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Supply and Demand: Why PPC is Dying and the Future of Paid Search Ads

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Pay-per-click (PPC) ads were once a hot ticket item in the world of search marketing, serving as an excellent complementary strategy for practically any type of business. But PPC activity is slowing to a crawl as more marketers are encountering the limitations of the strategy. PPC ads are still available and can still be useful if created properly, but their future is looking grim.

Search marketers have a penchant for making bold predictions about the industry—people have been claiming that “SEO is dead” fairly consistently for the better part of a decade, but it’s still a viable and growing strategy. So why is our prediction of the death of PPC ads different?

The Rise of Paid Search Ads

articleimage464The Rise of Paid Search Ads

Let’s take a look at why traditional PPC ads became so popular in the first place. Various institutions tried to start a PPC model in the late 1990s, but it wasn’t until Google introduced their AdWords system in 2000 that the idea started gaining popularity. Because advertisers only paid for clicks, the concept was appealing to search marketers that were wary of investing in a questionable idea. Search marketing was still in its infancy, and PPC ads provided some level of investment security for the average business.

Combined with the detailed analytics and insights of AdWords, the concept of PPC advertising took off. Marketers could analyze exactly how much they spent on PPC ads and how many actual conversions they received. This fundamental basis has not changed, but the environment surrounding PPC ads certainly has.

Modern Problems

articleimage464Modern Problems

Getting started with a PPC ad campaign today is much different than it was back in 2000. The cost of ads, the appeal of ads, and the competitive landscape of PPC have all played a role in deteriorating its feasibility as a long-term strategy.

Price

The cost of running a PPC ad campaign with Google has steadily risen from its inception. When PPC ads were first starting to gain popularity, search marketers were able to choose almost any keywords they wanted and were able to fit them into a reasonable budget. Today, Google offers a bid-based system, in which multiple advertisers can bid a specific amount of money for advertising on the KWR page of a given keyword. The more you bid, the more likely you are to be placed higher in the chain. In order to build or maintain effectiveness in a PPC strategy, you are required to spend more money, while your conversion rates and customer values remain constant. It’s a losing strategy for most PPC advertisers, resulting in a break-even or net loss for anyone without a highly effective strategy.

Competition

The level of competition around today is also playing a major role in the downward spiral of PPC ads. When PPC ads first started, there weren’t many people using them because they were new and unfamiliar. Now, PPC ads are commonplace, and almost every business owner in the United States is aware of their existence. Since ad space is limited, competitors are forced to go up against each other in a vicious scramble to get to the top of the paid search results. It leads to difficulty in securing the most relevant keywords for your business and puts stress on budgetary restrictions.

Type of Traffic

Google has experimented with the placement of their paid ads, ultimately resulting in its modern format—a selection of three designated ads at the top of the search results (marked with a yellow “Ad” insignia) and a group of secondary advertisements in a right-hand column. There are a handful of problems with this format.

First, most searchers are aware of these advertisements, and will not click on them simply because they do not want to be advertised to. These ads appear as “white noise” to the average user, who will skip to the organic results immediately. This isn’t a budgetary concern, since marketers only pay for individuals who actually click the ads, but it does severely restrict the pool of people who are likely to click.

Second, many businesses have complex sales processes that cannot be limited to a handful of clicks. Cheap consumer products might benefit from PPC ads since conversion rates are higher and it takes less time to sell, but most companies do not have the luxury of that format. B2B companies especially feel this stress with the level of competition looming over them.

Finally, attracting users to a simple, click-based conversion-optimized landing page might be a good strategy to win a handful of conversions, but it does nothing to build a long-term relationship with your customer. When you pay for a PPC ad, you’re essentially paying for a one-time customer. By investing a little more in a branding strategy that attracts more long-term relationships, you’ll see a much higher return on investment, and you won’t have to rely on new customer acquisition as often.

The Possible Future of Paid Search

articleimage464The Possible Future of Paid Search

This isn’t to say that all forms of paid search advertising are dead. PPC ads are dying because of their current format and limitations, but if those limitations can be overcome, paid search advertising could be revived into a new renaissance.

Bing Ads

Bing and Yahoo! have joined forces in one collective search endeavor, combining their search algorithms as well as their paid ad management platform. While Bing and Yahoo! together are responsible for less than one-third of all search traffic, they could be a viable means of advertising for certain companies. The cost is lower, the competition is less severe, and their management platform is straightforward and intuitive. In addition, most Bing and Yahoo! searchers are of an older demographic, so if that matches your target audience, Bing ads could be worth considering. Plus, Bing and Yahoo! are on the rise in both popularity and sophistication, so depending on what they have in store for the search world, they could herald in a new era of paid search advertising.

More Targeted Advertising

It’s also possible that increasingly sophisticated search algorithms at Google could pave the way for more sophisticated, targeting forms of paid search ads. While this is purely speculative, it’s entirely reasonable to think that one day, search advertisers will be able to pinpoint highly specific types of users, and could therefore reduce their competition and maximize their rates of return.

Better Alternatives

For now, it’s a good idea to steer clear of PPC ads altogether unless you have a very specific, cost-efficient strategy and a broader strategy that relies on one-time customer purchases. Instead, invest your time and effort into a strategy that will pay off for years. Building a good brand that provides true value to your customers is the most beneficial thing you can do: it builds your reputation and attracts new customers, makes your customers loyal so they keep buying from you, and boosts your organic rank in search engines so you’re easier for new customers to find.

This long-term strategy doesn’t offer immediate results like PPC ads do, but the payoff is exponential. With a little patience and perseverance, a content marketing and branding strategy will serve you far better than even the best PPC ad strategy.

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James Parsons

I'm an avid blogger on SEO, social media, and design. When I'm not working with the awesome guys at AudienceBloom, I'm writing for my personal blog at JamesParsons.com or working on my next big project.

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  • Liam Xavier

    Hi James,

    I would have to disagree with about 90% of your article. PPC is not dying. I can see why you would want to downgrade PPC and promote SEO. For an agency the SEO profit margin is significantly larger than PPC. The reality is, PPC and SEO are two completely different strategies and when used together strategically they can be a huge benefit for businesses.

    I was a little confused while ready the article because you mentioned several supporting points of PPC and tried to twist them around into reasons not to do it. First the price or cost per click for some industries has increased over the years indicating more businesses are using PPC, which I take that as a positive showing that it works. If it wasn’t working more businesses would be dropping their PPC advertising and cost per clicks would be falling. Same thing with the competition. If competition was decreasing it would be showing that businesses are turning away from PPC.

    Also your idea that no one clicks on PPC ads is simply ridiculous. Google wouldn’t be making $100 million dollars a day on PPC if no one was clicking on them (source: http://searchenginewatch.com/sew/news/2220372/how-google-rakes-in-over-usd100-million-in-search-advertising-daily-infographic).

    • James Parsons

      Liam,

      Thanks for your comment.

      My theory is that SEO and search marketing is growing, and as a result, more of a focus is being put into sustainable long term growth rather than expensive short term traffic.

      PCC as an industry is certainly nowhere near dead, but most can agree that it is not growing nearly as fast as the content and SEO industry is.

      Lastly, me saying nobody clicking on PPC ads wasn’t meant to be taken literally; sorry if that was confusing. The first organic result in Google has exponentially higher click through rates than ads, which is a documented fact. Your traffic and sales could be several times higher with an organic #1 listing versus a PPC #1 listing; yet another reason why investing into an organic SEO campaign is more appealing than PPC.

      Hope this helps!

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