Are you new to search ads?
If you are and have opened up, say, the Adwords interface, it is probably the most daunting thing. Like getting into the cockpit of a 747 jumbo jet.
(That kid is you.)
Or trying to do your own brain surgery.
Or (a man) trying to understand why a woman spends ridiculous amount of money to look the same:
(I kid. Adwords is not THAT hard.)
I’ve launched & optimized hundreds of search engine marketing, retargeting, traditional banner ads, contextual, and every other possible online ads you can think of, for myself and for others.
Almost always, this question pops up from people who ultimately are footing the bill:
“How long do I need to run this?”
… which is in effect,
the same as
“How much money do i need to spend?”
Totally understandable. You’d never go to a bar, open a tab, and not know how much the bartender is going to charge you.
To that question, I almost always answer – “it depends“.
Here are 2 MAIN reasons why people do online advertising (who are looking for results, i.e. not brand advertisers).
1) ROI – Simple math. $1 in. More than $1 comes out. This is the most “vanilla” direct response marketing that people engage in, and also the most competitive and the least margins. If that’s the case, your ad spend is potentially infinite unless you’re the time differential between accounts payable and accounts receivable are so massive and you don’t have the funds to cover it.
2) Lead generation – Fill out a form expressing your interest in some product or service, and the company sales rep will contact you. This is probably the biggest slice of the online ad market.
ROI Driven Advertising
This is the simplest to understand.
If your product cost $100 and your margin is 50%, that means you have $50 margins to “play with” in advertising.
If you spend $25 to make a sale (which has a net revenue of $50), that means you have ($25 to make $50) 100% ROAS, or return on ad spend.
If you’re in growth mode, you can make it more aggressive.. say bid $40, which means 25% ROAS ($40 to make $10).
Sometimes, some funded companies are in the market capture mode and will even take negative ROAS to be market leader. When these 1/2 off daily sites were popping up like crazy, venture capitalist backed Groupon spent hundreds of millions of dollars on the concept that if they were market leaders, they can eventually make their money back. (Well, good in theory.)
This is where you can literally make money sitting on your butt and watching orders come in.
Great business model, right?
Wrong.
It might have been the case when search ads were relatively unknown.
Now the word is out, and the margins on these “set it and forget it” type ecommerce companies (that sell commodities like electronics, clothing, everyday “stuff”) that spend tons on search ads are very very slim.
It’s just plain economics: 3 major search engines (in US) vs. HUNDREDS of thousands of competitors looking for this easy ROI.
The only winner here are the search engine companies, and hyper niche product owners.
Sales Lead Generation
This is a bit tougher to understand because this type of marketing has more moving pieces in the machine, and one tweak can actually have huge profound impact on your bottom line.
Suppose you sell solar panels (i use this example a lot because I started & ran a solar lead generation company for a while) for houses.
The odds are, homeowners don’t have $25-50k spare cash in their pockets, which means they’re going to get some kind of debt funding. So it doesn’t matter if you’re ready to sign on the dotted line, if you don’t have the money or the qualiications to get debt financing, you’re not gonna make any money for the solar installer.
So this is how it works in online sales lead gen:
step 1: express interested in product
step 2: lead gets qualified
step 3: proposal is made
step 4: close
Now imagine, for each step, only 10% move on to the next step.
If 10,000 are in step 1, then step 2 would be 1,000. Step 3, 100, Step 4, 10. If solar system costs $50k and you sell 10, that’s $500k in gross revenue.
If you have a 30% margin, that means you effectively brought into the company $150k.
So that means, you have to make sure that your leads cost $150k / 10,000, or $15 per lead.
But what if your online leads are costing you $20/lead. Maybe your bid is too high, maybe bid is too low, maybe your conversion rate’s not quite there… whatever the reason may be….
Should you stop?
NO. A big fat NO.
Because this is where the “tweaking” comes into play.
The most obvious?
Step 4: Get BETTER sales people. (i.e. understand the product / customers, more experienced, etc.)
Step 3: Make BETTER proposals (i.e. more competitive pricing, better value, etc)
Step 2: Get BETTER qualification (i.e. get financing companies that are more lenient, get products that can work in variety of scenarios, etc.)
Suppose you manage to improve only 2% in each and every step.
That’s 10,000 => (x 12% = ) 1,200 => (x 12%) => 144 => (x 12%) = 17 sales.
17 sale @ $50k = $850k.
Just by tweaking 2% in each and every step, the gross revenue went up from $500k to $850k (increase of 70%).
That’s tweaking just the sales part.
Imagine, now you have a bigger revenue to play with, can you get more aggressive with ads too.
$850k at 30% margin = $255k NET revenue.
$255k / 10,000 = $25.50 per lead.
See? Just with that 2% tweak in your sales process, you have more “wiggle” room because now you can bid from $20 to $25.
So why do most (new) search campaigns fail?
(I’m going to assume that your product has product market fit like solar, not some brand new startup product that people have never heard about.)
Another way of phrasing this question: why do the campaigns FAIL to meet the advertiser’s expectations in terms of cost per action, or ROI?
Simple. Fear & laziness.
I’m not trying to get all Tony Robbin’ish, but that’s the truth.
Imagine, if you never ran any kind of online advertising, and you give the ad network a blank check. Or a big check that you just have NO idea is going to produce any results.
How would you feel?
Yea, you’re gonna feel uneasy. Hell, it’s YOUR money, so it’s normal to feel that way.
Here are the symptoms of that fear:
1) Not enough time
All online ad networks will tell you that, you turn it and on, POOF… money comes falling from the sky.
If that were the case, why don’t the ad networks advertise themselves? Most don’t because the holy grail of instant online ad profit spigot is just a myth.
Online ads take time, and lots of work.
Just because you tell Google “hey give me $500 worth of traffic”, will they actually give you that much right away?
You are competing or that valuable ad space with
other advertisers (as with anything good in life, there’s competition), their budget, their targeting, and their ad performances
their “organic” algorithms – (ex. Facebook has to decide ad vs. organic content in their feed)
ad networks’ “optimized depletion” algorithm, where they try to make as much money as possible, so believe it or not, they might not deplete your budget because it might actually reduce their total revenue
and a WHOLE lot of other factors people will never ever see or hear about
On top of that, ad networks evaluate you as a customer. If you have no ad spend history, the chances are that you are probably waiting in line like everyone else.
In order to gauge the success metrics of your search campaigns, you have to keep them running for a while for your online ads to find its “equilibrium” among all the forces that affect your ads.
2) Not enough volume
Do you know Colonel Sanders knocked on 1,001 doors before he made his first sale?
Why? Who knows. It could be that
his salesmanship sucked originally
no product market fit
price was too high
wrong target market
idea just flat out sucked
But he kept going and finally someone said yes. Voila, multi-billion dollar business KFC was born.
(and is now alive & eating with an Asian kid at his own restaurant)
Advertising is like little salesman that knock on doors for you.
But just like any sales force, you have to give them enough time for you to find out if you should fire them, change your marketing message, or just flat out change your product or service.
Fortunately for you, you don’t have to wait months.. but you might have to wait days.
How do you get “enough” volume? Yes, budget. (Sorry, there’s just no getting around this).
Suppose, you’re bidding on an insanely expensive keyword like “cord blood” which can cost upwards to $50 per click. (yes, FIFTY dollars).
If you’re daily budget is set at $500, then you’ll get 10 clicks at best.
Should you determine that your campaign tanked and search ads don’t work?
Unlikely.
Here’s a very simple tip – take a good at what your competitors are doing.
What are THEY bidding on? What are THEY saying? How are they getting THEIR customers?
Don’t give up so early because you’re not seeing the results instantaneously.
3) Not enough targeting
If you’ve ever seen Google’s Adwords Express ads, they’ll tell you that you just upload 20 keywords, your website URL, your ad copy… and voila! Magic will happen.
Yes, the magic of Google sucking your wallet dry and their shareholders getting richer.
Search marketing is HARD, just because they have insane targeting options that can fine tune your ad campaign.
That’s why search engine marketing agencies STILL exist despite Google’s marketing message that Adwords is really a DIY platform. Right.
I’m not talking broad vs. modified broad vs. phrase vs. exact… there’s negative (which by the way, can make or break your ad campaigns), geographic targeting, publisher targeting (content network), demographics targeting (who), etc etc.
There are ENDLESS options.
With those options comes even MORE endless strategies that can work for you, like targeting your competitors’ customers (kinda shady but often practiced).
A lot of time, search engine marketing specialists will tell you to target high-intent-to-purchase keywords, like “reviews”, “coupons”, “buy”.
Unfortunately, that’s also where 99% of the advertisers can get slaughtered. (Remember crocodiles hang out where the antelopes like to go drink water.)
Suppose you see your competitor bidding on “buy XYZ widget”, so you copy that.
Unfortunately, you have no idea what targeting his using. Hell, he might even be losing money on that keyword or doesn’t even know that he’s losing on that keyword.
You have to use your own sets of data and fine tune your targeting as you go.
4) Not enough A/B testing
Do you know what marketers & growth hackers 90% of the time?
Yeap. A/B tests. You can say that we’re just glorified A/B test monkeys.
Bottom line: if you don’t want to A/B test, don’t even bother spending money on advertising as I assure you that you cannot succeed without testing.
For example, take a look at this A/B test and guess which test won (i.e. more premium signups)?
From the looks of it, they look the same right? The only difference is the one on the left has a different # of free features then the one on the right.
Yeap, the one on the left won.
Why? Who knows.
How about this test with Dell’s ecommerce / checkout page?
Two same pages, one has Next/Previous pagination button vs. page numbered pagination. Which had higher revenue per visitor?
The left one improved revenue per visitor (RPV) by 9.1% at a 94% confidence level.
Why? Like I said, no one can really predict this stuff. (if they do, i guarantee you that he/she has never done A/B tests before).
Marketers can only guess and surmise, but if we knew all the answers, these marketers would bat 1.0 average. But they don’t.
You ca predict all you want, but quantifiable data is the only king we answer to.
5) Not enough company awareness
In 2011, when I was doing solar lead generation, I remember scraping the web to find something like a couple of hundred registered solar installers in United States
Ever since the SolarCity IPO and the general awareness of solar (there are solar panels ALL OVER New Jersey, even on street lights), there is an explosion of solar companies.
I am all for solar as more solar we have, the less dependence we have on foreign energy sources. The less dependence, the less wars we get into. And less wars mean fewer senseless death tolls.
But unfortunately for small solar startups, they have an uphill battle – company awareness.
You can have the exact same keywords, same targeting, same budget, same landing page, and same everything else… BUT if your company isn’t known (i.e. including your name and/or logo), the chances of you converting at the same rate as the big boys is close to zilch.
The more you see a brand name, the more likely that you’re going to trust it. (which is why I highly recommend that people do retargeting, regardless of company size or brand power). And the big guys are there, because well, they spent the time, the money, and the energy to get their name out there.
This isn’t just in solar industry, but everywhere. For a small guy to have a chance, you must fight twice as hard for that awareness.
I am highly, anti-TV/radio/newspaper advertising, but i admit.. their remnant ads are quite cheap. And the cheapest of all? Your company blog.
What’s even better? Be an expert – host offline events, do PR, speak at conferences, get influencers to give you awareness by offering help, etc. Your goal in these events is to get people to buy from you (if they do, extra bonus), but think of them as way to create free awareness of your company’s offerings.
Believe it or not, if you do enough of it, people WILL search for your company and if you bid on your company’s name, your cost per lead will be insanely low (assuming that you’re bidding & targeting correctly.)
If you don’t want to do this, yes, you can still win in search ads, but expect to pay higher cost per conversion / lead.