Let me guess. You own, operate, manage or consult for a local business that is considering paid search as a means to generate leads or new customers. It’s always good to look at different ways to get the job done, weigh your options, and be informed before making a decision like this.
But do yourself a favor and be sure to look past that appealing cost-per-click before plunging into a paid-search program like Google’s Adwords. Local businesses looking for a few reasons why paid search might not work might want to start with these five:
1. Paid lead coversion rates average 2-3%: And yes, averages still lie. This average accounts for the good sites, that have dynamic content, inventory, fulfillment … as well as the bad sites, that are static brochures and can’t convert leads. Since many websites at the local level are more like the latter, the lead-conversion rate is more like 1-2%. If we’re lucky. And that rate actually tells us what percentage of visitors convert to leads (not customers) for local websites. Those leads still need to be closed, typically at a rate of 20-30%. Unless you’ve got a great site that can immediately convert visitors to customers and know your way around Adwords … count on 1 in 200 paid “clicks” becoming a customer. Not so good! (Sources: Compete/TNS Media, and Engine Ready)
2. There’s a 10% immediate bounce rate: Meaning immediately after clicking on your paid link, 1 in 10 visitors leaves your site. Immediately. Most of them aren’t coming back any time soon. (Source: Compete/TNS Media, as reported in Ad Age).
3. Factor in a 13% attempted click-fraud rate: This number is actually down from 16% reported in 2008. Google is taking measures to counter this, so these numbers might be overstated, but there wouldn’t be a discussion about CPA (cost-per-action) if that were the case. You might want to visit a forum of current paid-search advertisers first and ask them about their experience. (Source: Search Engine Watch and Click Forensics)
4. Organic leads stay longer on your site: The person who finds your site through organic search will stay on your site longer, by almost a full minute. (Source: Compete/TNS Media)
5. Organic leads return to your site more often: The person who finds your site through organic search will return 61% of the time within 30 days. The paid-search lead only comes back 49% of the time in that same time period. (Source: Compete/TNS Media)
Five pretty good reasons. But really, what does this tell us? It tells us paid search is among the lowest in converting lead sources. Visitors who are trafficked directly (type in the URL), visit from another content site (e.g. local news site), or are email-marketed are 2-3 times more likely to become customers, according to EngineReady. Paid search’s sub par performance drags down the overall conversion ratio. There are other ways to get the job done!
If after reading these five reasons you’re still not convinced, here are five more reasons why paid search can’t get the job done for local advertisers.
Dave Eckstein is a partner in the firm ESA & Company, based in Red Bank, New Jersey. Dave specializes in highly profitable market share growth for local business and gets a kick out of demonstrating a declining cost of customer acquisition for his clients.
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Uhhmmm, clearly you don’t like Paid Search. So my question is this, how come every high paid analyst in every major stock market on earth who covers Google stock and no doubt who are also party to the research you quote, are not shorting it into oblivion? If it is performing so poorly, which you no doubt have studied yourself with exhaustive research, why does Wall Street have such a love affair with such a blatantly loosing proposition? I mean, Google makes ZERO dollars from Organic SEO, and Paid Search is their meat and potatoes, so then what gives? Should I short Google stock? Just wondering…
Great post Robert, thank you. Actually, this is going to sound funny, but we love paid search. I’m actually a fan of much of what Google does. I recommend Google products and services to my clients. Paid search underwrites the organic search that has enabled a new lead generation source for many companies. That alone makes me applaud the effort, not to mention all the other stuff. Paid search has a place in the mix for certain types of businesses, and has proved successful in those cases. But the local advertiser needs to take a close look at the math before diving in, just like they should with any decision (FYI, many do not). Comparing apples-to-apples is difficult here, but at the end of the day, if I can connect with more new customers using something other than paid search, I should do that “something else.” Many of the companies we work with would be making a mistake using paid search, simply because their “ad cost per new customer” would go up! For example — and there are many, so I’ll just pick one — if I am a lawyer in Seattle, I would pay an arm-and-a-leg for leads through paid search … yet so many do. Still, there are many businesses that can and do use it; some quite well.
I’m guessing you know there is a tidal wave of money bleeding out of dying media like yellow pages, direct mail, newspaper, etc. A nice portion of that money is funneling into things like paid search and behavioral targeting; but in some cases, the new digs aren’t any better than the old when you look at the math. Fortunes will be made, but many more mistakes will be made along the way.
As for shorting GOOG … Hmmmm, I probably don’t have the proper clearance to give out financial advise! I will proudly say I did own the stock for a while there, and it treated me well. Great business, one that continues to enter new markets to diversify risk, but still remains dominant in search. Good for them! But I will add this. I personally would not base investment decisions upon any assumption that all media buys are based upon solid logic. I mean, the last time I checked, our Yellow Pages was still as big as ever (and still sitting in the bottom of our shoe bin). There are thousands of bad media decisions in that shoe bin alone! Wall Street and Main Street are and always will be two different animals.
My guess is paid search will continue to rake in more money. More importantly, that’s also the educated view of many people who follow Google much more closely than I ever will. Google is a great company and I hope I didn’t confuse with the slant of this post. Thanks Robert, for taking the time to share your well-worded thoughts.