Are Small Businesses Abandoning AdWords? A Reality Check

2012 Year of the Small BusinessAre US small businesses (SMBs) abandoning Google AdWords in droves because of rising CPC prices? That’s the implication of a recent story in the New York Times:

[Concern over the rising cost of keywords] has become increasingly common as online advertising has become a standard channel for large companies. Attracting those additional advertisers has been great for Google, which reported a 42 percent increase in paid clicks, year over year, for the second quarter of 2012. But the heightened competition has driven up the prices for keywords and made it harder for small companies like Mr. Telford’s.

While rising keyword prices is a legitimate concern for many paid-search marketers, the article holds out Blue Creek Cabins, operated by Tom Telford, (cited in the passage above) as a typical SMB. In fact, Mr. Telford isn’t typical. In addition to Blue Creek Cabins, Telford runs a marketing company called 98togo that makes money by helping marketers get SEO and social media traffic. In other words, Mr. Telford has an interest in convincing business owners to shift their budgets from paid-search to other channels.

Telford tells us, by the way, that his cabin rental operation is still by far his biggest business, that his marketing business grew out of what he learned doing marketing for himself. Nor is Telford the only interview in the article. There are other marketers quoted who also complain about the rising costs of paid-search marketing. And, yes, it is a much more competitive market than it was a few years ago.

But the reality of what’s going on in the market (especially among SMBs) is more complex than the article suggests. For example, in last week’s quarterly earnings report Google said that CPC prices were down 15 percent over last year.

One could have written an article that picked out SMBs who were moving budgets from, say, traditional media into search and were quite satisfied. Google can point to many case studies involving SMBs who are very happy with paid search. I was referred to a couple of examples in fact.

However it’s not like paid-search has been a mainstream marketing vehicle for SMBs for years and now it’s getting too expensive. Historically AdWords has been too complex for most traditional SMBs. Many have also been ambivalent about advertising on Google (and online advertising generally). Yet nearly all of them are interested in Google as a marketing channel; most are just much more interested SEO. Social media has also been the focus of considerable recent SMB attention and interest.

As a general matter, the small business market is incredibly diverse and generalizations or characterizations are elusive. What we can say is that the majority of SMBs have few if any employees. The bulk of the market is concentrated in the fewer-than-four-headcount end of the spectrum. Most SMBs are “time starved.” And the SMBs that spend meaningful money on digital marketing or advertising tend to have more employees and revenues.  These (and e-commerce companies) are the advertisers that built AdWords — long before the brands and big agencies showed up.

Google won’t share detailed numbers. But the company said recently that Google AdWords has “well over one million advertisers.” It also claims the majority are small business owners. That could just as easily mean the local plumber or massage therapist or an IT security company with 99 employees.

For the better part of the past decade Google has been trying to push deeper into the traditional service-business segment, which is huge but fragmented and hard to reach. It has done so through small agencies and reseller partners and more recently with AdWords Express, which offers radical simplification of AdWords. As you know it’s basically a do-it-for-me program. It takes the mystery and complexity out of paid-search marketing for time-starved business owners.

SEOs and PPC experts have given AdWords Express mixed reviews. It’s simple but more blunt than a self-managed campaign. Google hasn’t shared any success metrics, although it continues to tweak, improve and enhance AdWords Express, most recently with call tracking (which Google calls “Call Reporting”). Google has also invested in building a service organization to respond to SMB-oriented AdWords support calls.

Search (in the form of organic rankings) will always be of interest to small business owners. And, along with a range of other channels, paid search will continue to be utilized by the more sophisticated SMBs who generally can afford to use an agency to manage campaigns.

I think a more accurate picture of what’s happening in the market is that some veteran paid-search marketers (that may technically qualify as SMBs) are diversifying their ad spends into new areas, in part because of cost but also because the market is evolving and their are new channels such as social and mobile.

And even though costs may be rising in some categories and for many keywords, it’s still pretty hard to beat the ROI of paid search.

Related Topics: Channel: SEM | Features: Analysis | Google: AdWords | Top News

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About The Author: is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling.

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  • http://twitter.com/HyperTexted Kevin Gerding

    I think many small businesses did not have proper conversion tracking solutions, and their recent loss in organic ranks left them with a simplified metric to gauge the effectiveness and cost of their paid search listings. With extremely thin margins to begin with, many small businesses in the retail sector find they are now competing with their suppliers for retail sales and are also abandoning Adwords. As the economy continues to flutter along, I think we will see many changes in retail and their desire to pay for traffic that results in a net loss at the end of the day.

  • azchipka

    Isn’t it pretty much well known at this point that the average user of google completely ignores everything that is showing up in the ads section anyways!

  • Justin Sous

    Great post, Greg. It’s definitely a growing challenge to keep PPC costs down for small businesses, especially in the high-tech metro areas.

    Question for you, have you come across any type of visual aid that represents the GROWTH of cpc on desktops? That 15% decrease Google is stating incorporates mobile.

  • http://www.buzzmaven.com/ Scott Clark

    Adwords Express only recovers a percentage of the opportunity costs of a poorly set up Adwords campaign. I see small businesses running campaigns on broad match, with search and display in the same campaigns, no negative phrases and no measurement. Just cleaning up a few basic things transforms the effect of these campaigns and only requires a small engagement with a qualified adwords consultant.

  • http://www.facebook.com/fionn.downhill Fionn Downhill

    Also, the drop in revenue for small business from hits from Penguin, Panda, polar bears or whatever will no doubt have impacted the SMBs ability to participate in paid ads.

  • http://www.radicalmustache.com/ Mikel Zaremba

    Maybe I’m an exception or maybe the geography is but I have huge success for smb’s on AdWords. I think most businesses run into the problem that they want ALL the keywords instead of focusing on words and terms that will bring them foot traffic.

    I spend about $60 a month and generate close to 1200 clicks with an average CTR of 3.5% on most of my campaigns. That is more than fair in my book.

  • http://twitter.com/sporkmarketing Jason Lancaster

    Absolutely agree. Yet Google seems hesitant to make this recommendation, as that would detract from the notion that AdWords is easy…I would call this sacrificing long term revenue for short term gain.

    If this was an SEO campaign we were talking about, I would call it “spammy,” LOL.

  • http://twitter.com/Pkrim Philip Krim

    A tool to help SMB’s optimize directory listings: http://www.VocalizeLocal.com

  • William Bakhos

    Exactly Scott… when a small business follows Google’s default setup
    they throw in a bunch of broad unmodified keywords, 1 ad, put in billing
    details and hit go. A great way to spend your money really really fast.

    I think Google should look at a Wizard of some sort for small businesses
    just explaining match types, settings and possibly some
    tracking/conversion tips.

  • Yousee

    Most of the SMBs stopped opting Adword due to the increase in CPC this is why Google came up with the solution like Panda, Penguin and EMD hitting all the SMB(s) hard………very hard compelling the business owner to choose Adword…

  • Yousee

    If you can share the information as how do u manage to get such cheap clicks

  • http://www.smartseobacklinks.com/ SmartSEOBacklinks

    Adwords is just too expensive. If you don’t have a Google Adwords Expert monitoring your spend every day, the costs run up. Its like going into a shop and asking the shop owner to choose you out a pair of shoes for you, then charge whatever he likes. Optimised Ad networks are catching up, but their conversion rates are substantially lower than Adwords.

  • http://www.facebook.com/profile.php?id=628155046 Chad A. Buie

    I certainly agree, you need to know your customer’s well. Small business owners that are new, need to become more visible outside the Internet and learn the trends of their industry. I had similar success with CCTV industry keyword “bullet camera” for a campaign I did in the past. Out of all the keywords that you could compete on for SEM and PPC, this was a pivital point for our marketing strategy because we know the buying process very well. Testing, traveling, tradeshows, and experience is going to be all the difference. I have said time and time again, shooting a targets on a range can add up; especially if you have a weapon like a AA-12 or Desert Eagle.

  • http://www.facebook.com/profile.php?id=883535625 Julie Wallace Brooks

    Amen brother. Peformance is increasingly all that SMB’s will pay for.

  • cjvannette

    Um, should they pay for a lack of performance?

  • cjvannette

    Why all the downvotes? Haters gonna hate.

  • cjvannette

    Yes, which is why AdWords has gone belly-up.

  • robthespy

    Conversion tracking and attribution. Get it in place and figure out your ROI before saying Adwords does or does not work.

    I’d bet fewer than 10% of “SMB’s” know the ROI of their campaigns.

    If it was real easy for inexperienced marketers to track ROI, Google would risk losing tons of advertisers…many before their campaigns have enough data to draw conclusions.

  • http://www.radicalmustache.com/ Mikel Zaremba

    Here is what I did. Exact Match business name and location, the business name is rather long so I had 7 variations. Phrase match business name, location, plus their main services and I did a broad match of their two main services. I wrote 3 ads for this campaign. I then target these ads to run 5-7 miles around the business. I continue to tweak and modify this campaign but I find the biggest impact has been limiting my ads during “down” times which are weekends and 10p-5a during the week.

    I add negatives that my broad match tend to trigger that are way out side of my product and services.

    And I stand corrected I was thinking of the month before that I spent the $60. That resulted in 570 clicks. I spent $150 and got over 1200 clicks. Still extremely fair in my book. If you can’t spend $150 a month to get results like this than as a small business you shouldn’t be do PPC.

    Here are my stats:
    1,287 Clicks,
    19,943 Impressions,
    6.45% CTR,
    $0.12 Per Click,
    $150.46 Spent.

  • http://www.radicalmustache.com/ Mikel Zaremba

    I replied above ^

  • Pat Grady

    To me, most often, It’s more like hiring a personal shopper and paying them a percentage of what they spend. And a lot of the personal shoppers aren’t given clear preferences and they often lack shopping experience. Either shop for yourself, or pay your personal shopper based on how happy you are with the results, that’ll get their attention focused on your needs.

  • Pat Grady

    Can you break out the CPC trends separately, for mobile and not?

  • http://www.smartseobacklinks.com/ SmartSEOBacklinks

    Hi both,

    Have either of you tried Wordwatch?

  • http://twitter.com/MaryKayLofurno Mary Kay Lofurno

    I have not used Adwords Express so I cannot comment. I will say that from what I know about small business and how they do their marketing, even adwords express probably takes more time than they have to effectively manage it with all the other demands.

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