Everyone hears the stories about zillionaires minted through Google AdWords and other paid search programs. But is paid search wrong for some kinds of businesses? I’ve always told people that paid search is not for everyone, but it took a conversation with a professor from Lehigh University to get me to think about why.
I was meeting with a professor at Lehigh before a talk I gave to the local IEEE chapter, Lehigh faculty, and students last week. She was visibly excited about a contest that Google is running for students to find a business that is not using AdWords and create a successful campaign. She showed me several local businesses that were volunteering to work with students in the contest.
She showed me an interesting business that creates nitrogen and other gases using a machine that separates regular air. She showed me a business that throws parties and corporate events around race car driving. Then she showed me an old-fashioned General Store.
At first, I was completely thrown for a loop. Being a city boy, I wasn’t entirely sure what a General Store was in this day and age. Turns out that it is a cross between a convenience store and a fancy delicatessen that serves specialty foods. Fair enough.
The ostensible attraction for this business is that it is located near a local tourist attraction and the tourist train stops for 20 minutes right in front of it several times a day. “Great, but why do you need search for a business like that?” I wondered. The professor replied, “Tourists might plan ahead to make sure there’s food before they take the trip.” I was dubious, wondering if anyone that methodical might instead pack a lunch.
The professor persisted, asking if people might want to search for the name of the tourist attraction and get some information about the General Store. I remained skeptical, and suggested that they might be better off paying for search terms around the specialty food they sell, as long as it is really special. If it is the same stuff everyone else sells, however, then who cares?
It got me to thinking, “What marks a business that should stay away from paid search?” I think there are three broad categories:
- You don’t have a specialty or a brand reputation. If you have known brand name or a unique selling proposition, paid search can work very well, because people will click and buy when they find you. But if you sound a lot like your competitors, it’s less likely you’ll do well.
- The return is too low. If your product sells for a very low profit margin, paid search might cost more profits than you’d make. Likewise, if your Customer Lifetime Value is low (possibly because you get few repeat customers), don’t expect paid search to rescue you.
- You can’t track your purchases back to the Web. If you don’t know what each additional visitor to your site is worth to you, you aren’t ready for paid search, because you won’t know what to bid. You must be able to track sales back to your Web visitors, whether those sales are online or offline.
Coca Cola has a great brand, but it is a horrible candidate for paid search. Coke can’t tell whether purchases resulted from anything on its Web site and its profit per sale is quite low.
The General Store from Lehigh Valley had those problems, plus the lack of a known brand. A few days later the professor e-mailed me to say that she had talked them out of participating in Google’s contest. I was glad, because that is not the Internet marketing tactic that will work for them. E-mail lists, social media, a blog—there might be many ways for them to get their message out—but not paid search. It’s wrong for them and I am glad they didn’t waste money trying. They are far better off experimenting in several other ways.
Is paid search wrong for your business? Are you using paid search just because all the cool kids are doing it? Take a careful look at the characteristics of your business model and see if there might be better ways to spend the money.
