While pay-per-click (PPC) search can be effective for some, here are five factors you should consider when deciding to invest your time and budget elsewhere.
You may find it strange that someone who's been a practitioner of pay-per-click (PPC) ever since GoTo.com launched in 1998, and someone whose team manages hundreds of millions in PPC search spend annually, would pen a column on the topic of giving up on PPC search. The reality, however, is that in the hyper-competitive world of Google AdWords and Bing Ads, not everyone can survive. It's actually beyond survival of the fittest, because there are scenarios where even a fit company can't survive here.
PPC search advertising is auctioned off in close to real time and, as in any auction, there are winners and losers. The winners get the click and the losers don't, or so it would seem. In auctions, there is a concept called the Winner's Curse. In a nutshell, the Winner's Curse happens when either the click profit profile has been miscalculated and the click is actually unprofitable to the advertiser, or the high bidder (or bidders) have insufficient information to make an accurate bidding decision but have low tolerance for losing the click and so bids high. If you have less information or less accurate information than your competition, you may find yourself in a Winner's Curse situation, which is just one of the signs you should give up on paid search (or fix the problem).
Auctioned digital (and traditional) media has placed marketers into unfamiliar territory, and search is just the tip of the auction media iceberg. If you've ever had an opportunity to buy traditional media (other than in the TV "Upfronts," which are animals unto themselves), most of the time when you buy more media from a particular seller, the cost per unit drops. In PPC search - and in all the other new forms of digital media being auctioned off - the more you buy, the more you pay for the new units (clicks or impressions). It's the opposite of a volume discount. Therein lies one of the primary factors that is driving many marketers out of paid search and has them evaluating other options.
Without the pressure of the auction, everyone could happily buy paid search clicks. Instead, you may find yourself wondering if you should give up on PPC search altogether.
Five factors you should consider when deciding to invest your time and budget elsewhere than paid search advertising are:
In addition to the above factors, there are some rare situations where, for example in the lead-gen business, your competitors are actually lead-generation partners. They will sell you non-excusive leads and, because they sell leads to more than one of your competitors, they can afford to bid more than any one of the final lead buyers.
If the PPC markets make it impossible for you to profit at scale, you may find it necessary to resort to innovative SEO strategies. SEO algorithms are much different than PPC, and in SEO (particularly when combined with a great social strategy), there is room for creativity that can deliver results. The days of building a huge profitable business exclusively on PPC are dwindling for many industry sectors. Best of luck.
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Kevin Lee, Didit cofounder and executive chairman, has been an acknowledged search engine marketing expert since 1995. His years of SEM expertise provide the foundation for Didit's proprietary Maestro search campaign technology. The company's unparalleled results, custom strategies, and client growth have earned it recognition not only among marketers but also as part of the 2007 Inc 500 (No. 137) as well as three-time Deloitte's Fast 500 placement. Kevin's latest book, "Search Engine Advertising" has been widely praised.
Industry leadership includes being a founding board member of SEMPO and its first elected chairman. "The Wall St. Journal," "BusinessWeek," "The New York Times," Bloomberg, CNET, "USA Today," "San Jose Mercury News," and other press quote Kevin regularly. Kevin lectures at leading industry conferences, plus New York, Columbia, Fordham, and Pace universities. Kevin earned his MBA from the Yale School of Management in 1992 and lives in Manhattan with his wife, a New York psychologist and children.
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September 23, 2014