The Great PPC Balloon

[This transcript has been edited for clarity]

Jacob:
Yes. Hi, Jeff. Welcome to another episode of the Human Friend Digital Podcast.

Jeff:
Hey, Jacob. Today we are piggybacking off of our last episode where we talked about the buyer’s journey vis-à-vis pay-per-click and AdWords and all that stuff. Yes. And towards the end of the episode, we started talking about how difficult it is to get into the world of advertising for your business because of the ballooning cost of advertising in the digital space.

Jacob:
That’s true. Yeah, we talked about that in the other one. But I do want to take one quick moment and just let the listeners know: me and Jeff are doing something different today, which we haven’t done in a while—we’re in the same room.

Jeff:
We are podcasting together. Yeah, usually we do it remotely.

Jacob:
We do. We usually use Zoom. Makes us lazy. Today, Jeff drove a car—

Jeff:
All the way across town to Jacob’s basement.

Jacob:
Yeah. So anyway, I’m excited that you’re here, and it’s going to make it a little easier to talk about this weird stuff.

Jeff:
It’ll only get harder for me to edit, but you know…

Jacob:
Yes.

Jeff:
Pluses and minuses.

Jacob:
I think the subtitle for today’s episode is “PPC Bloat,” and how basically more and more people have taken this advertising route that’s fairly accessible. It has a fairly low overhead to be advertising ready.

Jeff:
Or like cost to entry.

Jacob:
Yes.

Jacob:
Yes, but also like style to entry too. A lot of times, if you liken to  a billboard—sure, what are you going to put on it? You’ve got to get a graphic designer, a photographer. Pay-per-click, you can just put some words on it. You can write it. You can get it out there today. And also, it was a lot more affordable than other forms of advertising—or was affordable.

Jeff:
Let’s jump in right there. You’ve been in this industry for a while—. 

Jacob:
Getting on 13 years.

Jeff:
Do you want to talk about how the cost for PPC or pay-per-click and advertising and AdWords has changed over the 13-ish years that you’ve been in?

Jacob:
Yeah. When I first started in this industry, the company I worked at didn’t do a lot of PPC, but we did a little, we’d do it with some companies. It was an affordable thing, so the cost-per-click could be 5 cents, 10 cents, 50 cents. a click. So you can really make like $200 to $500 actually test the waters a little bit for an ad before spending more money to see if it would be more successful and more money.

Jeff:
Right.

Jacob:
Which was great, but also the entry point is way less. I mean, if you compare that—even billboards back then—if you did a billboard on a major highway in the city, you would get way more traffic to see your thing.  But it’s not as targeted. It’s not towards people looking for the right keyword.

Jeff:
Right.

Jacob:
It’s just—but that is like $20,000-plus a month, $30,000-plus a month. Depending on location. This could be $500 a month, $1,000 a month. And anyways, the cost has just ballooned over time, and it was really easy to get started.

It was a lot more targeted, so you had to be very controlling over what keywords you had. Now things are AI-driven, they’re dynamic-driven. You have these topic spaces, you have negative keywords. Before, it was very much a targeted, zoned-in approach. So sometimes you could over-target, and you could find that your campaign around a particular set of keywords was actually bad because you targeted too much. You didn’t make it broad enough.

But now it feels like it’s a spray-and-pay—sorry, spray-and-pray—approach.

Jeff:
Well, kind of spray-and-pay as well.

Jacob:
Spray-and-pay. And that has gone back and forth on that too over time. But that is kind of where the history is, and that’s what we wanted to talk about today, because now when people ask me, should I advertise for my business on pay-per-click—which happens from clients time to time. I’m a little skittish at first, unless the client actually has a sizable chunk of change to spend every single month.

Jeff:
Right. So if you could be more specific, what was it like using PPC 15 years ago or whatever?

Jacob:
Now when you sign up and go to Google and get all that stuff, they kind of let you put in a couple of topics, and they generate a bunch of keywords for you. Back then, you had to pick everything manually. You had to set your bid strategy manually. It was a very complicated system, and you had to know what you were doing. Everything was in the settings.

Now it’s very guided, because they know they can make a lot of money here, so they’ve made it very polished for non-technical people to use. There is an AdWords Manager account that can still get all that old-school technical stuff, but that’s not very accessible to most people unless you set up an AdWords Manager and everything.

So that’s on one end, but the other end of it was, you could do a lot more experiments really quickly and try things out. Also, the competition wasn’t as heavy. It was easy to show up and dominate a term. You could have a bid strategy of $10 a day for one term, and you might not even use the whole budget—just to make sure you show up number one for that one term. Just to kind of hold a space in line.

Jeff:
Okay. Can you break that down—what do you mean by bid strategy per term? We’ve talked about how pay-per-click works on previous episodes, but just briefly—how does that work? Like, you have a $10/day allotment to show up for a keyword, but then you run out, and then—can you just break down how it works?

Jacob:
Yeah. In the beginning, this was a little more tightened in on the keyword you were spending your money on. Now it’s a little more broad, and they try to do all these AI and responsive things. But the way it started out was, I have a keyword or phrase. So, let’s say—and this was a true example that I did some years ago—“commercial photographer Cincinnati.” Not a lot of photographers in Cincinnati were doing ads for that spot, but it’s the one term that this company wanted to show up for, and they wanted to make sure they were always number one for that term, either in organic or in the ads, or both.

So we just set it up, and we made sure it was exactly that term. We geofenced it to that area.

Jeff:
Geofenced meaning?

Jacob:
Oh, we targeted the region. You can target it by DMAs—Nielsen DMAs for whole markets—or you can do it by zip codes and stuff like that. Very targeted regions.

So anyway, we fenced it around the Cincinnati area. We had this one keyword term. We set how much money we would bid per day. What Google will try to do is use its money and allocate its resources each day to get as many clicks as it can. There are other bid strategies, but that’s the best way to think about it: as many clicks as it can for the dollars you put there.

So if not a lot of people do it, you could put like a $50-a-day bid on there, which would be like, you know—would you really want to spend $3,000 a month on one term? Probably not. But you could set that. If nobody bids on that and you’re not competing with it because you had the bid so high, you’d always be the first bidder. You’ll always get the top spot. But that is what it is. It’s kind of like a little gambling horse race that you’re trying to get up there, and you can juice it with your dollar.

Jeff:
No, I mean, yeah, if you want to be number one always, always, always. 

And so how has that changed versus—that was back then—how does that work today? Can you even do that? Like, if you wanted to do that same thing today, how much would it cost you?

Jacob:
Probably quite a bit more, ’cause sometimes the clicks—especially at national levels—can be $30, $40 a click. You can get one click for the day, you’d be number one for $40, and then you’d be gone. You won’t be there the rest of the day.

Jeff:
You’d only end up one time per day.

Jacob:
One time per day. Unless you put hundreds and hundreds of dollars per day for that. It’s a little ridiculous to do that kind of marketing version of it now. And Google kind of gets people away from doing that too.

So they don’t really let you pick a very specific keyword unless you go really out of your way, do a lot of negative keywords, hone it in, and do a lot of this.

Jeff:
What’s a negative keyword real quick?

Jacob:
A good example would be—back to the photo retouching photography thing. So if I wanted to show up for “photo retouching.” But I’m not a photo retouching app. I’m not like something like Fiverr.

Jeff:
You’re like “photo retouching service,” vs “photo retouching app.” So the negative keyword would be “app.” And the positive keyword would be “service.”

Jacob:
Yes. And there’s a space in those AdWords areas where you can select your negative keywords and say, “No, don’t spend my money on those clicks.” I don’t want those clicks anymore. And that would be it.

But I do want to get a little bit back into some of the research I did for today.

Jeff:
Yeah, please. Let’s dig in.

Jacob:
So I did some digging in to see what would be the average costs for a campaign going back 10, 20 years. And in 2005, it would be under a dollar a day for most campaigns. You could actually do some clicks. And the cost per click would be well under a dollar for almost every single vertical that was out there. So it was really cheap.

Well, I’m sorry: not under a dollar a day. I shouldn’t have said that. Under a dollar per click. Yeah, back in the day almost all the time.

Jeff:
What’s a vertical?

Jacob:
So, a specific industry would be another word for a vertical. So like, therapy is a vertical, or something like that. Or pizza. I’m in the vertical of fast food. Not information-wise. 

But now, over time, that’s almost tripled or quadrupled across the board. And in some verticals, you do see keywords getting up to $30–$40 a click, which is like—whoa, that’s a lot of money.

Jeff:
Yeah, that’s very expensive.

Jacob:
Back in 2005, you could just spend money to spend money, to see what would work, and get a lot of traffic to yourself.

Jeff:
What is it called? Throwing paint at the wall?

Jacob:
Yeah, you could throw some paint at the wall, see what worked.

Jeff:
That’s not the right—right? Is that the right phrase? You know what I mean.

Jacob:
Yeah. But you could do that back in the day, 

Jeff:
And now you have to be very intentional. 

Jacob:
You should… well, unless you have a lot of money. And that’s where it is: now that gate to entry is there.

I remember it being so kind of freewheeling back in the day too, that some competitors would click each other’s ads to drain each other’s budgets.

Jeff:
Right? Yeah, we’ve talked about that—I think just you and me, not on the podcast. But just like—could you go to your competitors and just drain their budget?

Jacob:
Yeah. Back a while ago, you definitely could do that, and it would be really easy because you would know the handful of keywords they wanted to show up for. And then everyone in your organization could just go drain their budget for the day.

Jeff:
Okay. “So all of my employees:today you’re going to spend five minutes draining the PPC accounts for all of our competitors. Go!”

Jacob:
They really did that. They really did that. And sometimes—I remember one story: somebody put a really big ad budget in, but it was easy to over-budget and then not reach your budget back then too.

Like, now when you put in a budget, Google’s going to get all your money spent. Back then, you could actually over-budget, and Google would underspend because there wouldn’t be as many clicks. And you could make those clicks go longer over those days. But then they would just drain budgets. People would get $5,000 bills—way more than they thought—by just doing that thing. 

But you could do those experiments back then, and it wasn’t so bad. Now, I mean, really as a starting threshold, if you don’t have at least a thousand dollars to spend every month, your return on investment can be really skimpy.

Because not only do you have fewer clicks that you’re going to get for a thousand dollars than you would 20 years ago—15 years ago—you’d get three times less clicks for the same amount that time ago. Now you also have to deal with the fact that you’re getting less quality clicks as well. There’s a lot less ROAS—return on ad spend—that has occurred.

Jeff:
So what would that look—what is the return on ad spend? What’s a quality click?

Jacob:
So it really depends on what your campaign’s about. Let’s say you’re getting a sale, or you’re getting a lead filling out your form. Great AdWords campaigns will break a conversion rate where they’ll actually go and do a form on your site over 1%, they’ll break that. But it’s really hard to get there. I don’t see that very often.

So, let’s say you spend $1,000 and you get 300 visitors to your site for that amount, because you’re doing like around $3 a click or less. And you only get 1% of the people—maybe you’ll get three people to fill out your form for $1,000. And that would be $333 per lead. Is that really what you want to spend it on?

Now, if you have a lower-cost item—not in B2B—that could maybe be a little bit better because you’re just, you know, “I need to sell my orchid plant,” and it’s a little bit easier cost entry. You’ll have maybe a better conversion rate on that, and then that would directly track to revenue dollars.

And now with AI, the nice thing is—versus that time period ago—it can learn from your successes on your campaign and say, “Okay, if this type of person will click on this and follow through and get to checkout,” it can learn from that, if you give Google enough access to your analytics data and you hook up Google ad tracking with Tag Manager and all those things, it will learn from that and then can modify the campaign of what it displays to get better mileage.

Jeff:
So I do want to come back to AI, but just quickly—talking about the history of PPC and how it’s changed toward today—what have you seen? What industries have been most affected? Or are we being affected across the board? Is it just like everybody is suffering, or are some people really suffering?

Jacob:
I think the people that suffer the most from all the bidding strategies that have been AI-enhanced and all that stuff is the small business owner. Because you need a lot of money to get it to work well. And then you really have to be monitoring it. You have to spend a lot of time on it. You have to hire someone to manage it.

I mean, the thing is, with those really nice tools now—where you put in a couple topics and it does all these wide keywords and shows up for all these things—if you are not on the ball with your negative keywords, you could be burning a pile of cash really quick.

Jeff:
It’s saying, “Oh, look at all these places that people are looking for stuff like you.” And it’s like, well, actually that’s like—it’s, “Oh, look at all these people looking for photo retouching apps.” Yeah, like “that’s helpful to you, right?” And it’s like, no, I’m not an app.

Jacob:
Yeah. If you’re not paying attention you will be burning more money. And that’s where all this stuff is—like, it’s really easy to get into it. It’s really easy to put your credit card into it. It’s really easy to spend it. But if you don’t have someone working with you to actually make something meaningful out of it, you could really be burning cash quick. And that would be, I think, the biggest thing.

But as far as particular industries go—no. But I do think any industry that has really high-value products—in sales, B2B, cars, anything that’s really high-value and there’s a lot of money on the line—the CPC for some things can quickly go to $12+, $13, $25, $40. I’ve seen $60 on some of these in SEMrush before. And I’m just like, “whoa!” That’s where it really happens. If you are in a high-value game, you will be spending a lot more money because your competitors are spending more money—because they have money to spend. So it kind of just feeds into a cycle of itself.

Versus if you have a more information-based business, there’s still like 50-cent clicks out there, 30-cent clicks out there.

Jeff:
Sure. When you move away from transactional to informational, or… what’s the other ones?

Jacob:
Informational, navigational, commercial.

Jeff:
Yeah. So like, not transactional and navigational—those are going to be the high, high-cost ones, correct?

Jacob:
Potentially, yeah.

Jeff:
Yeah. Yeah.

Jacob:
And commercial—well, commercial can be up too. It’s really information that’s the one.

Jeff:
Commercial could go either way, I think.

Jacob:
Yeah. It depends on what the topic is and the space that it’s in, but it is basically—you’ve got to spend more money to make more money. And now it’s becoming pretty much on par with any other advertising campaign, traditional advertising campaign.

‘Cause I did some research on it to see how much people are spending now. There was a study that was done recently—and I’ll link to it—from WebFX. They have a PPC pricing study. And what we find is that 43% are spending between $0 and $5,000 a month. And then more than half of everybody spending on ads right now—so about 58%, if I did that right, 57%—are spending more than $5,000 per month. And at least 11% of businesses spend $50,000 to $100,000 a month on their ad spend.

So it is a legitimately very expensive place. And there’s even—they said in here—5.56% spend $100,000 to $250,000 per month on their advertising spend

Jeff:
Yeah. That’s crazy. And that’s getting into traditional ad space expenditures like TV, radio, like all that stuff.

Jacob:
Exactly.

Jeff:
So what strategies should small and mid-size businesses—how should they approach this? Are there alternative strategies that they should be thinking about in terms of budgeting? Or should they just, I don’t know, try to move away from PPC altogether? AdWords? Just try to find some other avenue of getting yourself known?

Jacob:
Yeah. I think if you’re a small business owner, it’s really about creating a really healthy mix. I like to think of it in the—I’m going back to—you made a joke before the call: Did I take an economics class? Like, yes I did. But one thing that is important is diversification with your investment. And this is in that zone as well. Your marketing can play into each other.

So I think you should pick something that is a central backbone element of your brand and your marketing, that then you trickle your work out from. 

So I’m an SEO person, and I think your website should be your backbone. That’s where you should spend a lot of your time to get really good foundational experiences for your website, for your content, so that when you drive ads to it, they get better. But then, you know, you get a good photo shoot that needs to go on your website, and then you can use it in your ads—on different ads.

And you need to diversify through it. And like, I would say that…

Jeff:
Or, what else would that look like? Like a good backbone of your website?

Jacob:
Well, I think if you’re an advertiser—like, let’s say you’re a liquor company: I would say the best thing that you might be using as a backbone of your marketing efforts would be your video and photo shoots. So then you’re going to be using that on social media. You’re going to be using that in your ads. You’re going to be using that on TV. But pick a craft to be the central part of your experience.

Or if you’re—sometimes I see this with BetterHelp. It seems like podcasting is their place to be the backbone of their advertising, where they sponsor so many ads. 

Jeff:
That’s why I know of BetterHelp is only through podcasts, ’cause they sponsor literally every single podcast on Earth.

Jacob:
Yeah. And I think there’s something to be said about picking one that’s going to be your winner. That’s the one that you’re going to stick with. But they all play into each other.

That would be a good thing to do with the diversification of it. And I would think SEO, in my view, is like bonds—slow and steady. If your website’s doing good, you’ve got your SEO going good—great. Are you going to make a ton of money on SEO in the short term? No. It’s kind of like buying bonds. You’ve got to stick it out for the long haul. But if you have a really good foundation of that kind of stuff in your portfolio, it’s better.

But for PPC, getting into that—like, okay, now I’ve picked my thing, and how is this going to play into PPC? So if you have good landing pages on your website from your SEO work, you could use that as landing pages for your pay-per-click campaign.

But then, when you’re picking your bid strategies, you want to think: big fish, small pond. So how do you hone this in? Because if—on a national level, something like therapy, something like—I was just talking about BetterHelp, I’m thinking of therapy—something like that, in which I just did keyword research for recently, it was around $12 to $14 a click on a national level. Increase the long tail of your keyword—put more words in there—and then the cost of the bid will go down because you’ll have less competition. Target to a geo-fenced area again. You’re lowering the competition pool.

Jeff:
Yeah. If you’re a counseling service—sticking with therapy—you know, go with keywords that, like you said, geofence. Or that are “counseling services near me” or wherever it is, your locale “counseling services in Greater Cincinnati.” Because “counseling services” nationwide is prohibitive.

Jacob:
You’ll get lost in the mix so quick, and your budget will just disappear immediately.

Now, if you are a national company though, you’re going to want to show up nationally. But I do think, if you do market strategies and you hone in on, “I’m going to focus in on these three key regions of my marketing spend”—so I have sat in on some tourism campaigns, and it was really smart to watch those guys say, “Okay, I’m not going to blow all of our money—millions of dollars—on all of the United States evenly. We’re going to pick key markets that are people that have an easy point of entry into our state.” So they’ll pick surrounding cities, hone in on those, and hone in on those again to the most… 

Jeff:
Or even times of year.

Jacob:
That’s true as well. You could probably do that

Jeff:
Like seasonality.

Jacob:
That could play into it. When New York season’s on, all your competition’s season is on as well. 

Jeff:
It depends. If you’re talking about the entire United States, that’s not true.

Jacob:
That’s true.

Jeff:
Maine’s season is not the same as Florida’s season.

Jacob:
That might be true. So you might change your advertising around that. But every time you can increase the long tail of your targets and then decrease the scope of where you’re targeting, you can make those dollars stretch farther. So you’re going to be a little more scrappy in it and, you know, have a sizable budget.

Like, I don’t think anybody that’s going to spend on advertising today should spend less than $1,000 a month. I just don’t think you’re going to see it come back.

Jeff:
It’s pointless. If you’re going to spend less than $1,000, spend it on something else.

Jeff:
Okay. So we usually think of it in terms of Google—in terms of internet advertising—because that’s been the backbone of the whole industry. But where else is this happening, or where else should people be looking at besides Google?

Jacob:
Yes, Google is the main one, but there are others. Just like Google has competitors—Microsoft being one of the biggest ones. According to some research I was doing from WebFX, they found that 51% of pay-per-click advertising was spent on Microsoft, and 89% of digital advertising was spent on Google. So people still use it as part of an overall mix. Oftentimes there’s overlap. Most people are on Google and Microsoft—they’re not usually exclusive to one platform.

But a lot of other advertising where pay-per-click is at play is important too—Meta would be a good example of that, so you have Instagram and Facebook. Now, those don’t necessarily work on the same kind of keyword strategy. That’s definitely more about trying to get like-minded individuals to follow and click your stuff. But we’re still dealing with pay-per-click budgets.

So you’ll have an overall marketing mix of digital marketing needs, and you could be spending money on Meta, you’ll be spending money on Google Ads, you’ll be spending money on Microsoft Ads. Basically anywhere someone will sell, that is there. But those are the three big players in the space where people spend hundreds and hundreds of thousands of dollars.

Jeff:
All right. So Jacob, any final thoughts to leave us with today, other than “get out your wallet”?

Jacob:
Yes. The classic thing is: if you’re gonna make money, you gotta spend money. So trying to plan this out maybe more on an annual basis is going to be to your benefit, not thinking of it in month-to-month chunks or a cost-per-click level. To be like really thinking  about how much money you can spend over the course of a year, and then how much you want to allocate to certain areas.

But also, going back to the buyer’s journey that we talked about in the last one: Where are those people going to be? What part of that journey are you targeting them on? Maybe if your buyer is doing a lot of research on TikTok, maybe that’ll be a part of your mix, and less so pay-per-click. And vice versa.

So it’s going to be a lot of mapping it out around that diversification idea we talked about, making sure that you aren’t just relying on one thing. 

Because I’ve made a joke before: pay-per-click and Google advertising can feel like making smoke signals with a pile of money. You just keep burning it, the signal goes up, lots of people are coming… and, you know. A lot of time, paid advertising—and I see this definitely on websites—and I do reporting on a website that has over a million visitors a month—their engagement rate, when people actually click on stuff on their site from Meta advertising, different types of social media advertising, Google Display Network, pay-per-click advertising—all that, a lot of times it’s in the 20 to 30 percentile. Sometimes a little higher, sometimes a little lower.

Most websites that get organic search and direct visitors—they’re in like the 50 to 60 percentile. So, you just get less engaged people. You really want to make sure you’re spending your money where you really think it’s going to have the most impact.

Jeff:
Right. You’re spending money to get people who actually might click on your stuff. Eyeballs are not that important if they’re just passive.

Jacob:
Right. And they might be interested now and come back later. There’s a lot of things about it. It’s a little bit like treating your website a little bit like a magazine that you’re around. You can be seen more. There is some benefit to that.

You get more visitors with pay-per-click, but less engaged visitors with pay-per-click of all varieties. So that’s why it’s really important to diversify what you’re doing and pay very close attention to where your people are actually at. Because if part of their buying process really isn’t Google pay-per-click, and you spend tons of money there, it’s really going to hurt. And all this money goes quick. It just goes as fast as you can spend it. And it doesn’t come back.

So definitely get an ad partner. I think that would be the best thing to leave on: don’t do this alone. Get a partner. Get someone who’s actually done something similar to your company, on your company’s scale, previously, that you can really trust. Or if you’re really small, you can risk it on somebody new. That’s fine. Someone’s got to learn somewhere.

Jeff:
Not us. We know everything.

Jacob:
Yes. But maybe their ad spend budget will be– their ads management budget will be– a lot more affordable if you get somebody on the books who’s less experienced. It’s part of this whole process. But having someone in there, helping you guide, helping you map this journey, helping you target people, will basically make—even if you don’t get a massive amount of bottom-line interactions or sales from this—if you did all the due diligence up front, you’re going to feel more confident in the end.

Jeff:
Right. And just hearkening back to some of the stuff we said at the beginning of the episode: if you don’t know what negative keywords are, you might be throwing really good money after some stuff that is not going to help you at all. If you didn’t know to do a negative keyword for “app,” then here you are…

Jacob:
Burning money again. Burning those smoke signals. And so that’s why a partner—someone who can actually be there with you, helping you identify that—

Jeff:
Right. At least like minimum, those sorts of things.

But yeah, so I think that wraps up our episode today.

Jacob:
Yes.

Jeff:
Next time we are going to be switching gears from our acronym soup to—what was it called?

Jacob:
Jargon Board.

Jeff:
Yeah. Jargon Board.

Jacob:
We’re going to pick jargon from the industry to make fun of and define, and try to treat it a little bit like a charcuterie board.

Jeff:
Yes.

Jacob:
Acronym soup… we’re trying to keep the food theme alive.

Jeff:
Yeah, we’ll take bites of each little thing and tell you what it means.

Jacob:
Yes. Alright. Thanks, Jeff.

Jeff:
Yeah, thanks, Jacob.

Jacob:
Goodbye.