How Do My Competitors Afford Their Ads?!?!

High priced ads + Low ROI = ...more ads?

[HyperGeek]

One of the industries I work with is fairly competitive with a very small demographic. Needless to say, this results in a small, but steady, amount of sales.

We the leading company that distributes "golden widgets" online, but our profits dictate that the golden widget sector does not make enough money to invest in Sponsored Ads on Google... or even AdWords (except on few occassions such as "Golden Widget Appreciation Month").

So why do we see our competitors - small, home grown, raw, garage-based businesses - advertising all of the time with AdWords and even as Sponsored Ads!

Don't sponsored ads have a $5000 minimum?

How about AdWord ads that never seem to dissappear from the top four positions on the sidebar?

We just don't understand how these guys find the resources to advertise like that... unless...

...unless, there's something being overlooked.

Anyone buy a Sponsored Ad? Any tips for AdWords that will give us more faith in the PPC model?

Thanks in advance.

[hannamyluv]

Well, just because he is at the top does not nessecarily mean that he is a sponsered ad. They are phasing those out and the adwords advertisers are being pushed up to those spots.

He may also be working through a third party who is able to meet that $5000 minimum and handles his ad for him.

As for advertising on adwords, there are many different factors. It could very well be that he is one of those not so keen advertisers who pay more attention to traffic than ROI. Maybe he really can't afford it and he just hasn't figured it out.

Or it could be that he has discovered something that you haven't. For example, originally we thought that our really low end stuff (under $10) would not be worth it to advertise on adwords. Not enough mark up. But then I tested a few ads with those products. What we found is that if people really needed the product, they would buy it and to offset the cost of the S/H, they would either shop around our site for other things to buy or they would buy 2, 3 or sometimes lots more of the same item. They bought enough on their order to make the ad worth it.

You may want to really re-evaluate the product and look closely. He could just be an idiot or he just might have found a real gem.

[steverose]

My particular widget is not a one time sale. If someone springs for it, there is an 80 percent chance that, with followup, she/he will buy the widget for a long time and perhaps even become a distributor of same. I do not find adwords inordinately expensive, even on words you would expect to be costly. I limit my efforts to single [keyword] with specific ad tied to the word. I bid enough so that they are initially in the top three and then may drop slightly to trim costs. I am now paying between .05 and 0.34 a click. The words are generally ones that log around 30K searches a month according to Overture's Search Term Suggestion Tool. Dunno of any of this is germane though. Depends on the widget mebbe. Cheers, S

[martinibuster]

It's true, though that some folks have both eyes on the traffic without correlating it to sales.

I've seen a number of competitors spend incredible amounts of money- And I encouraged them to spend more- and I have watched them burn out when somebody's boss got the bill at the end of the month.

does not make enough money to invest in Sponsored Ads on Google

It only takes a nickel.

[Tropical Island]

One of the things we have discovered is that the way your site is designed or the way you respond to e-mail inquiries has a lot to do with the success of AdWords and PPC in general. We compete with a number of small advertisers in our area all of us with the same (or close to same) service. Time after time our clients have told us that they chose us as a result of our informative web site and our timely response to their e-mails (in most cases in under two hours).

Anaylze your site to see if there are areas that could make purchasing easier - eg. have a look at your competitor's site. How long does it take to answer e-mails? Are you indentifying yourselves sufficently to instill confidence in the purchaser - we won't buy from a site that has no contact info or a fixed address.

[abcdef]

HyperGeek

We agree. Because of the nature of our product, we have to sell alot to make Google PPC a reasonable alternative for us, and the conversion from Adwords doesn't provide that type of formula (though it definitely should, and we are underwhelmed by conversion rate history with Adwords in our case).

We use Adwords for specials from time to time, where it fits in nicely with our well ranked free SERPs in Google, but as small company with a very low budget and that requires ROI in reasonable period of time, we could not think of running it consistently right now.

Maybe when we are larger and have the revenue base and therefore budget to spend on advertising, quick payback on campaigns won't be so vital and PPC will have a bigger place in the scheme of things, but until than it does fit in nicely with our well ranked SERPs from time to time, as mentioned. A nice supplement when we need to get special information out quickly and in front of eyes to see it.

[jimbeetle]

Basically in the same boat as you HyperGeek excpet that in our area it's the deep pocket folks spending big bucks for what I would at first think to be a negative return. I also assume that these big players have both eyes solidly on the bottom line.

I was gritching about this to one of the WW Adwords gurus at PubCon -- "How the heck can I afford to spend x dollars when my conversion rate is y and the average sale is z?" Faces and names are still a blur but he said that Adwords conversion rates *can* be much higher than folks surfing the SERPs. I'm sure this varies by category and am planning to throw a few bucks into a test, maybe in July.

Am hoping that the results aren't too horrible and as abcdef does, maybe use Adwords for specials from time to time, possibly on a seasonal basis.

Figure I can't really gritch too much until I test it.

Jim

[ariff44]

well, the best thing about ppc, is that you don't have to depend on the ever-changing mood of Google for your traffic...

[martinibuster]

I strongly advocate researching your negative terms before jumping in the ring with the deep pockets.

This is especially important with geo-targetted campaigns because the 1000 impression test can blow the air out of your tires and leave you stranded.

There's more I can say, but I'm going to hold 'em.

[steverose]

The 100K rule is daunting. These days, with 100 or so impressions that do not meet the needed rate, I zap. The combination of daily and bid limits, and the running record of impressions and clicks, seems to me a pretty failsafe system with more up than downside. Cheers, S

[hannamyluv]

We test to 400 clicks at a rather low set bid rate. I can calculate what our max bid possible (and still be profitable) is based on the clicks and sales and a few other factors with as little as 2 sales. After 2 or 3 sales, I set the bids to the calculated max bid and leave it there, adjusting as needed using the same formula to set the initial calculated bid. (yes, I do adjust to lower bids based on # of competitors and how high 1, 2 or 3 costs) Most of them end up in 1 - 3 spot b/c the ROI, but if I can't afford it, I won't put it up there. But having it on adwords, even at the lower spot is still worth it, b/c we are still profitable.

[tolachi]

I've been advertising on overture and google for 1.5 years now in market where I know exactly who most of my competitors are. My tentative hypothesis, since I have often wondered how they afford what they do, is that the top bidding spots see a lot of turnover. A company decides to jump into selling widgets and realizes after a few months they can't afford what they are bidding. So I really think that some of the more popular keywords in a market are often inflated beyond what the average ROI can support.