Why AdWords a waste of money for most businesses

I was thinking to write on this topic for some time as I work in many areas of digital marketing such as SEO, PPC, etc as consultant and over the years find most businesses losing money on Google AdWords advertising campaign and thought to share it.

Google adwords

Google adwords

Despite the fact that many business even in today’s time running with the help of PPC and some solely running because of PPC still I can say one thing with conviction that most Google PPC campaign/account runs on losses.

Google AdWords advertising would be a waste of money for many businesses (both small and big business) unless it is extremely carefully managed. 

Even several PPC experts use SEO and other digital marketing methods to increase their visibility instead of solely relying on PPC.

Below is just one article for beginners in the area of PPC, which shows how easy it is to lose money on Google AdWords with the default settings. 
http://www.london-school.org.uk/google-adwords-biggest-mistake-lose-money-167/

Although there are some points in favor of PPC such as with Google AdWords you can start attracting customers almost instantly and with SEO it can take a while, however the cost of acquisition with PPC has risen astronomically high in the last few years which will make all those business unviable if they solely depend on AdWords.

(1)For example let’s say somebody wants to launch e-commerce business or book selling business, etc. Let’s say they are selling at average price range of £20 with 10% profit margins which is £2 per average sale.

Now general cost per click in Google AdWords nowadays for most clicks easily go above £1 or £2 and for some even above £100 per click and it is not that customer will simply click and buy the product as nowadays customers have options and they prefer to compare and search several website before buying which means at an average even assuming very high conversion rate say 10% your cost of acquisition per customer could be easily around £10 to £20 and your profit margin hardly around £2 on that sale.

Another situation where your landing page is not highly optimized where your conversion rate is say around 1% (actually most businesses I audited have conversion rate less than 1%) than your cost of acquisition will be around £100 to £200 and your profit per sale only around £2 so how AdWords advertising will be profitable?

(2) Now there are industries or businesses where average sale price could be higher say for example £1000 to £10000 (Ex with 10% profit margins, profit say £100 to £1000 per sale) or may be even more however again there cost of click is very high and could easily be more than even £100 per click, so same situation again.

Now some of the readers will immediately start calculating the LTV (Life Time value) of customers but that concept is also fading away because of the increased competition and innovations.

Not only that, the cost of Google CPC acquisition is going up every year anywhere from 10 to 20% which can easily make any business unviable if solely dependent on PPC.

Below are just some of the steps which shows that you need absolute precision before you run your Google PPC campaign or else you are bound to lose money.

(1) Absolute clarity who are your customers/audience and lack of which means wrong keywords choice and hence irrelevancy and whole ad campaign is wasted.
(2) Precise keyword research based on your audience and volume.
(3) Avoid Google default setting of Broad Match and instead start with EXACT Match option.

(4) Either Landing Page relevancy or it will leads to low CTR -> which will lead to Low Quality Score -> which means high cost.
(5) Precision in making each Ad.

PPC boring ads

PPC boring ads

Now take a minute and think which of the Google PPC ad did you find compelling in the screenshot? 

Actually none of the ad in the screenshot has a compelling headline and missing the fundamentals of designing PPC ad.

The point I want to highlight is that each ad should be compelling or otherwise it will lead to low CTR which will leads to low Quality Score which means high cost per click again and losses for the businesses.

(6) Precise grouping of relevant keyword in an Ad groups (again avoid Google suggestion of adding 25 keywords in ad group for more impression). Precise relevancy or you lose money. 

Adword suggestion to add 25 keywords in one ad group

Adword suggestion to add 25 keywords in one ad group

(7) Don’t Use Google DKI option or very high possibility of losing money.

and so on …

Think for a moment how many entrepreneurs have precise knowledge on all above aspects of PPC or have time for that ( Note : Above 7 points are just few points out of many areas of PPC where precision is needed).

 

If above is not enough let me share with another startling fact.

Some PPC campaign I audited, they were managed by the renowned PPC agencies based in London and they all have done the similar mistakes such as highlighted in above examples!

The reason for agencies making mistakes is obvious because in agencies each account executive is managing 5 to 10 campaigns and account manager easily up to 50 to 100 campaign so how will they do justice with the client business? 
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