The declining profitability of Google Adwords | Hacker News Reader

The declining profitability of Google Adwords

successfulsoftware.net

140 pointshermitcrab99 comments

I spent $100,000 last year on Google AdWords - it made me some decent money. The costs kept getting higher and higher - I called one of there advertising rep's to give me advice - it cost me around $600 losses in 1 day. Called back, made changes - told them I don't want to take 'risks' like that again. I then tried this 'Enhanced Campaign' feature that I think they're bringing in across all accounts in June - it put me in the negative and I'm now no longer advertising with them.

This part hit the nail on the head: "(suggesting ridiculously high default bids, goading you to bid more to get on page 1, not showing your ad at all if you bid too low – even if no other ads appear etc)."

Every time I'd call they'd say up your 'Cost Per Click'. Every single time.

I've been doing SEM for five years and worked with the full range of google reps.

Quite simply, don't ask reps for advice on a product they've never actually used (as in, with real money). You're better off investing in a proven SEM expert in your field.

Also, the answers/responses from Google reps are basically read from a training manual.

I concur with the above whole heartedly.

SEM Specialists and the tools that they use make your money work very hard - as much as your website will allow it to that is.

I've just google'd SEM expert and not hits. Google suggests 'SEO expert'. Could you elaborate about SEM? I'm interested.

Although I can't give you any exact answer since I'm not an SEM expert, doing a verbatim search[1] will give you better results[2]. Though you might already be aware of how to do that (but even if so, someone else might not and find it useful). I just add it as a custom browser search[3] using the following URL template to do a verbatim search without having to click on options in google search:

https://encrypted.google.com/search?q=%s&sourceid=opera&...

Where %s will be your query.

[1] https://support.google.com/websearch/answer/1734130?hl=en

[2] https://encrypted.google.com/search?safe=off&client=oper...

[3] http://www.makeuseof.com/tag/create-custom-search-engines-go... (for chrome)

[3] https://support.mozilla.org/en-US/questions/780073 (firefox)

[3] http://my.opera.com/community/blog/2009/01/16/custom-searche... (opera)

[3] http://operawiki.info/CustomSearches (some premade searches that add just by clicking, may work on other browsers, but not sure)

Happy to elaborate? What would you like to know?

As for finding an SEO/SEM expert, typically best to go by referral. Most SEO/SEM experts that you'll find on google/forums will run you through templated best practices.

Best to work with someone who has been vouched for.

Another good way to find qualified SEM experts is by using this tool: https://www.google.com/partners/

I assume it's this: http://en.wikipedia.org/wiki/Search_engine_marketing, i.e. SEM = search engine marketing.

I followed the same route:

Starting with Adwords on 2003 it aligned well with my business as a complement to SEO. I could test different keywords and it worked. Nobody beats AdWords at the audience and self service system.

But then, we started to see keywords at $ 2, $ 5, $ 10 ... wow, for just one click! At the end we stopped all our campaigns and spend our promotional resources to our blog. And our blog, scientifically, have a better ROI.

I would add that now AdWords is more difficult to administrate than Windows Advanced Server with Exchange.

Of course, AdWords can be quite difficult. But if you are doing it right you can see positive ROI. I have been managing a few account which had trouble doing that. But it really depends on your strategy. Want to play safe? 1. Forget that broad match even exists. 2. Focus on long tail keywords only, this will drive enough conversions while costing you less money.

I am sure that AdWords works! and the reason we paused our campaigns is that I think it's better to spend time on writing articless because we don't have the time to put on AdWords. The worst thing is that I can't really outsource or contract someone to do it because they must know a lot about my niche.

I agree with your comment on administration and I am pretty sure this is deliberate on Google's part.

Never listen to your Adwords reps - they're usually extremely uninformed about anything except the Google party line.

Seems like the article is only showing half the story.

Costs are going up which means increased competition. Increased competition will mean your ads are running against more competitors. Reason for fall in click-throughs could be under-optimized ad's losing out to competition's ads.

As for conversions. Looking at the table plan site I feel overwhelmed. If this is where the ad's are taking users I think it is fairly obvious why sales are dropping off.

I don't think Adwords can be blamed for the profitability of a product.

This isn't to say Adwords isn't declining in value for site owners. To make this claim though you would need information from lots of sectors from lots of site owners.

I agree; the site for the software looks terribly out of date, which in turn doesn't instill confidence in potential customers.

Updating the site would be his best investment.

Although I agree updating the site would be good, that's not really to the point of the post, which is about click-throughs _to_ the site.

The point of the post is about overall profitability of adwords. An ad's CTR is important to drive as much traffic as possible and also to keep a high quality score, but you arent directly paying for people who do not click your links. However, you are paying for all the people that click your links and do not convert, so focusing on improving your conversion rate is one of the best ways to improve the profitability of an adwords campaign

Lower conversion rate ale signifies lower page quality which is another factor that AdWords use to calculate the ad position, and if and to whom to show the ad to. Which, in turn impacts click rates and so on, ad nauseam.

This is incorrect. The conversion rate does not affect your quality score: http://adwordsagency.blogspot.com/2008/12/quality-score-fact...

A "conversion" means different things to different companies. It would be extremely easy to game the system if conversion rate affected quality score.

The site looks out-of-date, but would the average potential customer for table planning software know that? I'm not sure. If anything, it seems likely to me that the complexity of the site is reducing conversions, but not the fact that it is "out-of-date".

Updating site wouldn't make a dent. You seen Cragilist recently? or even Google homepage for the last 10 years??

People go to his website for a certain product. They couldn't care less how the site looks. Does crappy look of Apache software website turns you down from getting the newest download? How about PHP site not updated since 1999. Does their crappy site means they don't know their craft?

After checking couple tabs (that are easily accessible) and being convinced he knows his business, there is nothing more to do than either pull the trigger and buy a product/try it, or leave the site. No fancy graphics or frameworks will change users' mind. And they shouldn't. In fact, if that site would be up to date designed website all nice and clear, I would immediately think its a scam or probably software with built in backdoor, etc.

His site is fine. He is selling table planning software (that looks decent), not a web design lessons.

This is not how the vast majority of people shop. It seems like you are arguing that changes to a site's design will rarely result in a significant increase to their bottom line, but there are countless case studies that prove the opposite.[1]

[1] http://www.abtests.com/

Google homepage has always been good.. You are immediately drawn to a big box in which to enter text.

The problem with guys site is it isn't optimised for getting purchases. Too much is going on. The user isn't guided through the software or pushed to take a trial or purchase. Instead the visitor is hit by everything at once, doesn't know where to look and is somewhat overwhelmed by stuff.

You don't need to be a graphics designer to make a successful site. Good content and a clear call to action is the important thing. Beautiful design on top is just gravy.

Why wouldn't updating the website make a dent again? Landing page optimization is a huge forcus for any online commerce company because updating a website (design, content, flow) does make a dent.

okay I am talking about the outlook, not landing page optimization and the stuff under the hood.

sorry but his website talks to me: "hey I seel software to plan tables and i know how it works, but i am not a designer and wont spend money for a coll website". which is fine with me. again, I didnt came there to appreciate his website apperance but to see if his software is good enough for me (had I been in the business that needs his software)

You're taking your own opinions and applying them to the entire target market. Just because you feel this way doesn't mean that everyone else does, and it certainly doesn't imply that "updating the site wouldn't make a dent".

I am an example of this mindset. I bought this software to use for our wedding last year. Normally a website looking like this would not be something I'd ever purchase from, but I'm familiar with the guy from several years of forums and mailing lists.

The OP probably needs to optimize his ads (i.e. tune them) and the conversion funnel. In my five years of working at Google as an AdWords manager (I don't work there anymore), I've seen cost-per-click and bids rise consistently especially for Google search. This has a lot to do with competition and limited real estate. However, Google maintains something called Quality Score which is analogous to page-rank that determines the bid required for an ad to show. Quality Score is based on the keyword - ad text - landing page relevance. With a high Quality Score you can get clicks for a much lower cost. Some experiments put this at about 5% per unit of quality score change (Quality score is on a scale of 1 to 10).

Low quality score is also a reason your ad might not show even if there is no competition – Google assumes that the relevance of the ad is low, and tries not to show irrelevant ads to user, even if it means not showing any ads. Of course this is not fool proof, but that is the idea in general.

Getting a click is only half the story. Actually getting the user to convert and buy your product depends as much on your ad as it does on your site. Is your keyword related to your ad? Does the ad landing page offer what the ad text promised? How easy is it for a user to buy your product or, convert? How many steps does it take to get to your thank you page? Is your sign up process too long? Most people tend to focus too much on bids and ignore optimizing their ads to improve relevance of the keywords to ads and relevance of ads to their site. Doing this can help increase Quality Score which significantly brings down cost per click. It comes as a surprise but small tweaks can make huge differences - and increasing bid or cost per click is not the right answer in most cases.

Plug: I'm one of the founders of Optmyzr (http://www.optmyzr.com) and we offer optimization services and automated tools for optimizing AdWords campaigns.

Can you give an idea of how much lower the cost per click could be with a very high quality score (ie 5% of Googles suggested cost per click)?

"With a high Quality Score you can get clicks for a much lower cost. Some experiments put this at about 5% per unit of quality score change (Quality score is on a scale of 1 to 10)."

As I understand from your question, there are two things here one is average cost-per-click which is how much you actually pay for each click and this is usually lower than how much you bid (max CPC). I've seen avg. CPCs fall by 10 - 50% (depending on the industry) when Quality Score changed from 5 to 7 for keywords. You can actually track Quality Score and overlay it with avg. CPC and other stats to see a correlation for your account. We created a tool for doing this. The second is Google's suggested cost per click which is the recommended first page bid that Google shows next to each keyword. This is a function of your Quality Score and competition. You'll notice that keywords with a low Quality Score have a relatively high required first page bid. Please feel free to email me (geetanjali att optmyzr.com) with any questions!

Thanks very much for the detailed answer. That really explains things from Googles perspective. Very nice service you offer. I think that it will serve to save people a lot of money on Adwords.

Does that mean that if your quality score isn't high enough, Google will pocket your adwords money and never actually show your ads? That sounds incredibly dishonest.

Google charges you only when someone clicks on your ad. So you don't get charged for your ad showing unless someone clicks on it. The way it all started out was to show good quality ads to people. Just like search results the idea is to make ads also as relevant as possible to the user. Not defending Google, just stating facts. Some changes they have made recently (enhanced campaigns) may not be as advertiser friendly as promoted.

In my previous gig we used to spend single-digit millions/year, and saw all metrics falling down like OP did, and we had a team of 6 experts with tons of experience in AdWords.

Not sure about this vertical, but in other (much more lucrative) ones such as travel, Google is pushing its own solutions at the expense of other websites.

For example, try looking for a hotel in new york and you will see Google Hotel Finder results, Google Map (which feeds from Google Hotel Finder), Google Places for Business, etc. Google Map will even stay fixed meaning that as you scroll down the ads are hidden by it.

There's much less value in positions that used to be profitable, especially 4+ (right-hand side ads).

Seeing similar in home-services. Plumbing, electrical, etc.. have steadily risen over the last few years. We have highly optimized ads pointing to highly optimized sites (better than 30% conversion to phone calls). In the end we're rapidly being priced out.

We saw it coming, thankfully, and have been moving to a broader advertising strategy which is working well.

Do you mind sharing what's working for you these days? which channels? Do you do offline also? Would make sense given your vertical..

There is a very simple reason for this happening - Google needs to keep making more money, so over time they need to raise advertising prices or increase click volume. There isn't going to be a dramatic increase in click volume anytime soon, so for Google to grow at 20%+ a year, they need to raise prices over time, which they do via quality score and social engineering.

I've watched Google do this relentlessly since 2006. They are quite good and the fact that people in here are blaming the advertiser for not managing their account well is proof of how good Google is at social engineering their way to profits with AdWords.

That's regrettable.

One of the things that Google seems to generally understand is that a good business is built on delivering ever-higher value.

But depending for growth on getting an ever-higher percentage of the total value generated, rather than generating ever-more value, is the road to ruin. Happy customers rarely switch, even if somebody else is offering an as-good or somewhat-better deal. But having a bunch of mildly irritated customers is a massive opportunity for a competitor who isn't trying to hit an arbitrary set of revenue targets.

Source? Or is this just opinion?

It's experience and observation. I started doing PPC and SEO back in 2006 and what I've seen over and over again is that Google is trying to black box as many of the success factors as possible so that it is harder for people to game the system.

For example, in SEO, Google continues to devalue on page optimization, and various methods of getting links because it break's Google's algorithms. So, they invent/demand the use of rel="nofollow" because otherwise they couldn't detect paid links. Google works very hard to tell people they should nofollow advertising links and whatnot under the guise that it's better for the internet or it's more ethical, but the reality is they need the nofollow "link condom" to keep their search engine from looking stupid and being easily gamed.

In the PPC space, AdWords also does a lot of things to black box their system to make it harder to succeed. For example, they introduced "Quality Score" which is a metric they can use to rank ads, which seems nice. But originally they had a simple CPC * CTR bidding system which was simpler and easier to game. More importantly, it made it hard for Google to maximize profits because if someone had a really high CTR ad, it would effectively lower Google's ad rates.

In reality, QS adds a layer of indirection where Google can tweak various quality metrics to raise their advertising rates in subtle ways that people won't complain about because instead of saying that they are raising rates, they can just lower a quality score and you have to bid more if you want traffic for that keyword. After they rolled out the quality score system initially, I believe then CEO Eric Schmidt was quoted as saying something along the lines that they are able to show fewer ads and charge more while creating a better user experience. That's a nice way of saying they're raising their advertising rates.

In short, Google is always struggling to balance between making more money and maintain a certain user experience. To achieve that goal, they create these black box systems that are harder to influence individually. That allows them to periodically raise their rates and "improve quality".

I'm not sure I would do anything dramatically different if I were Google, but their black boxes and social engineering efforts should not be underestimated.

Can you explain more what you mean by QS and social engineering being the way Google is raising prices?

My understanding is that AdWords is a an auction system, where your position in the auction is a combination of your Max bid, inventory, and a QS multiple. If Google is manipulating QS, it would just change the ordering of auction winners, rather than overall CPC, right?

My first thought was that prices are rising because 1) more competition on the ads [more companies, higher prices], and 2) as a kw cost/value saturates, more companies were "overpaying" [bidding more than expected ROI], due to any number of causes.

AdWords started as a pure auction system where to rank higher it was basically CPC * CTR, which maximized profit in a simple way for Google and it worked well. The problem is that some people are too good at getting high CTR ads, so their CPC's got too low.

What Quality Score does is it adds a layer of indirection to the system where they can tweak some invisible dial so to speak to increase the "quality threshold" for ads. Google will tell you what each keywords QS is, but it's not as explicit as it could/should be as to why.

The point of QS is to enable Google to maximize profit while maintaining a decent user experience, but the problem is, at any point Google can turn the knob of QS and increase their ad rates. If Google needs to make more money, they can drop QS and people will bid higher to rank higher. Or, new advertisers who aren't very good will bid the "recommended" bids of $2 or $3 per click, where in the pre-QS world, those numbers were less than $0.50 in most cases.

They also can use QS to make you redesign your pages to be more what google wants, even if it doesn't increase your conversions or align with your goals. Google totally can and does dictate what kind of pages you can advertise and how you can advertise them.

So it's not just a auction system. It's much more clever than that. It's more like if eBay auctions had a bidder quality rating where you would have to pay more if your bidder quality score was too low.

I'm actually quite impressed that people earn money from these advertisements. I have never clicked one of the adverts, unless it was the top result on a Google search for the thing I was actually looking for. It's like a natural instinct to ignore the ads.

With the rise of addons like AdBlock Plus, I think it's inevitable that this Ad-venture (pun intended :P) will decline, and cease to work, until a new medium or method emerges(Social networks, website-product-placement, etc)

you would be also surprised that there are lot's of people using IE.

The fact is, you and probably most of the people here on HN are the 1%.

ABP has 15 million users on firefox and 10 million on chrome. This is 25 million users worldwide, so out of a total 2.4 billion internet users ABP users are about 1% of the world population.

the rest, 99% of the internet users are people who see ads. probably some of them also never clicked an ad but since the advertisement industry is a huge one, it is safe to assume that it works.

Good point, i searched a bit, and found this comment on Quora; Key findings:

On average, 9.26% of impressions were found to be ad-blocked, with some sites reaching as high as 50%

Tech sites average at 17.79%, followed by news (15.58%) and culture (9.94%). Business, real estate and travel sites average lower

Ad-blocking is higher in the US and EU: top countries are Austria (22.50%), Hungary (21.52%) and Germany (19.44%). Average in the US is 8.72%

Blocking rate is found to be highest among Firefox users (17.81%), followed by Safari (11.30%) and Chrome (10.06%). Explorer averages at 3.86%

Linux users have a staggering 29.04% blocking rate, compared with 12.95% for Mac users, and 9.25% for Windows users.

Mobile blocking is gaining popularity: Android shows a 2.24% blocking rate, and iOS 1.33%

*Findings point to the estimation that ad-blocking will significantly increase in consumer adoption

http://www.quora.com/What-is-the-percentage-of-Internet-user...

Your average Internet user has no problems clicking on Adwords ads. If anything in ecommerce they are just as likely or more likely to click an ad than an organic listing.

Watch an average user browse the web and use Google to make a search.

They will click on the top ad result returned if it is vaguely relevant and not bat an eyelid.

Average users do not even know those yellow sections or the right hand section are ads.

The natural instincts of geeks <> The natural instincts of average users

Yep. My cofounder did a ton of user testing. One guy, as he was doing a shopping-related search on Google, said, "You want to know the secret of Google? Ignore the left side of the page. The good stuff is the little things over on the right."

All Adblock does is guarantee that the user won't cost the advertiser any money because the ad is not shown ergo can of be clicked. Google ads are pay-per-click. Adblock does not affect the conversion rate of the people who don't use AdBlock. AdBlock does make it more difficult to reach markets that use AdBlock disproportionately, but those markets don't like advertising anyway, so the difference in reach caused by AdBlock is only a percentage of the user count for the market being measured.

P.S. If you clicked on an ad because it was what you were looking for, then you did exactly what the advertiser wanted you to do. That's the whole idea behind PPC, and why that top spot is such a good one.

I don't believe this post tells the entire story. Adwords (advertising in general) is just one part of doing business in general. Other reasons that might explain the trends showcased:

- Businesses have cycles, maybe the author is experiencing the end of his software's business/product cycle. An 8 year period is considered by many an economic cycle. I certainly don't use the same software today as I did 8 years ago.

- During the past 8 years the business of software has completely changed: distribution, barriers to entry, platform (desktop/web/mobile), etc.

- Profitable businesses tend, over time, with no meaningful reinvestment, r&d, etc, produce marginal profits equal to zero.

- What are the software alternatives to the author's product/service? 8 years ago Encarta was "the" digital encyclopaedia, today it's Wikipedia.

- Adwords 8 years ago was a nascent ad platform, resulting in low cost due to low competing bids, today it's "the" most popular online ad platform.

These are just a few reasons behind these trends. Any other thoughts?

Maybe the shift towards web apps has turned potential users away from desktop apps like the one mentioned.

I don't think he said his sales were flagging, just that Adwords was becoming less profitable.

He said "conversions" were falling, which means sales: http://successfulsoftware.files.wordpress.com/2013/05/adword...

But he doesn't say whether conversions-per-incoming-click are declining.

CTR and conversation rates have remained pretty constant throughout.

First, this has nothing to do with Google's profitability re:Adwords (the title was a bit misleading).

Rather, it seems like an efficient supply-demand market is converging to a price point that renders his ROI to neutral-or-negative. I guess that indicates that the rest of the world is catching up in SEM... and it's time to search for alternative marketing channels. This should come as no surprise -- golden geese don't live forever.

Exactly, it could actually show an increasing profitability of Adwords overall but skewed towards products that are best suited to this kind of ad thus pricing others out of the system.

I agree that without maintenance an AdWords account will exhibit this kind of decline, but it appears to me as though the OP might not be bidding on exact match search terms which can make it difficult to control your spend and target your audience. If most of your spending is on broad or phrase match keywords then you're far more susceptible to changes due to other people coming into the market place and also have much less ability to optimise your ad text and landing pages to get the best ROI.

In my experience the single biggest improvement you'll ever see to your campaign comes from bidding only on exact match keywords that you've extracted from the search term report with ad text written specifically for those keywords. It's a pretty laborious task but the results can be pretty phenomenal.

Costs go up because of competition. Costs go up because Google gives a $ 100 for every new Adwords customer, this inflates the prices. Costs go up because there're more ads, not just on the right side. People are less likely to buy when there's a recession.

Please bury articles where people claim facts without providing a single number.

We don't know how many total clicks this involves, did the clickthrough rate drop 1%, 5%, 90%? Was the traffic search, search syndication, content? Where there content text ads, image ads, flash ads? Did he ever add new keywords, ads, geographic markets? Did he ever change the landing page design?

I would be very embarrassed if I wrote that blog post.

I'm entirely ok with this. He really doesn't want his competitors knowing the numeric details of his business.

He explained his methods and gave useful graphs.

Yes, the article could have been more useful. But the way to make that happen in the future isn't to bitch endlessly about people not doing enough free work for you. It's to thank them for the good you got out of it, and politely suggest next time that their article could be even more valuable if they did X.

However we could still discern a great deal from the data given in the graph.

http://www.evanmiller.org/how-to-read-an-unlabeled-sales-cha...

there's plenty of ways to make a useful graph without giving exact numbers. and if he really didn't want to give information away to his customers, he'd not write the blog post in the first place.

Blog posts are marketing, he's driving traffic to his site with this blog. and his "facts" amount to squiggly lines. he doesn't deserve to get traffic from this.

I expect the Adwords ecosystem to auto-regulate itself instead of just deteriorating over time: the more people like you realize they have to pay more for less, the less they'll do so, leading to a decrease in prices until they're acceptable (profitable) again. Supply and demand, like you said.

From the linked http://andrewchen.co/2012/04/05/the-law-of-shitty-clickthrou...

  When you are marketing with useful information, then CTRs stay high.

It is hard to split out the effects that are leading to a tougher Adwords market in general and this particular campaign.

One thing we have noticed about Adwords is that longer campaigns are being ran as essentially residual income with maintenance the more they decline. Thing like bids, keywords, ad text can progressively put you in a worse place than the competition left unchecked. I addition over the years we are getting bombarded with new Adwords features that your competition is likely across.

The other thing I would say is that from first glance your software and site design may be the cause for the decline. People are used to the instant gratification from a web app vs having to download, whereas when you started people wouldn't blink an eye at having to download software. The trend these days is to pair you landing page down to the key point and call to action.

The good thing about all that is that there is probably a lot you can do with landing page A/B testing and possibly on the ads themselves to turn it around.

> People are used to the instant gratification from a web app

Which people? The 1% inside the tech bubble?

Outside of the tech bubble people still download stuff. And smart phones like Android and iPhone with their downloadable apps don't really condition people to use web apps.

If you want to make bold statements about the software market take a look at the people outside of your tech savvy peer group.

I guess we will have to agree to disagree. Here is a good article on the web app vs downloadable: http://www.kalzumeus.com/2009/09/05/desktop-aps-versus-web-a...

I don't have an stats but from watching regular people use computers I absolutely believe that people are much more willing to give something a go if it involves clicking a button on a web page rather then downloads and installers etc.

I used to be wonder if anyone really made any sales on those ads because even as less savvy as i was with internet, I could readily identify 'ads by Google' and not click them. Honestly, sometimes I could just look at the website and type the address in a new tab instead of clicking on the ad( because I wasn't going to make a purchase anyway so why make them pay for my visit?)

But then I observed first-hand how people I thought should know better were clicking on these ads unknowingly thinking it was part of natural search results. So here's what I'm thinking; it could be because there as more and more people get online, there's going to be more and more people clicking on ads unknowingly thinking it's part of their natural search results, which will consequently result in increase in CPC .

But what irks me from the post is: > not showing your ad at all if you bid too low – even if no other ads appear If this is true then it's really evil!!

I'm wondering if it's got something to do with saturation on the demand side. I'm going to take a (roughly) economic angle...

When AdWords first launched, it wasn't (necessarily) a standard for online advertising, and especially for advertising generally. As more businesses consider it to be part of basic strategy, the cost of your bid goes up to remain profitable.

The previously obtained performance is the anomaly - it's a first-mover advantage on a new technology. You get more bang for your buck because you're making use of an asymmetry in the market-place.

The phenomenon that's occurring here is commoditisation - Adwords is well-known and well-used; it's a standard. The competitive advantage that comes from its use has finished.

The title seems misleading to me. I thought Adwords was losing it's profitability to Google.

If the OP's premise is extended to all others in his peer group, I read this as the implied "long-run" outcome. Whether that's true or not is another argument...

If the problem is that he's getting a worse return as people are outbidding him for the best words/placement, it could be the opposite.

agreed

Graphs are less useful without scale.

It's against Google's ToS to share detailed data, I believe.

Really? Cite?

If you look carefully you will see that they do have a Y=0 axis (and the Y axis is linear).

This resonates with me pretty well, even though I don't have such long experience. However, my wife has a small website selling vintage items to Japanese customers, so we have some experience with online advertising over the last couple of years.

Apparently, Google isn't as strong in Japan as Yahoo. At least for the demography that reaches my wife's website over the last couple of years. We see this quite clearly on (organic) site visits.

Given this, I would assume that advertising on Google would be cheaper than Yahoo Ads in Japan. However, it's not the case. Google adwords are far more expensive and deliver far worse results for the same campaigns. Maybe competition in this niche is not well informed/stupid and uses Adwords more than Yahoo, which drives the price up, but to me it doesn't make sense. If Yahoo gives better bang for the buck (and it does!), then advertisers would naturally shift there, which would raise the Yahoo price, and reduce Google's. However, that does not seem to be the case. It feels like Google is somehow inflating the prices not completely in line with supply/demand.

I've been experiencing exactly the same problem. Used to make thousands of pounds each month from AdWords ads, now just about break even on them.

Another aspect of this is Google's inflationary tactics that continue to rack up rates. I had written a post on this: http://www.vinaysahni.com/how-google-inflates-adwords-bids

Their inflationary game has still not ended. This week I got a coupon in the mail for $200 AdWords credit if I spend $50.

Hey Vinay -- I just wanted to remark that supportfu.com looks great. Even though I'm not in a business where I'd need such a thing, I found your copy compelling enough to imagine myself running such a biz and how to provide the best possible support, and concluded that I'd want something very much like what you offer. Best of luck.

Thanks for the kind words :)

An advert for ads.

To some degree the OP is right.

A static campaign, sending traffic to the same landing page, not increasing the bids to account for changes in CPC, will be less successful than before.

Over the last several years, the barrier to entry has dropped but the barrier to success has risen extremely high. It is much more difficult to profit when most of your competitors are using every tool at their disposal to crush yo.

The two things that could easily make/crush his conclusion is average position and quality score. I want to see the average position on search and quality score over time as that will indicate:

1. If he has not kept bids in line with the market 2. If his site has continued to be updated with sufficient fresh content to appease the googlebot 3. If he has continued to improve his ads (CTR is one of the components of quality score!)

Those things will indicate where his efforts have fallen down.

So, just for fun, I googled "event table planning". No paid ad for his app appeared.

However, a quick scan through the first page shows he did get at least three freebies: two of the four image results are screen shots from his homepage, and the second search result is his site and includes a to-the-point abstract.

Standard economics. As you start penetrating potential audience its going to get saturated after some point until you reach all of the audience. As impressions to get one more click are needed more, google needs to exhaust their inventory more. Apparently CTR is going to degrade, and google will start increasing marginal cost per click. Cost per click is curve is often going to be marginal cost curve, where maximum profitability is at lowest point on the curve. Its not about profitability of google adwords but the profitability of the media you're bidding for. When saturated you can always expand your potential market (audience) by adding more keywords/placements.

I wonder if click-per-view count is dropping too. Maybe people slowly learn the patterns of ad placements and subconsciously ignore them, like I feel I started to do back in the banner days before using AdBlock.

Well, the online display advertising market is getting harder for everybody, so Google is not having that easier either.

As RTB market (http://en.wikipedia.org/wiki/Real-time_bidding) is growing in significance, then it is starting to make sense to diversify the networks that advertisers would use, so just using Adwords is not enough anymore, and in that sense it is time to start checking out OpenX, Appnexus, etc.

You can't just display an ad at any price, even if there are no other ads. There are too many spam ads now, but it used to be quite a bit worse. Setting a minimum price sets the bar high enough to make it not worth the cost to spam. It's gotta be a juggling act for Google to keep prices within reach of legitimate advertisers while keeping out the riffraff.

The only other solution is to manually approve all ads before they go live.

Hang on a minute. What's the difference between spam and an ad, anyway? It's all spam, surely.

Part of this can be explained by the nature of auction-based systems: the more participants there are in an auction, the higher the average price will be at the end of that auction for any given item.

As far as CTR, that could be explained by way too many factors.

This is unrelated to the article, but is anyone else experiencing not being able to scroll with a mouse scroll wheel on this page? I'm using Chrome on Win 7 64 bit and the scroll wheel does nothing, though it still works on other pages.

For every one of these "declining profitability" stories, there is an equal and opposite story. It's a cyclical story, too.

Either way, Google wins.

What are the best alternatives to Google Adwords in terms of paid advertising?

there is no best alternative as Google owns more than 80% of overall market. If you want scale you cannot ignore Google - hence the monopoly and inflation of bid rates.

the next best alternative which can bring 1/4th of google adwords traffic are bing adcenter, retargeting companies like adroll, vizury. Facebook & Linked Ads work for specific domains.

https://www.projectwonderful.com/!

we are seeing similar trend, looking for a alternative which works and is cost effective

Find which sites your buyers are visiting and advertise there directly without Google. your customers are using google.com for a few seconds a day, but reading relevant sites for hours.

1. Search for your keywords.

2. Click on top 20 sites within organic (not paid) results

3. Strike a deal with these sites to advertise.

Ozzie c

Reply on news.ycombinator.com