Entrepreneur
Article
By Andrew Neitlich

Why Google Adwords and Yahoo! Overture are overrated

By Andrew Neitlich

As Google’s stock price continues to come back to earth (sort of), and the company acknowledges some weakness in revenues, it is a good time to remind Web developers and designers that Google’s AdWords program is a bit overrated. It is important for you to help your clients understand that CPC is not a panacea or silver bullet, but only one part of a marketing campaign.

Here are the problems with CPC advertising (and my major assumption is that you are a savvy businessperson who measures the cost per order and compares it to your unit margin, so you know which marketing tactics are profitable and which are not):

1. For general but very popular search terms, you end up paying so much money that it is hard to break even on your marketing. If you reduce your top bid amount, you may find your key words inactive or rarely show up on Google-sponsored sites.

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2. For highly specific search terms, you may find some bargains (or not; some specialized terms command $5 per click minimums). Even so, the clickthrough numbers end up being low and you don’t attract many people to your site.

3. In bidding situations, many people are willing to suffer the “winner’s curse.” That is, they bid a high CPC rate to get visible, but end up losing money in the long run. More savvy marketers will not fall for the winner’s curse. While this should drive prices down in the long run, there may be enough demand out there to keep the winner’s curse alive. Regardless, for savvy marketers, it again becomes difficult to use Google to drive signficant and profitable volume.

What does this mean for you and your clients?

1. Never forget about good old fashioned educational marketing: speak, write, do research/surveys, send out a newsletter, and issue press releases to set you up as the expert in your field.

2. There are plenty of low-cost and high-impact ways to get visible: referrals, membership and leadership in your market/community, and building strong relationships with current customers.

3. Continue to test other direct marketing vehicles like postcards and letters. Also test advertising that drives people to your website.

Personally, I can’t believe Google’s stock price has reached into the $300 range. I think as more and more people learn about AdWords and test it out, you will see a continued pull back as they find that it is a fine service but not a panacea.

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