Guest post by Brad Shorr
PPC advertising is wildly popular: Google AdWords is the world’s largest ad network, reaching about 80 percent of global Internet users. Despite its popularity, PPC is not for every company. In fact, in certain situations, PPC can be wasted motion and a serious cash drain. Here are situations where PPC should be approached with caution or completely avoided.
1. Small Budget
A monthly ad budget of a few hundred dollars probably won’t be enough to produce a meaningful number of conversions and amount of revenue. Sometimes, companies with modest budgets are lured into PPC because it makes them feel they are at least doing something. A much better approach is likely to be putting that money into something like an email campaign to solidify relationships with existing customers. Or, if no better option appears on the horizon, pocket the money until one comes along.
2. Low Profit Margin
When the product being sold through PPC has a very low profit margin, it may be impossible to reach a cost per conversion low enough to generate positive ROI. Spending $30 to get a sale generating $10 in profit is a bad business proposition, unless the sale is repeated or can lead to other, more profitable sales. Sometimes companies make a mistake by calculating ROI based solely on the ad’s direct conversion, rather than on the total sales opportunity. On the other hand, if the ROI calculation is too “pie in the sky,” the PPC campaign could be a recipe for disaster. Careful monitoring of PPC-generated leads and sales through the pipeline will give companies the facts they need to arrive at their true ROI.
This last point highlights the necessity of patience in PPC. It is usually impossible to gauge the effectiveness of a campaign after only a few months, since testing of ad offers, landing pages and other variables can have a huge impact on click-through rates and conversions. Companies with a culture of “immediate gratification” won’t have the staying power to ever know whether their foray into PPC was a success or failure. They are better off avoiding it entirely.
4. Competitive Market
In PPC, the cost of a successful keyword bid depends on its competitiveness. If the PPC niche is dominated by large organizations with five- or six-figure budgets, it may be cost prohibitive to enter the arena. Sometimes, a sophisticated long-tail keyword strategy is a way around this problem, but there must be enough search volume among the long-tail keywords to make the strategy viable. Another workaround for highly competitive markets is to geo-target the campaign; this can work very well, provided the big players are not also targeting your geographic market of choice. As always, it takes careful research to determine whether a competitive market has entry points for smaller competitors.
5. Low Keyword Volume
Some industries are so specialized that even the most popular keywords have a volume too low to generate a meaningful number of click-throughs and conversions. Also, some businesses, products and service models are so new that nobody is yet searching for them. In such cases, unless the value of the sale is extremely high, the many costs of PPC — research, tracking, testing and ad budget (however small) — produce unfavorable ROI.
6. Better Options Available
Any Internet marketing campaign should be evaluated in context. PPC can indeed be a profitable form of marketing, but how profitable is it in relation to SEO, email marketing, social media, etc.? When companies invest in PPC with tunnel vision, they may be maximizing their least effective marketing option. If they invest in a little bit of everything, they may spread themselves too thin and maximize nothing. Think strategically, and track results carefully on PPC and all other Internet marketing activities to continuously fine-tune the marketing budget.
With over 25 years of experience in marketing, Brad Shorr is a skilled SEO copywriter, social media marketer, and content strategist. He is currently the Director of Content Strategy for Straight North, an online marketing company specializing in SEO and PPC.