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We removed duplication last Summer, but although it resulted in some of the pages coming back, the loss of the extra pages meant we disappeared on other search engines for many terms and overall we had far fewer visitors. Instead of being a low ranking filler site for many on-topic phrases, we got a few useful search phrases on Google and lost many others on Yahoo/MSN.
Adwords in our area is 10x over the break even point for us, with major companies bidding up the prices far beyond break even point as a long term promotion. I estimate they need to make $70 from each sale on those general keywords, and are viewing it as a long term investment in a customer. We cannot do that.
The direct ad buys were more cost effective, but don't generate enough traffic volume.
We ran adsense on many of the landing pages, when we got banned the adsense CPM drops to almost nothing, as the CPC rate was dropped also.
Shipping Costs us 40% more than 2 Years Ago as the oil price hike bit.
Tax per employee is 25% up on 2 years ago, the fix minimum employment insurance outstripped the profit last year.
We fired all but 1 employee last year to reduce costs and took up the slack ourselves.
None of the other projects we did online last year made money. Two hit their visitor targets, but were smart priced. I read Flickr was running at a loss when Yahoo bought it, and was not suprised.
I was hoping this year, Big Daddy would fix the supplemental problems and Google would choose a better way than a duplicate filter to fix whatever problem they were trying to fix. That Yahoo and other advertising networks and search engnes would be competitive with Google driving down Google's margins on buying and selling adverts.
None of these happened. We're still stuck with Google and the numbers still don't add up.
So what will change with this situation in 2006? In a years time does everyone expect Google will have the same search market share, that the cost of Adwords will have increased, that the online world will be the same?
I notice that we are the last of our product class, we are the last to consider shutting up shop.
As you have already discovered, Google is an unpredictable beast. In its ever-increasing battle against spam a few innocent victims are bound to be taken along the way. The only sustainable long term plan is to produce a business that can break even without traffic from Google's organic results and think of it as a bonus when they bring in extra income.
It seems you are already looking at off-line promotion. This will work for some businesses and is cheaper in relation to on-line advertising than it was a few years ago (due to rising Adwords costs etc...). You may also want to look at Brett's recent thread about targeting "long tail" key phrases and using it to revise your pay-per click strategy.
My main website was out of the organic Google index from August until March (after a 301 redirect) and it really forced me to think about life without Google. I survived, but only by learning how to send out press releases, completely revising my Adwords stategy to include hundreds of extra "long tail" key phrases, and increasing my ad spend in trade magazines.