|Report: Newbies Inflating PPC Rates|
Hey there, that's not a NIN CD You're bidding on...
- I once sold a Nine Inch Nails CD on Ebay for over $200.
- I've sold several May 2001 issues of an $8 magazine for $20- even though it's still available from the publisher for $8.
- I've seen people pay $30 on eBay for books that are for sale at Amazon for $15.
According to a Wired Magazine news report [wired.com], PPC Newbies are invading Overture and AdWords and inflating the bids without regard to ROI.
This is an old complaint, I'm well aware. I haven't seen that much of an uptick in the smaller players, yeah the occasional local merchant from time to time- but they disappear within a couple weeks.
So who are these newbies? In my opinion, it's the big name corporate schmucks, used to spending tens of thousands on banner ad "branding" campaigns (euphimism for No ROI), are pouring huge amounts of money into their campaigns.
If you pull the mask off of these PPC Newbies, I think you will see that they are the big name corporates, muscling in with all the finesse of a zit-faced teen on eBay...
Not sure if this is a positive or a negative. One thing is certain, the game is evolving.
... as long as the market can bear it...
The game continues to change!
|So who are these newbies? In my opinion, it's the big name corporate schmucks, used to spending tens of thousands on banner ad "branding" campaigns (euphimism for No ROI), are pouring huge amounts of money into their campaigns. |
I'm skeptical about the "huge amounts of money" part of your argument, but I don't have any doubt that traditional advertisers are starting to bid on keywords. And why shouldn't they? There's no reason why a highly effective medium should be limited to mom-and-pop merchants or affiliate sites.
well i guess its a loss leader strategy. Products are sold at a loss for the brand awareness and recognition that the campaign gives the company as a whole and losses are amortised against further earnings from anticipated follow-on and future purchases, and things like the name on the database for future promotional mailings etc.
Nothing illegal about it, and very common. No reason why companies should not use PPC as an avenue for this as well as more traditional channels.
We have a client who is now willing to pay ppc money across the board and loose money.....but the conversion ratios on their google listings have increased noticably. They are being seen in more and more places and hence people are feeling more confident about booking with them.
|So who are these newbies? In my opinion, it's the big name corporate schmucks, used to spending tens of thousands on banner ad "branding" campaigns |
I have first hand experience here. A large retailer has bolstered their e-commerce presence, and taken to the PPC's. A term, that was relatively expensive, but still carried a good ROI, had been driven to a point of almost uselessness.
What is a small company to do here? We decided to fight. Our prices are comparable, and our service is personable. Over the course of the first two months, our sales in this particular line dipped slightly, while our costs rose. We stuck to it, and now our big corporate competitor has learned to control themselves. Our sales balanced back out and the spending went back to just above normal.
Was this experience common? Can the "big name corporate schmucks" learn to maintain ROI?
the difference between a lot of "online only" operators and "tradional media" is that the latter measures ROI in terms of "Life time value" of customer, rather than the 1 time purchase.
I have seen a # of advertising agencies pitching this model, and it seems to be working, as its still cheaper than things like Direct Mail or Radio Advertising.
Hate to say it but we are seeing it also.
Just remember that if you have a nice product the customer will come back and hence the value of a customer over a period of time is worth more than one sale. But please remember that once they have bought they should not be forgoten about.
One of our online clients is now aiming to direct mail presents to their best customers.
The influx of monied newbies means that people who actually *depend* on PPC for a living need to start managing their PPC investment as a portfolio, not at a granular per-keyword level.
I can't tell you the number of companies and SEM consulting firms who think they know how to bid keywords when in reality they know about as much as my 6-year-old boy. If you think that knowing the value of an individual keyword and bidding accordingly is a strategy, consider this:
In the traditional advertising world, there are scores of people inside F1000s and on Wall Street whose sole job is to manage eight, nine and ten-figure marketing budgets. They use sophisticated portfolio management and modeling tools that allow them to take portfolio goals and apply them to individual media buys; the net effect of this is that they can fit costly point spends into a broader portfolio and still make more money and a larger media spend than the smaller companies. The same thing will happen to the PPC space - large media buyers will come in and bid up the most valuable keywords by virtue of media portfolio management analysts and technologies.
So what's the little guy to do? IMO the smaller PPC buyers (<$100K/month) need to have the best web analytics deployments, track to the individual keyword level, and implement media portfolio management solutions - not per-keyword bid mgmt tools like GoToast, Did-It and BidRank - but real portfolio mgmt tools.
That's been happenning for a while though hasn't it? For example, the casino people have been bidding quite a high amount per click, knowing that if they acquire the customer, the payout will be a lot higher. Perhaps it's just catching on to other industries.
My problem isn't with the big companies with big budgets. Mine is with the NEW small mom and pop websites that keep popping up in my industry. They bid up the ppc prices, then after about a month, they realize it isn't worth it, and they drop out. But, by the time they drop out, another idiot is right there to jack the prices back up. It seems there is a never ending supply of them. ARRRGGGGHHHH.
I can see why it's a problem from the POV of folks who are using PPC to GET traffic.
As a publisher using adsense, this trend feels quite nice, at least for now. Adsense has overnight been a major new source of income and if Google keeps up the rates of revenue sharing, then I look forward to MORE traditional, corporate schmucks coming in with very high bids.
I believe that there will always be room for a smart operator to find a niche with adwords, but it will require even more work if the corporate guys catch on bigtime.
OTOH, if the Google ad reps become as good at helping their corporate clients with adwords as some SEOs are at managing a campaign, then it might get very hard indeed.
This will be an interesting space to watch for some time to come.
BTW, if your CTR is below a certain margin, does Google still kick out your account requiring that $5 renewal thing? That really drove me crazy! when I tried out adwords right when it came out.
|My problem isn't with the big companies with big budgets. Mine is with the NEW small mom and pop websites that keep popping up in my industry. They bid up the ppc prices, then after about a month, they realize it isn't worth it, and they drop out. But, by the time they drop out, another idiot is right there to jack the prices back up. It seems there is a never ending supply of them. ARRRGGGGHHHH. |
Hehe, yes that's what's going on in my industry as well. I've learned to ignore them. It's just the way it is. I can see them wasting their money a mile away and know they will be gone in a month. Funny thing is, yes, as you said, it seems the suply of new idiots never ends.
Is ther any portfolio software out there and where do you find it. I have been looking.
Yes, try looking at Everest Technologies:
IMO they're the only true portfolio management solution for the PPC world - the others are more of a keyword-by-keyword bid/position mgmt approach.
>So who are these newbies? In my opinion, it's the big name corporate schmucks, used to spending tens of thousands on banner ad "branding" campaigns (euphimism for No ROI), are pouring huge amounts of money into their campaigns.
In my cats it is exactly the opposite. The big name companies know exactly where the ROI is, and never bid above it. I watch 3 huge companies on Adwords and OV and they always stay in the $1.00 to $1.08 range, which is where I think they should make a small profit while buying some market share for the future.
However, the rookies often come in with rediculous bids, $30, $40, $50 is not uncommon....they can't make money at these prices and last 3 to 6 months....these are the folks that I believe are the newbies in question. Often I see a few of these newbies lose all control and bid each other upto that $50 mark...totally foolish of course!
Longterm it will all settle itself out and the big corporate players with patience will still be there to mop up.
|Longterm it will all settle itself out and the big corporate players with patience will still be there to mop up. |
Yup. There's a lot of truth in that, and I think the smaller but nimble niche players will always find a place.
I think its just that we maybe starting to see the PPC model maturing (or maybe segmenting) from a mix of a direct-marketing/back-of-the-bus/leafletting model to one that can offer brands value in terms of brand recognition, recall, and image, leading to sales in the future as well as right away, which is the purview of direct marketing. As such it raises the value of a "PPC" click overall.
But it may be more complex than that. I feel that Adwords may be aiming for the corporate advertiser/brander more these days though various procedures (like context matching via Adsense providing great opportunities for branding your products/services/company on respected niche professional sites), while other PPCs may continue to focus more on the direct marketer, with rates to match.
So it may not be much that these guys are schmucks (indeed they may be much smarter than you think!), but that direct marketers should be looking at further targeting and trying out other PPC and other format online advertising to keep a competitive advantage.