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From Josh’s Desk: The Dark Side of Pay Per Click (PPC)

I was recently at a networking event and was approached with questions about Pay Per Click advertising (PPC) or Search Engine Marketing (SEM). When I was finished explaining my opinions, I was approached by a software developer who had overheard the conversation. He told me he had never heard someone who did search engine optimization (SEO) tell the truth about PPC. So I thought I would share my thoughts:

Each piece of advertising has an appropriate use and fit based on the size of the company and the demographics they’re targeting. The biggest mistake that companies make is purchasing PPC ad campaigns with ad spends of less than $2000/month (or more for more competitive industries). The majority of them just don’t work because of the budget. For this example, I will use a company spending $1000/month.

Within the industry, the administration fee for managing PPC campaigns runs between 40%-50% on average and may decrease with higher ad spends. So spending $1000/month leaves only $500-$600 of the budget to purchase search terms. In order to stretch those dollars throughout the month, the managing company will usually purchase less desirable keywords at lower costs to show results and justify the client’s continued expenditure. If they don’t do this, then that $500-$600 will be used up in clicks on higher cost keywords usually within the first 7-10 days of the campaign and no other ads will appear for the remaining two thirds of the month.

Another dishonest strategy often employed is using the company’s own name as a search term to show better click through rates (CTR) or even to show that a customer converted to a sale. The problem I have with this strategy is that the potential customer was looking for your company anyway and would have converted. This is another way management companies justify continued ad spends.

I have had many discussions over the years with guys who sell these services and it’s well known that at lower price points PPC is a poor strategy. But, they sell it anyway for the commission whether or not the purchase is beneficial for the client.

Beyond the “dark side” of purchasing lower priced PPC campaigns discussed above, the world and the US in particular are changing the way they respond to Pay Per Click advertising. Current estimates show that up to 40%-50% of US users employ some type of “Ad Blocker” which blocks the display of these and other types of advertisements both on desktops and mobile devices. **It should be noted that Pay Per Impression (PPI) campaigns still count the impression even if your ad is blocked. In addition, ever increasing data shows that many US users are more likely to ignore online ads, click them accidentally, find them intolerable, or find them untrustworthy. With an average click through rate of 2% on most good performing campaigns, more and more obstacles to good PPC performance are ever mounting.

Other issues starting to make impacts include privacy protection initiatives that strongly suggest or require anonymization of customer data or the prevention of tracking customer data all together. PPC at its core is based on customer searches in certain geographic locations. Without being able to track by specific locations, these campaigns can suffer greatly in accuracy. My own testing leads me to believe that cellular phone companies are already anonymizing client tracking information while using cellular data (as apposed to wifi) which can further impact effective ad placements.

With all this being said, there is still a place for PPC, but as a general statement, it is for companies who have bigger budgets or special circumstances. Small to mid-sized business (SMB’s) with smaller budgets should look for good organic placements either in place of or in conjunction with PPC through a trusted provider.

Just a reminder: If a salesman tells you that they have an effective PPC campaign for you below $2000/month, please do your homework. As always I implore you to do your own research. The web is full of articles and recommendations. Some of the numbers may vary but the story is still the same.

Thanks for reading.