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Is Pay Per Click advertising actually worthwhile?

Internet Psychologist Graham Jones weighs up the pros and cons versus the costs and the results and comes to the conclusion that…

Paying for clicks is so commonplace online it might appear that it is an essential element of online marketing. Indeed, every time you search for something – which you probably do dozens of times a day – you are faced with a seemingly endless list of businesses all willing to pay Google for you to click on their advertisement. And when you land on many web pages they are often full of text-based links which are actually pay per click advertisements. We are in a constant virtual soup of adverts.

This all came into focus for a client this week who was annoyed by the fact that every time they searched for keywords relating to their products and services a competitor had several adverts dominating the search results page. The company asked me “should we advertise as well?” The problem for my client was they knew nothing about pay per click advertising or the intricacies of Google AdWords.

So, let’s get things into focus. The vast majority of people who search for something NEVER click on an advertisement. Just under 8% of people click on the first advert, which is ten times a better performer than adverts in the right hand column. That means the bulk of people who find you on Google will not click on an AdWords item, not even one from your competitors.

It is also worthwhile considering where Google gets its money. Typically, Google earns around $80bn a year from Pay Per Click. But, Amazon alone contributes most of that. Furthermore, an additional $4bn comes from the insurance sector. That means only a comparatively small proportion of Google AdWords revenues come from all other businesses.

In spite of all these figures though, the amount of money being spent by the 1.2m advertisers on Google has gone up by 25% over the past year. Not only that, most businesses who advertise on Google say they plan to spend even more money on Pay Per Click in the coming year.

Paying more for less

You have to ask yourself – why? Fewer people click on adverts than ever before. With a current click-through rate of just under 8% it doesn’t compare well with the 25% figure from five years ago. In other words, advertisers are now paying more for less. That’s not sound business, for a start.

On top of all this, there is another issue. That is the complexity of advertising. Google AdWords has a complex calculation method of working out how much you pay and where you feature in the list of adverts. Indeed, it is so complex that you either need to attend “Google University” to learn all about it or hire the services of a “Certified Google Partner” to organise it all for you. More costs.

Let’s be frank about this; advertisers are paying for “clicks” not customers. Just because someone clicks on your advert does not mean they will do business with you. Many advertisers lose money from Pay Per Click. We should also realise that because AdWords provides 97% of the revenue for Google, the system is clearly going to be loaded in its favour, not ours.

So what does this mean for us? It suggests that extreme care is needed before we consider using Pay Per Click advertising. It means that we need to do lots of research and analysis before we advertise. It also means we need to be certain that everything we have done on our own website is maximised to increase conversion rates, otherwise those paid for clicks will be to no avail.

Pay Per Click clearly is worth it, otherwise Amazon, for instance, would not spend so much money on it. But they have teams of specialists and experts who understand the system and make it work to their advantage. If you do not have the same degree of expertise then you will either have to gain it or buy it in.

And what do you do if your competitors are advertising against you? Probably just smile. They will have low click through rates for which they are spending and you are not. Sit there smugly.

Visit Graham Jones’s website

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