Last week, Matt Umbro wrote a post called, “Why SMBs Should Not Run AdWords Accounts”.
Before I give my response (Spoiler! I don’t agree), we have to define what an SMB is. Matt’s definition is a business that spends less than $500 a month on clicks. So let’s use that.
Now that’s out the way, here are the points I want to make:
#1: Spend is the wrong way to measure the size of an account
Which account is “bigger”,
(A) One that spends $1,000 a month and brings in net sales of $2,000 – profit $1,000
(B) One that spends $300 a month and generates net sales of $3,000 – profit $2,700.
I would suggest the latter. And, BTW, that’s not a crazy example, I’ve had clients who got that sort of ROI. (I’ll explain more later in this post.)
So my view is that, when judging the size of account, you look at the value of the traffic, not the cost of the traffic.
#2: The cost of AdWords management should be compared to net sales, not click cost
Matt gave an example of a PPC account that spent $500 on clicks, and $225 on management. That would mean that, of the $725 spend, 31% goes on management.
As Matt pointed out, by that measure, it’s hard to justify paying for PPC management.
But, looking at it another way … if the $500 brings back $2,000, the cost of management is only 11.25%. A totally different story.
#3: Why are they only spending $500?
There are four main reasons why a business may be using AdWords but spending less than $500/month.
One reason is that they’re testing AdWords, with the plan of rolling it out if it’s profitable. But I’m going to ignore those businesses because they won’t be spending $500/month for long.
A second reason is that they’re a local business where there simply isn’t much in the way of search volume.
A third group is niche national businesses. Again their products or services are so niche, there’s little in the way of search volume.
And the fourth is businesses who, because they earn so little from a visitor, can’t bid competitively. Their spend is limited because their ads rarely show, and when they show, they’re low down on the page.
For this fourth group, the answer is simple: they need a better strategy.
(I outlined what I believe to be the correct strategy in my book, “How to dominate your market with search engine marketing.” You can download a copy here: http://www.bothsidesoftheclick.co.uk/dominate)
For the local and niche businesses, margins tend to be high, and competition tends to be weak, so it doesn’t take a lot of expertise to manage it yourself.
Which takes me to the next point…
#4: AdWords is easy
Matt wrote, “AdWords is difficult”. I’m going the opposite way.
Although I agree with him that PPC has become increasingly complex, I still think it’s the easiest form of direct marketing.
You can read an introductory book in an afternoon and know 80% of what matters.
Try doing that with direct mail, or newspaper/magazine advertising.
And don’t get me started on SEO …
#5: Do you even need PPC management?
If your business is spending less than $500 a month, do you really need much on-going management?
As I just said, you can learn 80% of AdWords in an afternoon. That’ll put you ahead of most of your competitors.
So you might hire someone to set up your campaigns, or to optimise them, but by-and-large you can “set it and forget it”.
#6: Is Facebook a substitute for AdWords?
Matt recommended Facebook ads as an alternative because they “require less time and effort while being more cost effective.”
Again, I don’t agree with this. For three reasons …
First: it’s a totally different beast. As I wrote in an article a couple of years ago,
“Imagine this was 1995, how would you sell your product/service?
If you’d sell via shops or the yellow pages, then AdWords is probably the best fit.
On the other hand, if you would have used direct mail and/or telemarketing, Facebook probably suits you.”
Or, to put it another way: if Facebook doesn’t suit your business, it doesn’t suit your business. And, on the flipside, if AdWords doesn’t suit your business, you shouldn’t be using it.
Second: AdWords is a moving parade of prospects. The people searching on a keyword this month aren’t the people who searched last month. So, in uncompetitive markets, you can have the same ad running for a year, without seeing a drop off in click rate.
That’s not the case with Facebook advertising.
That’s because Facebook is demographic targeting, it’s the same people seeing your ad over and over. And that means your ads – and your offers – will fatigue quickly.
And when your ads fatigue, you click rate plunges and Facebook stops showing your ads.
So, in order to keep the enquiries rolling in, you’re going to have to keep coming up with new ads and new offers.
That might not be a problem for some businesses. But it’ll be a problem for most businesses. And, either way, it’s work. And that work is a cost.
Third: while clicks can be a lot cheaper, conversion rates are usually much lower. That’s because, unlike someone searching on Google, Facebook user isn’t actively looking for what you sell.
#7: What disadvantage?
Matt wrote, “Small businesses are still at a severe disadvantage when trying to run AdWords accounts.”
My question would be, “A disadvantage to whom?”
Small businesses tend to compete against other small businesses, not big companies with large ad spend. And all they have to do is be better than those small businesses.
It’s like the old joke:
Two men are walking through a forest. Suddenly they see a bear walking towards them. One of the men takes running shoes from his bag, and starts putting them on.
“What are you doing,” asks his friend, “Those shoes won’t help you outrun a bear.”
“I don’t have to run faster than the bear,” says the first guy, “I just have to run faster than you.”
Summary
Small businesses need to get traffic from somewhere. And, although AdWords is increasingly complex it’s still easy compared to the other options.
Not only that, but it brings in highly-targeted, ready-to-buy traffic that’s easy to convert.
So I still believe that SMBs should seriously consider using AdWords.
Best wishes,
Steve Gibson
