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.