Profits Murdered By Google Adwords
July 19th, 2006 by Michael Gray in Advertising, Business Issues, Case Study, Google, SEMIf you're new here, you may want to subscribe to my RSS feed. Read my top posts or learn more about Michael Gray. Want more frequent updates follow me on Twitter. Thanks for visiting!
There’s been quite a bit of noise in the SEM space about some of the recent changes made by the Google Adwords Quality Score. I thought it might be interesting to take a more in depth look at some of my site statistics.
The following data is from one domain that was running three different adwords campaigns. The domain has existed since late 2003, and has been running adwords since early 2004. About 90% of this site’s traffic came from the adwords program. Here is a shot of the traffic for July 2006. The black bar is July 11th the date of the quality score change, the red line is July 15th when I pulled the plug on the campaigns.
The graph shows that trying to stay within my budget I was getting less clicks and less traffic (duh!). When I changed my landing page there was minimal increase in average time on site and number of pages viewed. My original landing page had a zen-like brevity to it,consisting of the following elements a top graphical banner, a product description, a product image, and a “buy button”. The page was an island with no way in or out to other parts of the site. After speaking with some Adwords reps on the phone it was suggested I “improve the user experience” some suggestions were add alternative navigation, add more information and customer testimonials. So I took the main website template and set the landing page inside of it. I lengthened the product description, and added some reviews. After calling and requesting a re-review nothing changed. I called again and was given little or no help. Here’s a look at average CPC and profit for the same time period The blue line represents the division between profit and loss:
So what happened? Well I increased my bid, my thinking was with less competition I might get more conversions and afford to be able to pay more (Although tripling the price overnight is clearly excessive). In an effort to regain my lower price I made some changes to increase the “user experience” the customers now started meandering all over the site without purpose, they lost the plot. To make an analogy I paid triple price for my farm animals and threw open the fence and let them wander off into the sunset. Gee thanks Google, I have to say improving the user experience pretty much sucked!
I have yet to hear of anyone who requested a re-review have their prices lowered and adjusted down. So stop hoping for a miracle and stop the hemorrhaging. Move on and try something different, you may learn something if you don’t think like an engineer …
Sphere It
July 19th, 2006 at 2:38 pm
Wow! That’s messed up.
It looks like they’ve over compensated and tightened the belt too much. I remember when the Florida update happened, Lots of great websites disappeared but then came back in about a month after they were able to create a better equilibrium. Hopefully they realise this isn’t working properly and are still working on it.
July 19th, 2006 at 3:02 pm
I share your frustration with Google’s AdWords Quality Score fiasco. I’ve had several campaigns in very niche sectors with virtually no competitors which allowed me to capture traffic for less than $.05 a click. These were getting good click through rates (20% at times). Suddenly Google decides to turn several keyword phrases off unless I “increase quality” or the minimum bid amount! My landing pages were *not* to arbitrage sites, but to strictly on-topic, individual product pages hosted *within* the framework/design of a well-designed eCommerce site. Yet Google just decides to randomly pull the plug —- unless of course I increase my bids. It’s total BS. Frankly I’m sick Google’s “wizard behind the curtain” modus operandi.
I am agressively pursuing alternatives to AdWords (listen up Google: there are many, even outside PPC). They may require more legwork, but at least I’m afforded some transparency and direct control over my marketing efforts.
July 19th, 2006 at 4:18 pm
Holy smokes, you guys work too hard!
July 19th, 2006 at 11:52 pm
Graywolf…I’m glad to see you spelling this out. I run a business which I’ll keep anonymous for now but we deal with marketing. One thing we stress is, go for large numbers at low prices rather than large prices & low numbers. Google is good at taking the advertiser dollar, then telling the publisher the click didn’t meet their qualification so it is not paid. All the sudden, it’s 100% profit to Google. With as many small to medium sized advertisers and publishers, the small amounts to you and I will not make that much noise, other than little blog posts and what not, but it turns into millions upon millions of revenue to them.
I guess my point I feel I’m rambling on here is, the quality score is merely a way to increase the google bank account. People need to step back and realize that this company is just like a slot machine… “It’s extremely inviting to sit down and take it for a spin, and although you may get a few small returns here and there to keep you coming back, in the end you’re just throwing your money away.”
Put your money into the pioneer’s of this market… Overture. I’ve witnessed too many times our clients turning off adwords and seeing their roi only increase. On the other side of the coin, turning off overture dropped sales quite noticeably.
Good luck with whatever direction you go! Just keep exposing them as you go.
July 20th, 2006 at 12:15 am
What do you think are the factors they are looking for? Could you come in with a fresh campaign and add a page that has links and navigation and gain a better price?
I just did a test campaign and found them quickly asking me to raise my bid on keywords that did not even have that many ads and the other ads are not necesarily that relevant (ie, like ebay ads).
It seems rather silly to judge user experience based upon algorithmic analysis — what about flash movies or other methods of conversion? To me if the advertiser can afford to pay then enough users must find it of value. If the advertisers aren’t serving the users enough they would not make a profit and would have to drop out.
Anyone have ideas on how to get out of their system?
July 20th, 2006 at 11:25 am
Call me crazy, but I think that Google is using this as a way to force people to use the Google CPA network that they are working on. Think about it: everybody is using affiliate networks and CPA networks to use cheap Google clicks and convert them into $10-30 CPA sales.
So if for example someone’s clicks using CPA affiliates are paying out $1.25 per click while only costing 5-10 cents per click, that is $1.20 per click that Google is leaving on the table. Google might be making billions of dollars per year in AdWords, they are obviously leaving billions of dollars to affiliate marketers.
I think Google is going after the affiliate/CPA space and it’s going to make PPC a lot more expensive for people who do affiliate marketing.
July 20th, 2006 at 2:32 pm
Great post, thanks for sharing the data.
July 22nd, 2006 at 11:17 pm
Question…
where does that buy button go?
Are you selling a product?
Or is it an affiliate link to another site that sells the product?
July 23rd, 2006 at 3:45 pm
It’s an affiliate product. The button redirects through a tracking page and then goes to the merchant.
July 26th, 2006 at 4:26 pm
Michael,
Dude, I’m getting beat up left and right with Google adwords lately. I’m glad I still have a day job because my profits have tanked beyond belief.
August 11th, 2006 at 9:20 am
I see it’s now Aug 11th and Google still has most of our old (great) keywords priced between $1.00 and $5.00 per click. Up from .05 - I suppose Google’s profits will look great this quarter as people (such as the author) increase their bids as an experiment. However, I expect the following quarter to tank as those experimenters pull their campaigns. Has anyone noticed Marchex playing Google Arbitrage? They get you to their site, show you some adsense ads, then ask you to sign up to “their network”.
August 25th, 2006 at 6:00 am
Adwords have become nuts. I have paused all of my ads. Too high CPC. Overture is better.
November 10th, 2006 at 9:54 pm
The same thing happened to me, from one day to another the cost for most of my words went to the sky, I have been thinking that google believes that if you manage adsense in your page, even if isn’t the landing page, then your are trying to take advantage, in most of the cases I think thats wrong, most of us didn’t know that until the cost is to high, great post.
December 15th, 2006 at 12:42 am
The funniest thing of all is that those mom and pop businesses have high chances of getting nuked, too, because they don’t have keyword-focused ads and landing pages (if they use adwords at all).
Man, I thought Google would not play dumb that fast (or often).
February 2nd, 2007 at 8:47 pm
Hey Michael,
Sorry for commenting on an old post, but I was wondering if you had any update to this. I have only recently started using adwords and am having a lot of trouble with QS increasing my CPC. Did you do anything to get your QS back up without loosing focus on your sales process/funnel?
March 26th, 2007 at 1:55 pm
I’ve been using for a few years and at the beginning really liked the Adwords. But now they jump the prices like crazy. I placed an ad a few months ago. Went in and the search words were inactive. One the price had trippled and the other went up 6 times. I always liked Google but there greed now places them right there with M$. On second thought I think they have exceeded M$.
May 4th, 2007 at 11:49 pm
Wow, that is crazy! Talk about a wallet drainer!I used to get pummeled by Google as well. Not anymore now that I have a managed account, but I still cringe when I read stuff like this.
Good Luck
May 19th, 2007 at 8:32 pm
I thought it was the coolest thing, I’d never used adwords before. I set it all up a few hours ago, the click price was between $.05 and $.20 which I thought was reasonable. Then I went back a few hours later and all my keywords were inactive and said I needed a minimum bid of $10 a click!!!!!!!!!!
October 10th, 2007 at 2:08 pm
There is another problem that you must search about… how can a campaign of mine to has 1500 clicks that i have to pay for… and in Statistics show only 250 visitors from adwords… not unique, in total!!!! crazy… i think that they depend in a “hole”, that we cannot check them… they have the pie and the knife
we gave them the power to be as they are…
December 9th, 2007 at 3:10 pm
thank god for email marketing