They say that the road is always paved with good intentions, but I can see where this technology is actually doing harm. I work with several small business owners that have been getting good results in the last few years through pay per click…but those times are changing.
For the companies that enjoyed relatively few competitors I am seeing more competition. For those in the crowded spaces (think keywords like mortgage loan or refinance) I am seeing the costs go through the roof. If a perfectly optimized offer generates a lead from phone calls or filling out a form (old school lead generation) between 28-45% of the time in a good market, that number is dropping fast.
The number is dropping fast due to a number of factors. First, buyers are clicking on more links (including Pay Per Click links) before they make a buying decision. This fact alone can increase the cost per sale significantly.
Second, there are a number of internet marketers (called lead aggregates) that are coming into niche markets and driving up the cost of online leads through Google. These companies get their websites ranked for specific keywords and then sell the leads generated to multiple companies. There is no way to tell how many companies to which they are selling leads.
Now, it seems, Google is getting into this game. The problem is that at some point the money being paid per lead is no longer cost effective for a specific company to continue doing business…
Google’s New Plan
Google has decided on a two pronged approach to the issue. They have decided to become a lead aggregate themselves.
This is mistake number one.
They have also decided to change their search algorithm to be more “brand centric” which means that they will favor original manufacturers over affiliates and original service providers over their sales networks as well.
This is mistake number two.
This may seem like a good idea, but in the end, companies should be looking for new ways to market their products that don’t include a Google Centric business model. Small businesses hire 80% of the employable people in this county. Google has in fact elected to kill their golden goose in the short term. I have faith that small businesses are nimble enough to rebound in the interim.