necessity to have someone who knows what they are doing and has the time to do it properly. Your employee needs to understand how to track everything and what changes need to be made to boost your ROI or hire an agency to handle everything (like us).

You are simply bidding on the wrong keywords. This is a very common mistake in pay per click campaigns. Companies continue to bid on keywords that do not result in conversions; either leads or sales. Again, this goes back to tracking but if you have been bidding on a keyword for 4 months and it has not converted, why are you still bidding on it?

If you believe that you are managing the campaign correctly and bidding on the right keywords with the right bid then your next step is to look at your website and landing pages for your ads. Does your website sell your services and/or products? Does it emphasize your strong points and speak to objections? Is it easy to read and is the code correct in all major browsers? These are just a few questions to ask your design department and marketing department.

One rule of thumb that we like to use is to determine if your competitor is also using AdWords and bidding on the same keywords…if they are it’s a good indicator that they are getting a return on it. Now, they could be just lucky or throwing away money but someone with a good eye can usually tell if their campaigns are being run correctly and efficiently.

Google Adwords offers businesses the opportunity to sell their products to consumers who are looking online for them. Two advantages of Adwords are that they can be setup quickly and are not dependent on your search engine rankings. Companies who do not want to wait for SEO results and want to immediately start selling may benefit from Adwords.

We usually recommend that companies use a combination of Adwords and SEO in their online marketing efforts.