The Declining Profitability of Adwords

Adwords, the search advertising program behind Google’s huge financial success, is now less effective for advertisers, as online markets become saturated with competitors.  Particularly in trades and online retail, there are a huge number of businesses competing, raising the cost per click (CPC) on adverts to unprofitable levels.

Larger businesses now also seem prepared to pay a very high customer acquisition cost (CAC), by taking into account the life time value (LTV) of the client, rather than the cost of the individual sale.  With this approach, many small operators are being forced out of the Adwords market.  Given the increasing cost of online advertising, what can be done?

1.  Make Adwords work for you

Investigate all advertising options:  Take a look at advertising on tablets and smart phones.  The competition here is not as great, however you need to ensure your website is mobile ready.

Measure conversions effectively:  This means actually measuring phone calls, enquiries and emails on your website. If a keyword is not converting for your business, it needs to be removed. 

Monitor your Adwords campaign regularly:  We recommend the daily monitoring of your Adwords campaign so that you can make adjustments to adverts, keywords and cost-per-click (how much you are willing to pay per click on the keyword) as needed.  Daily monitoring helps you optimise your campaign so that it remains effective and also helps ensure that you are able to maximise your given budget.

2.  Word of Mouth Marketing

As we all intuitively know, word of mouth is the most effective form of marketing.  Referral customers come at a much lower cost, and convert roughly 30% better than leads generated from other sources (Tony Nissen, R&G Technologies, 2013).  The Wharton School of Business found that a referred customer has a 16% higher life-time value.  Get your customers doing the work for you, and spreading the word about your product or service.  Take a look at our article here, on automating referrals for B2B businesses.  Word of Mouth can be turbo-charged online if used effectively through social media and incentive programs.

3.  Improve Your Website

Paying for traffic to your website is not much good if you don’t convince and convert the customer when they are at your website.  Creating a website that sells is a complex business, one that needs the help of an expert web developer.  You need to ensure that your message is delivered effectively, and there is a clear path to enquiry or purchase.  

4.  Market to your existing customers more effectively

Once you have your customer’s attention, ensure they come back for more.  Online, this is usually achieved through obtaining the client email address or through social media channels.  Incentise email sign-up on your website, with a free offer, discounts or regular offers and events.  For existing customers, ensure you collect their email address, and contact them on a regular basis.  Typically this can be achieved through an email marketing system or newsletter, and with updates on social media channels.

5.  Provide products, services, offers or experiences that are unique and interesting

As quoted by Jeff Bezo, CEO of, “Advertising is the price you pay for having an unremarkable product or service.”   This is now certainly ringing true for many providers of regular products and services.

Products that are remarkable, turbo-charge word of mouth.  If your products and services have given your customers an extraordinary experience, the more likely these customers will talk about how amazing you are.  You may then get new leads from referrals without the costs of advertising.

Final Words

Adwords is only one of many ways you can appear in Google in order to market your products and services.  While word of mouth is a free way to acquire new customers, there are ways to become visible in Google search results, such as setting up your Google profile, social media accounts and regularly creating new content for your website.  You may also choose to advertise your services through email marketing and social media. 

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