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Friday, November 9, 2012

The Cost of Running A Google Adwords by Laymen

All too often  I come across small business owners who need help with their Adwords program.  Invariably they tried it, "but it did not work".  After examining their campaign (usually there is only one), creative or website, I can immediately see why.
Background
In a New York Times article, dated Thursday November 1, 2012, http://nyti.ms/RJpMp6 I came across an interesting article entitled, "Mistake in  a Pay-Per Campaign Leaves a Business Puzzled".  The small business owner retold a story how his business had a dramatic fall off in sales as a result of his Google Adwords advertising. In spring of 2011, the owner elected to introduce a new lower cost product to their business.  The owner kept track of basic metrics such as:

  • Web traffic
  • Sales
  • Inquiries coming in by day/week & month
  • How much each sales person contributes to sales total sales
After introducing the new product in Adwords,  there was acceptable traffic and inquiries. However, after a few months, "..there was a worrisome trend to sales-the monthly totals was falling.  ...January $193,154, February $213,677, March $135,732, April $146,677."  Secondly, the mix of inquiries changed.  More inquiries were coming in for the low cost product recently introduced several months earlier. Third, there was reduction in bread and butter large corporate clients.
What Happened
After examining Adwords data, the business owner discovered inquiries from the lower product were coming in the morning through mid day from schools and non-profits.  According to the owner, these business types do not have a lot of money.  Therefore, the inquiries were not generating much revenue.  "Bosses, who actually have decent budget, tend to call in the afternoon".  Examining Google CTR by hour for the more expensive product, the owner discovered the ad stopped running "...by about 2:00 PM". 

His daily budget was consumed before the "bread and butter" prospects would see his ads.  Since Google shows the ads receiving the most impressions and clicks, the inexpensive product was consuming most of the budget before the bread and butter prospects had an opportunity of seeing the ads.  "In other words, my budget was being wasted.  It was putting ads in front of people who were not as interested in our products and could not really afford them.  But Google's algorithm saw the total number of clicks generated as evidence of success..."
Solution
The owner discovered you can "fragment" each product into a separate campaign with its own budget.
Cost to Business Owner
  Let's examine how much it cost this business "doing it themselves".  
  • Jan-February-$20,523 Revenue Increase
  • Feb-March-$97,945 Revenue Decrease
  • March-April -$10,945 Revenue Increase
  • Total-$66,478 Revenue DECREASE (January-April)
Sadly, creating a separate campaign for each product is standard operating procedure for an experienced Adwords Agency.  One could also infer the extent of the loss if other owners were not as sophisticated as this one was in analyzing the problem.  Other owners might not  have and probably do not have the time or experience to delve into adwords metrics.  They would run the ads and either accept the sales fall off (unlikely) or discontinue Adwords (likely).

Let's assume an average $10,000 monthly budget (very high for a majority of small business owners).  If the agency fee is 10% to 15% of the monthly ad spend, the agency would receive $1,000 to 1,500 monthly.  The normal reaction many business owners have is this is "adding to their cost".  But is it?  When you consider how much this business owner lost in actual revenue the answer is NO.  It is a huge savings.  This doesn't take into account other cost savings an agency provides in such areas as:
  • Landing page optimization
  • Keyword Analysis
  • Budget Optimization
  • Creative Testing (A/B or Multi-Variate)
Do I think many will hire an agency after business owners read this article?  Maybe some, but most will do it themselves.

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