The Google Ads Myths That Drive Business Owners Crazy – Google Ads are overpriced and not cost-effective

This is the first in a series of posts that I hope will dispel some misconceptions or common myths surrounding Google Ads.

These myths are not exclusive to Google ads but perhaps because it is the largest ad platform in the world it is the one that receives the most scorn from business owners.

In many cases Google do deserve the criticism that they receive but in other cases it is just a case of a poor workman blames his tools.

So on to the first myth that we will cover:

Google Ads are overpriced and not cost-effective

Some advertisers believe that the cost per click (CPC) on Google Ads is too high, making it difficult to achieve a satisfactory return on investment (ROI) compared to other advertising platforms. Some have suggested that there is some sleight of hand going on in order to maximise profits at Google.

The reality is that Google have created an incredibly efficient money making machine – The Google Ads platform works on an auction basis so the CPC that you pay on clicks is a product of the ad auction and how much other advertisers are willing to pay for traffic on the same keywords/placements.

The formula that Google use to charge advertisers on keyword based traffic is a simple formula that multiplies an advertisers max CPC bid with their quality score in order to get an ad rank score.

The table below shows three advertisers running ads on the same page. Each advertiser has a different CPC and Quality Score. The ad rank number gets calculated by multiplying the CPC bid with the Quality Score. Advertiser A has the highest rank number. This means he gets position number one on the page. Next Google calculates how much to charge each advertiser for a click.

The actual CPC that an advertiser pays is the minimum amount needed to maintain a rank number higher than the next lower ad. This is one pence more than the amount that will result in a rank number that will cause the ad to appear in the next lower position. To calculate this Google divides the rank number of advertiser C with the quality score of advertiser A. The result is the actual CPC that would cause advertiser A’s ad to appear in advertisers C’s position (£0.64). Now Google adds one pence to put advertiser A’s ad in the top position. The same calculation is used to calculate the actual CPC for advertiser C. Notice that Advertiser A pays less than advertiser C for a higher position. This happens because advertiser A has a higher Ad rank than advertiser C. Finally, advertiser B only pays $0.01 because there is no ad appearing below it and Google simply charges the minimum bid for that keyword based on its quality score.

Obviously there are usually many more companies in the auction so you rarely get cpc’s of £0.01

Google Ads is simply a tool that mathematically calculates your position and cost per click based on the auction.

If you are failing to get a good ROI from your Google Ads it could be because:

  1. Your offering is not strong enough – overpriced, website poorly explaining the product/services value, slow website, competitors having a better offer etc.
  2. Ineffective keyword selection (Search) – perhaps you are missing large pockets of keywords that will work well for you and instead focusing spend on ones that are overly competitive.
  3. Poor product data (Performance Max/Shopping) – We often see companies that are getting poor performance on the shopping based traffic having not really optimised their product data for success – things like a lack of descriptive language to clearly define what their product is and what it does. Most common is using a model name without the descriptive product identifier to go with it.
  4. Poor tracking set up – if you are not reliably tracking your sales and leads then Google Ads cannot effectively optimise towards the campaign goals. Always ensure that you have reliable tracking.
  5. Inadequate Ad Copy and Creatives: Compelling ad copy that resonates with your target audience is essential for attracting clicks. Poorly crafted ads that don’t effectively communicate your value proposition can result in low click-through rates (CTR) and ultimately a low ROI.
  6. Improper Campaign Structure and Settings: Organizing your campaigns, ad groups, and settings properly is crucial. If your campaigns are poorly structured or your targeting settings are not aligned with your target audience, you may be wasting your budget on irrelevant clicks.
  7. Other competitors over-spending on their ads regardless of losing money and pushing your CPC’s higher – This happens unfortunately – not all advertisers analyse their performance and adjust methodically and objectively. Nowadays we typically use automated bidding rules across a whole campaign – sometimes advertisers may bid aggressively on a campaign in order to maintain market share for emotional reasons such as a strong belief that they have the market leading offering.
  8. Insufficient Knowledge and Expertise: The Google Ads platform is complex and constantly evolving. If you or your team lack the necessary knowledge and expertise to effectively manage campaigns, consider seeking assistance from professionals or investing in training.

Other myths that we will be covering in future posts:

  1. Google Ads can be misleading for users: Critics argue that the way Google displays ads at the top of search results can sometimes mislead users into clicking on paid ads, thinking they are organic search results.
  2. Google Ads prioritize big advertisers over small businesses: Some small businesses feel that Google Ads favor larger corporations with bigger advertising budgets, making it difficult for smaller businesses to compete effectively in the same ad space.
  3. Google Ads are too complex and not user-friendly: Some advertisers find the Google Ads platform to be overly complicated, with a steep learning curve, making it challenging for newcomers to effectively set up and manage their advertising campaigns.
  4. Google Ads have a negative impact on organic search traffic: Critics claim that the prominence of paid ads on Google pushes down organic search results, potentially reducing the visibility and traffic for websites that rely on organic search for their audience.
  5. Google Ads lack transparency in pricing and performance: Some advertisers believe that Google Ads could be more transparent about how ad placements and bidding work, as well as how they determine the costs associated with various keywords and ad positions.

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