13 Million PPC Conversions A Day on Google: Are You Getting Your Share?

Back in October 2012, something quite shocking occurred. Google’s Q3 earnings report was accidentally released before its scheduled time, causing a panic in the stock market. Within just a few hours, the stock dropped a whopping 9%, leading to a temporary suspension of trading. It was a wild turn of events.

Shortly after, Larry Kim, the brilliant mind behind Wordstream, delved deep into the revenue-generating machine that is Google. He wanted to uncover the secret behind Google’s massive earnings. What he discovered was extraordinary – a fascinating infographic dubbed 24 Hours in the Google Economy.

Hey there, it’s me, Larry Kim! I’m the Founder/CTO of WordStream, the genius behind the AdWords Grader and the 20 Minute PPC Work Week. You can totally follow me on Google+ and Twitter, by the way. So, I wanted to share some thoughts with you about a topic that caught my attention:

So, Google’s financials were released and their stock took a serious nosedive. A lot of people are talking about how the cost per clicks (CPCs) are going down. Does this worry you?

Larry Kim: Okay, let me break it down for you. Google’s moneymaking magic has usually relied on making a ton of money from each click. The problem with that plan is that it’s not something they can keep up forever.

Just think about it for a second. Why should you pay more than 5 dollars for something like registering a domain name, when someone clicks on your flashy ad? Especially if that click only leads to a tiny percentage of people actually buying what you’re offering? It just doesn’t make any sense!

I work with small and medium-sized businesses that have limited budgets for search marketing. Usually, they spend between $1,000 and $25,000 per month on this. It can be tough for smaller businesses because the cost per click keeps going up. This means they have to make their ads more targeted and sometimes they can’t afford paid search ads at all.

This change is actually good for both advertisers and Google. There are more opportunities for ads to be shown and the average cost per click is lower. So advertisers can get more customers while spending less money. This also means that more advertisers, even those who couldn’t afford it before, can participate in search engine marketing. It’s a win-win situation for everyone!

I gotta say, I know that CPC’s aren’t completely controlled by Google. What I mean is, when it comes to how much an advertiser actually pays per click, it’s based on an ad auction that takes into account how many other advertisers are competing for a keyword, and also their track record of how well their ads perform (Quality Score).

But you know what? I’m all for a model that focuses on growing Google’s ad revenue by increasing the number of ads available, and coming up with new ideas that get people clicking and converting, instead of just relying on raising CPC’s every quarter.

This way, it’s better for advertisers in the long run. It means they get more bang for their buck, and it makes paid search a more sustainable and attractive option for advertising dollars, especially compared to other places where you can advertise.

So, what do you think about how mobile search fits into all of this?

Let’s talk about how ads work on Google. You may have noticed that there’s not a lot of space for ads. This actually affects how much money Google makes, because people are doing more searches on their phones than on desktop computers. In fact, it’s predicted that more searches will be done on phones than on desktops by 2014. Pretty crazy, huh?

Now, here’s the thing. Even though mobile searches are becoming more popular, advertisers aren’t really keeping up. When you create an ad campaign on Google, you’re automatically included in mobile searches. But most advertisers don’t bother to make their ads special or interesting for people searching on their phones.

Let me give you an example. I’ve noticed that not many people are using new mobile ad formats, like click-to-call ad extensions or call reporting. And very few advertisers bother to create mobile landing pages or customize their ad text and offers to appeal to mobile users like you.

The problem is that it takes more time and effort to do this work. And I’ve also seen cases where advertisers have put in the effort to improve their mobile ads, but they struggle to measure the return on investment from phone calls. This makes it hard for them to get support from important decision-makers.

To put it simply, all of the things I just mentioned mean that when you search for something on your phone, it’s worth about half as much to the people showing you ads as when you search on a computer. But I think that’s going to change soon. For instance, I think there will be a lot more advertisements on Google Maps, and Google might start charging for businesses to show up in their listings.

Do you think the cost per click (CPC) in certain industries makes it too expensive for small and medium-sized businesses to advertise using pay-per-click (PPC) methods, particularly in the finance industry?

Larry Kim: In my research, the finance category includes businesses involved in credit and lending, financial planning and management, insurance, and investing, among other things. These businesses tend to make a lot of profit and have customers who stick around for a long time. For example, someone might have a 30-year mortgage or a life insurance policy.

Right now, there are certain industries facing a lot of pressure. These industries have a few things in common: their ads cost a lot per click, their conversion rates are low (meaning it’s expensive to get a customer to take action), and they have tight profit margins or short customer lifetimes.

I don’t know the specific profit margins and lifetimes for each industry, so I’ll just share the data on average cost per action that I calculated. You can decide for yourself if these numbers make sense for your business.

In my more than ten years of experience working with over a thousand small businesses, I’ve seen that almost any kind of business can succeed with pay-per-click advertising. The key is finding the right targeted, relevant keywords that attract people who are ready to buy, and getting leads and sales at a price you can afford.

What’s the best way for a small business to use this information now?

1. What will I gain from search marketing? This is the first question that comes to mind for anyone new to search marketing. While the results may vary for each person, I can give you an idea of what you can expect based on industry benchmarks. This way, you’ll have a general understanding of what you might achieve if you decide to invest in search engine marketing.
2. How am I performing in search? This is the first question that existing AdWords advertisers often have. They can see the metrics in their own account, but they don’t have a way to measure how well they’re doing compared to their competition. By looking at my research, you can find out if you should be proud of your progress or if there’s room for improvement in optimizing your account.

Finally, I have a great solution for analyzing all this information and gaining valuable insights – just run a free AdWords Grader report. It’s an instant audit of the important metrics in your AdWords account and shows you where you’re doing well and where you can improve.

What’s really cool about this tool is that it compares your results to other advertisers in the same industry who have a similar ad budget as you. This gives you a clear idea of how you’re doing and sets a benchmark for your performance. And the best part? It won’t cost you a thing!

Now, let’s talk about the advantages small and medium-sized businesses (SMBs) have over larger advertisers when it comes to PPC. Where do you think SMBs excel compared to the big players?

I, Larry Kim: Wow, there has been a massive increase in the number of available clicks and impressions! It’s gotten to the point where larger advertisers can’t buy up all the available impression share. This means that smaller advertisers now have an incredible opportunity to outsmart and outperform the big guys.

Now, don’t automatically assume that all larger advertisers are doing amazing. Let me tell you, I’ve come across plenty of them that are struggling and doing a terrible job at managing their accounts. And it’s not because they are incompetent (although sometimes that’s the case). The truth is, when you’re dealing with a PPC advertising account on a large scale, like managing thousands of products, inventories, and changing prices, it becomes really challenging. These are challenges that smaller advertisers usually don’t have to face.