Advertisers Cutting Google AdWords Spending With Surge of Keyword Prices

Most Google AdWords advertisers have been facing the problem of rising pay per click prices. But while in the past many advertisers have gone with the increased prices as the cost of doing business on AdWords, recently more advertisers have decided to significantly cut their AdWords spending because many of the keyword prices have resulted in advertisers being priced out of profitability.

Marketwatch recently spoke with six advertisers who all spent between $4 million and $10 million in 2006 who plan to spend less in 2007.

Shmuel Gniwisch of Ice.com saw his ads only convert once per every 300 visitors who clicked on the jewelry website during November and December, with an ad spend of $750,000 over those two months. And not surprisingly, he too plans to cut his ad spend significantly.

So just how much has the cost of doing business on AdWords gone up in the past year? Dan Sackrowitz of Bare Necessities says his keyword prices have gone up 40-60% in 2006, with his overall Google AdWords budget rocketing up 50%. Jack Keifer from BabyAge.com saw his search ad spend double. However, he has worked more on converting those clicks into sales so he plans on spending a comparible amount this year on AdWords.

You can read the full article here.

There is definitely a trend that seasoned advertisers have noticed where new advertisers jump in with huge ad budgets or huge spends per click, which greatly impacts the amount an advertisers needs to spend in order to compete and get one of the top placements for the search term. And simply the fact that there are significantly higher numbers of advertisers bidding on keywords which drives the prices up for all advertisers.

Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.

Related Topics: Channel: SEM | Google: AdWords

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  • http://www.traffick.com AndrewGoodman

    Hmm… seems pretty anecdotal…

    Prices have definitely risen in some verticals, especially retail.

    But in 2007, the aggregate numbers once again’ll tell the story.

    If “advertisers” (across the board) are cutting their spend, eventually that will have to be reflected in GOOG’s quarterly financials.

    Time’ll tell. In the end, it’s so granular that it’s hard to go by a couple of verticals.

    And then there are those crazy spends on things like $50 million stadium naming rights, as Godin pointed out in a recent post (Prudential). Take half of that wasted budget and apply it to search, and suddenly $10/click doesn’t seem out of line, given the at least measurable payback as compared with the glitz spends.

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