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Author Topic: Google AdWords
Szymon
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I'm starting a small business of my own and am going to use google AdWords. I know the basics, I know how it works, all the bidding and stuff.

I was just wondering if you have any experience with that and could give me some/any numbers. I know that adwords have different effectivity for different businesses, but just to know what kind of numbers I can expect.

For example: how many buyers can I expect from 1000 clicks? Is it closer to 1 or closer to 100? Assuming my product is in the first 3 spots (those 3 above the regular records)?

(My product costs 90 bucks and it is a GPS tracker the size of a very small cell phone, so you can put it anywhere and it sends a signal every 5 minutes as long as it's within a BTS range. You check it's position via website or iPhone App)

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MattP
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quote:
Is it closer to 1 or closer to 100?
Much closer to 1. Maybe even less than 1, depending on the product, words, the customer, and various other factors. Conversion rates for ads can be extremely low.

You should experiment with different words and heavily A/B test your purchase funnel if you are serious about selling a product and your primary marketing will be online.

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Szymon
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Yeah, I know I should try different words and optimalize the campaign in the process. I was wondering how effective can it get, provided I chose the best words, best region, best budgeting and everything.

So... with a cost around 70c per click, having a convertion rate of 1 per 1000, it would give me 1 sold unit for every 70$ spent? And not even that? Huh... I hoped for more.

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MattP
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There is a lot of variability. It's hard to really know for sure without spending some money to test it out. Maybe people that search for "gps tracker" are so desperate to find out what their husband/kids are up to that they are ready to drop $90 on the spot and your conversion rate will be through the roof.

Just don't *expect* that to be the case without validating it. A lot of people assume success based on conversion figures which they think are conservative but which are still way too optimistic. That's pretty much what every MLM depends on to get new suckers/distributors.

The company I work for is a well known national brand and our cost per customer (what we pay to get someone to buy our product) is a significant fraction of the lifetime value of each customer.

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Szymon
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Thanks MattP. This is not my only marketing tool, of course. It is just going to cost way more than I expected. It would be too easy to just pay 70 bucks and have a guaranteed sell for 110.

But out of curiosity, what are the numbers in your experience? Have you seen a 1,5% conversion rate? Or a 15% conversion rate? What product was that?

Edit
quote:
Originally posted by MattP:

The company I work for is a well known national brand and our cost per customer (what we pay to get someone to buy our product) is a significant fraction of the lifetime value of each customer.

Tell me about it, the company I worked for had customer obtaining costs so high that it was riddiculous. Customer started to pay off after like 30 months or so. And average customer stayed with us for like 30 months or so.
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MattP
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To be honest, I don't off the top of my head know the exact figures and I'm sure they are considered proprietary information anyway. I just recall seeing the numbers and being surprised at how much marketing costs relative to sales. Regardless, the numbers would not be very meaningful for you as we primarily sell a subscription service rather than a tangible product and our marketing spans every conceivable media.

In general though from my experience it's rare for any product to exceed single-digit conversion rates, and 3-5% is considered pretty good.

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Aros
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In my MBA curriculum, I took a class on direct marketing. 5% would be phenomenal for Google. Well, so would 3%. Less than 1% is more likely. And that's with an outstanding website and click-through portal.

But it all depends on your market and product. You need a test run. But don't get too optimistic. My professor claimed, however, that Google was the least effective of any forms of marketing. Direct mail was the most effective.

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Aros
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Shouldn't there be different prices based on your keywords? There SHOULD be some keyword / price combinations that can turn revenue, assuming your product, website, and price point are up to snuff. Remember that the highest click rate and price aren't always the best. Sometimes you'll get a much lower rate of clicks but a much higher clickthrough, depending on how many competing results and their quality.

It's an art not a science.

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Orincoro
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quote:
Originally posted by Szymon:
I'm starting a small business of my own and am going to use google AdWords. I know the basics, I know how it works, all the bidding and stuff.

I was just wondering if you have any experience with that and could give me some/any numbers. I know that adwords have different effectivity for different businesses, but just to know what kind of numbers I can expect.

For example: how many buyers can I expect from 1000 clicks? Is it closer to 1 or closer to 100? Assuming my product is in the first 3 spots (those 3 above the regular records)?

(My product costs 90 bucks and it is a GPS tracker the size of a very small cell phone, so you can put it anywhere and it sends a signal every 5 minutes as long as it's within a BTS range. You check it's position via website or iPhone App)

Reading list:

http://www.viperchill.com/
http://unicornfree.com/
http://www.cornwallseo.com/search/
http://www.aginnt.com/
http://andrewchen.co/
http://www.paulgraham.com/
http://www.startuplessonslearned.com/

Consider an accelerator, if you're looking to really attack growth, and you have a good product. But choose wisely, and choose for the right fit, not the right investors.

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Orincoro
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quote:
Originally posted by Aros:

It's an art not a science.

It's largely a science, actually. Just that most people who don't understand it (including me), call it an art because it makes us feel less inadequate.

Mostly it's neither art, nor science, because it mostly doesn't work unless you already have all of the other things that make your product extremely salable: Good product, good site, good content, good payment system, etc. The adwords part is the stupid 5% part that a lot of entrepreneurs spend 90% of their time worrying about. At their loss.

Everybody wants to believe that you can somehow "optimize" into profitability, but it doesn't work that way. Great products tend to be accompanied by great-everything-else, or investors and partners willing to do that work with you. If you just focus on your service, your product, and your content (whatever it is), you'll do better than A/B testing your landing pages and fishing for adwords traffic and trying to get 1% more out of your CTR. For a small business, that's mostly a waste of time you should be spending talking to your existing client base. You'll make more money if you have a personal interaction with every single one of your first 100 customers. Do that, and then *maybe* start fiddling with your ad words. But you'll find that 100 satisfied people who you have talked to will give you much more growth than an optimized site.

Think of it this way: you can spend 100 hours optimizing your site for ad words, or you can spend one hour talking to each of your first 100 customers. If that 100 hours of work on the site yields a 2% growth in CTR and a 1% growth in sales, you have won exactly 1 customer. But don't you think writing a personal email or even calling 100 people might get you more than 1 lead on a new customer?

This is a perennial issue for startups: they want to act like they have a revenue stream that they can grow through optimization, when they're not at the point where that makes financial sense. And it only makes financial sense when you're profitable- not really before. Until you're profitable, you have to do it the inelegant way: you have to go "door to door," and leverage every single existing customer into leads for new sales. Personally. A lot of people hate doing it, but it's the only way it usually actually works. The Air-BnB guys went literally door to door in Chicago, Boston and New York to set up new users. That's how they started growing.

Fiddling with ad words only makes sense if you have enough revenue to pay someone to do that work full time. If you have that much revenue, then the work will justify itself. Otherwise, it never will, and you shouldn't worry about it.
You'll be wasting a lot of time.

So I strongly, strongly encourage you not to fiddle with ad words at all until you have 100 customers, and have talked to every single one of them (if you can). You are honestly wasting your time and money if you start worrying about it now.

[ December 17, 2013, 06:13 PM: Message edited by: Orincoro ]

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Orincoro
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quote:
Originally posted by Szymon:
Thanks MattP. This is not my only marketing tool, of course. It is just going to cost way more than I expected. It would be too easy to just pay 70 bucks and have a guaranteed sell for 110.

But out of curiosity, what are the numbers in your experience? Have you seen a 1,5% conversion rate? Or a 15% conversion rate? What product was that?

a 15% conversion rate online is like manna from heaven. Or maybe Elfin bread? It's a unicorn, regardless. Even 1.5% is incredibly good. 0.15% is more realistic. 0.015% is likelier at first.

Anyway, your ROI for your first 6 months is not that important to keep track of. It will be low, but as long as your sales keep growing, that is the most important thing. You shouldn't care about your ROI *at all* unless it is less than 0%. Even if it is exactly 0%, you are almost winning. Because every customer you gain now, will be a basis upon which to optimize your sales later. And your sales will grow if you beat the pavement. They will not grow if you spend all your time on site development.

Do this instead of worrying about ad words: give your work a value, and track your ROI in everything you do. Not just material costs or infrastructure, but your time as well. Pay yourself $20 an hour (in fictional ROI costs). I guarantee you, you will discover that your ROI (calculated this way) grows more when you focus on sales instead of the site. At this stage, anyway.

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Aros
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Science / statistics can describe the Adwords results, it can even model and predict future behavior, but word selection and advertisement is not a science. Nobody can accurately predict macro behavior to that degree.
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Orincoro
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No, of course not. I have a blog post about this in fact for thursday.

But (and a big but), the parts that are most important for medium term growth are virtually all statistical. And the parts that are most important for near-term growth have almost nothing to do with statistics of any kind. Because near-term growth for a new business (unless it is launching with a LOT of capital and content/property, like a media company or real estate venture for example), has virtually nothing to do with ad optimization. And ad words will, by their nature, not help a new website grow at all. That's in the algorithms by the way: Google does virtually nothing for a new website, because if it did, they would be gamed into obscurity by the universe of "growth hackers," who attempt to exploit their system on a daily basis. It's beyond a waste of time to invest a penny into ad words before you have customers. You will never, never, never make more money on ad words than you do by spending the equivalent amount of time networking and developing customers at that stage of business. And you can expect that by the time ad words matter, the company founder should not be the one working on them.

Adwords is for media companies, porno, and established services. That's it. Startups don't need them, and shouldn't think about it.

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Aros
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Only partially true -- Adwords also works well for new markets where search terms aren't already saturated.

But, yes, it is probably the statistically worst way to try and gain new customers.

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Orincoro
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I guarantee you, you can't think of a business idea that is both salable, feasible, and not already situated in a market niche already saturated with content *and* have that same product be something people will find through ad words anyway.

It's not that the market is saturated, it's that the market was built around the concept of saturation. That is the point of adwords. If people are searching for it, it's there. Not the other way around. It's not like there are holes to fill. It's that there is an ever expanding universe of content that remains permeable to new relevance. You've got the concept all backwards.

quote:
But, yes, it is probably the statistically worst way to try and gain new customers.
This is an understatement. Google has spent upwards of a billion dollars designing a system that is impenetrable to this approach. Every dollar you spend gaming adwords, Google spends stopping you from gaming adwords.


Illustration: I was writing an article yesterday about pitching for startup investment. I was trying to make the point that a pitch has to be based around problem solving: the product (talking mostly about data projects) has to establish that a key efficiency is missing in an existing process, and offer a solution to that problem. As a random product example, I wrote: "Ice-Cream Shotgun." Then for fun I googled Ice-Cream Shotgun, and got a hit for a diagram of exactly that device.

Now, google placed a post on some random person's blog from 3 years ago at the top of my search for that word set. If there had *ever* been a market for such a product, there would be 3 product hits in that search, and the post would have relevant ads for those sites. But there's no market for that product. And there are no companies adding "ice-cream shotgun" to their adwords because there is no earthly way of connecting a product to a payed ad in that category. If there is an earthly way of doing that, then *it is already being done,* and the amount of money the company that is doing it is paying is equal in proportion to the worth of that marketing funnel. The second that search became more valuable as an ad vehicle, the price would increase. This is the nature of adwords: everything is "available," but only ever at a price which is proportionally equal to the value of leads.

The only profit in fiddling with adwords is discovering what set of searches leads to your highest CTR over a long period of time. And there is no possible way of doing this without spending lots of money getting nothing. Worse: you'd be spending the money on the adwords, and not refining your payment process and internal site performance, which have massively higher effects on your conversion rate than ad CTR has. So you'd be spending money refining an expensive process instead of spending no money refining a free process, and one that nets you more returns. It's absolutely stupid.

This is all not to say, ironically, that you shouldn't *buy* google ads. You should just spend no time worrying about whether your adwords and SEO are right. That comes much later.

[ December 17, 2013, 08:11 PM: Message edited by: Orincoro ]

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Aros
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I disagree. I said "new market". If it's something that has trending media coverage, and you're in the right place at the right time, with an established website, before people are searching for it. . . .

Ah . . . I see. . . .

My supposition is true, but there's a mighty flaw. In any case I can think of, there's no reason to buy Adwords. If you're positioned correctly, you should already be a top hit on the regular Google search. But maybe it would still be helpful to have a listing on ad-funded webpages?

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Graeme
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Syzmon,

Congratulations on the start of your business!

You might check out Perry Marshall's book, The Ultimate Guide to Adwords. He also has a shorter and free 5-day email course ( Perry Marshall's Adwords Email Course); (just know it will put you on his mailing list, though you can unsubscribe at any time).

Using Adwords can be a good way to check the strength of your market. Optimization can take a while ... but if you spend a $100 or so for a week and don't get anybody interested, that tells you something.

Plus, running an Adwords campaign allows you to test out different sales appeals. Look at all the things your product can do for people, and place each benefit in the headline of a google ad. When you see one getting more responses than others, that's a good indication of how to pitch your product.

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Szymon
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Thank you all very much. It actually made me decide to spend some more money on mailing and ePR. I'll let you know how it goes and what my convertion rate is going to be.
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Orincoro
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quote:
Originally posted by Aros:
I disagree. I said "new market". If it's something that has trending media coverage, and you're in the right place at the right time, with an established website, before people are searching for it. . . .

Ah . . . I see. . . .

My supposition is true, but there's a mighty flaw. In any case I can think of, there's no reason to buy Adwords. If you're positioned correctly, you should already be a top hit on the regular Google search. But maybe it would still be helpful to have a listing on ad-funded webpages?

Yeah, the whole thing hinges on "established website." So its inherently self-defeating if you're a real business, and not a scam. Otherwise, it's luck. [Smile] Always takes luck too.

quote:
Originally posted by Aros:
But maybe it would still be helpful to have a listing on ad-funded webpages?

Usually better for a self-started to seek partnerships and just buy direct mail marketing. Honestly. But sure, buy cheap ad words and see what happens. Just don't spend time worrying about it. You will never make good on that investment until other parts of your business are already working. That's the way it goes.

quote:
Originally posted by Szymon:
Thank you all very much. It actually made me decide to spend some more money on mailing and ePR. I'll let you know how it goes and what my convertion rate is going to be.

I'm glad to hear that. I've had people come to me for partnership ideas, and it virtually always works better. Adsense/adwords magic is just that- magic. It's not realistic for a self-starter.
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