The true cost of adwords
Work - Aug 10, 2021
Advertisers pay a fee every time somebody clicks on a link in one of their ads. Some of the costs per click being paid are absolutely staggering. Though they must be worth it, from the advertiser’s perspective.
If you are anywhere near the online marketing department in your company, you inevitably must have noticed the continuous struggles related to paid keywords.
An analysis conducted by SEMrush reveals that in 2016 Adwords prices for the following sectors are most expensive: Internet and Telecom, Finance and Trade, Software, Insurances and Education. All tend to have a CPC ranging between 20 and 70 Euro, depending on the country and the saturation of competitors in the field. As close runner-ups, the keywords ‘Household’, ‘Company and Marketing’ and ‘Travel’ compete for the dubious honor title of ‘Most Expensive Keywords of 2016’.
When giving thought to the reason that these keywords are so expensive, we find several reasons. Those industries often have:
There is very serious competition in these fields. Most services are necessary and even compulsory purchases to a broad range of consumers.
Often searches to these keywords intend to make an immediate purchase. A search term such as “Compare Health Insurance” implies an active search to switch health insurances.
The lifetime consumer value of any customer for these types of services is relatively high. Let’s imagine a situation where a customer signs up for a mobile plan of 50 dollars a month. The customer stays loyal to the company for 8 years, and the average churn rate for the company is 90% (10% of new customers leave after one year). This means that the company cashes in (50 x 0.9) x 96 = 4320 dollars for a conversion (not taking product costs in account). While pricing and retention doesn’t always remain stable, the calculation gives an impression of the Consumer Lifetime Value for the mobile subscription.
Google is very well aware that conversions are everything for a company. A high cost is only a logical consequence when the highest bidder takes the prize when such high revenue is at stake.
As Google is by far the most important source for information for consumers to evaluate brands and products at a global market share of 73%, companies feel like this is their best (and only) shot to reach new customers online.
Let me point out two issues that suggest why staying on the ‘Adwords Wagon’ may not be of best interest for your company.
A click can be the result of many things. It boils down to that it doesn’t matter what interaction a consumer has made your website. Clicks can be made without any real purchase intent, and even an erroneous click will still cost you the main prize. However, you don’t know that, making it hard to rationalize if you’re dropping tens of dollars a click.
Another main issue is that the company with the biggest bag of money takes the conversion. Imagine you’re a startup company looking to enter the skin care product industry. However, L’Oreal has bought the keyword ‘moisturizer’ at 7 dollars a click. Most likely, you will not be able to compete with that price as a smaller company. You might as well not show up at all, given research shows click through rates to search result number 4 on Google’s first page gets as low as 8%. If you can’t afford to be the first, you’re last.
Lead Generation proposes a particularly interesting solution for companies that operate in this highly expensive and competitive keyword-category. Rather than requiring companies to pay for every click, we only ask companies to pay per qualified lead. Some benefits to consider:
There is no doubt someone is interested in your service or company if they actively opt-in to be contacted by you and are registered in your CRM system. Also, the leads that you pay for are your leads. If someone has no interest to purchase even after qualifying as a lead, you have full control over the contact methods to reach this person in case you have a new product or deal on offer. You may just contact them again (unless of course, they unsubscribe from your mailing list) – until they are converted.
As you’re not competing to fill a space in the top 3 search results but only need to ensure you can reach the person via email and telephone (given consumers are people, not algorithmic subjects), costs per lead depend on the structure and exclusivity of your online lead generation campaign. Be ensured that even for the most competitive of categories, you will by no means reach the high acquisition costs that Google is forcing you to submit to.
All leads you pay for are over 18, have agree to be contacted by you, have valid contact details and most importantly, correspond to the criteria and demographics that you set as a company. If you only want to purchase leads that are females between 35 and 50 who are living in urban areas and have a car, you can. You know who your best customer is, and Lead Generation helps you find them. Risk-free. Available to most B2C Companies, regardless of size and budget.
There are few to no B2C companies that cannot benefit from Lead Generation services. Whether you are looking for loads of email addresses that you can send your newsletter or special offers to, or you are looking to convert a specific demographic target market for a niche product, lead generation helps you to create a tailor-made, personal first touch and experience for the consumer.
Set up a test now to see how your ROI improves by looking for out-of-the-box methods that convert, at a fraction of the price.