October 23, 2012
For many small businesses, an online presence that attracts and maintains customer interest is crucial for success. One way that such businesses have gathered this customer traffic is through Google’s Adwords program, which offers pay-per-click (PPC) advertising that enables companies to place keyword specific advertisements on Google’s site. However, as The New York Times reported last week, small businesses’ reliance on PPC advertising is shifting out of necessity towards other means of increasing customer traffic. As PPC advertising becomes increasingly expensive due to keyword competition from larger companies, smaller businesses are turning to other methods, such as optimizing their organic search results, honing the relevance of their ads, and increasing their social media presence.
The Times cites the experiences of small business owner Tom Telford to illustrate the financial barrier that PPC advertising now poses for small business owners. In 2001, Telford was able to garner significant and consistent profits from his use of Google Adwords, back when the cost per click for his company was about 60 cents. However, by 2010 the PPC scene had changed considerably with the competitive additions of companies like the University of Phoenix and Amazon. The cost for Telford’s Adwords advertisements more than doubled to $1.25 per click. Telford remained faithful to the Google program that had served him so well in years past; however, when he found himself paying $140,000 annually on PPC advertising costs for his various small company ventures, he realized, “I was spending more than I was getting. […] It finally hit me to ask, ‘Can I sustain this?’”
Telford is not alone in his realization and concerns. Byron Udell, the founder and CEO of life insurance company AccuQuote, saw the price of profitable keywords such as "life insurance" increase from $1 to $20 or more over the years before he decided to scale back on his PPC budget. “Something that cost $3 might be a no-brainer, but at $20 it becomes absurd,” he said. Experts in small business marketing agree. “Adwords can bleed many a small business dry,” commented Sharon Geltner, who is an analyst at Palm Beach State College’s Small Business Development Center.
The solution that many experts propose for small businesses is to take a multifaceted approach to online marketing. Perry Marshall, author of “Ultimate Guide to Google Adwords,” told the Times that small businesses “cannot put all [their] eggs in one basket. The ultimate goal for any business should be to drive as much unpaid traffic to their site as possible.” This unpaid traffic can come from optimizing one’s organic search results through search engine optimization, cultivating a solid blog, Facebook, or LinkedIn presence, and increasing the quality and relevance of the content on one’s ads and websites.
After conducting some small business marketing research, Telford came to a similar conclusion, “I finally understood how you can get better search results by creating content around the keywords people are searching for,” he told the Times. “As we become more relevant to Google, our quality score improves in our Adwords campaign.”
Other companies have detected small businesses’ need for simple and cost-effective advertising methods, and risen to the occasion. For example, according to TechCrunch, 12.8 million small business owners currently have a Facebook Page as part of their online marketing strategy, and 8 million of these owners use their Page on a monthly basis. Recently, Facebook introduced its own ad program called Promoted Posts, and has thus far convinced 300,000 local business owners to use this new service. In addition, companies such as RhinoSEO, Eloqua, HubSpot, and Marketo aim to help other smaller companies optimize their organic search results and hone their marketable online content, the Times noted. With the help of HubSpot, Telford was able to reduce his PPC budget from $140,000 a year to $33,000.
Some online marketing experts urge small businesses to still view PPC as a valuable marketing tool. In a Washington Post article advising small businesses on best web marketing practices, Joseph Ricard, founder and CEO of Plum Investors, noted, “From my experience, I used to say, ‘Don’t spend on PPC’ and instead put it all into generating organic results. But sometimes, depending on the market, it may make sense to do pay-per-click marketing. […] Sometimes you have to do multiple forms of advertising.”
Compiled by Kaitlin Louie
"Business tips: How to get the most out of your online advertising dollars," washingtonpost.com, September 24, 2012, J.D. Harrison
"Local Businesses Start Warming Up To Facebook Ads," techcrunch.com, October 23, 2012, Josh Constine
"Small Players Seek an Alternative to the Expense of Pay-Per-Click," nytimes.com, October 17, 2012, Darren Dahl