A very interesting discussion on Aaron Wall's SEOBook about whether Google is contributing to web spam. The best part is in the comments (sorry Aaron!) where two readers to the numbers on AdWords for relatively high priced PPC words.
Basically they just don't add up.
We have a solid network of sites that provide consumers information on financial, healthcare and business services. I pride myself on the fact that we try to provide high-quality, relevant content within a structure that is seo-friendly. I've been saddened by the fact that our "white hat" strategies are being pushed into what I consider to be a contribution to the irrelevant link structure of Google's web. I find myself pushing strategies that promote trying to get links from trust sources, such as .edu/.orgs and "topical hubs" instead of building quality partnerships with other sites that complement our core product offering. At the same time, I'm amazed at how advertiser's have continued to support the ineffective, and frankly archaic PPC model that has infected the web.
Did you ever wonder why Google hasn't moved towards a more advanced performance based marketing model earlier? Do the math. At $9 to $14/click for the term "mortgage" - and 20,000 clicks/day, they're raking in $200,000/day off of 'mortgage'. At a 2% conversion rate to mortgage lead, they are charging advertisers an effective $500/lead cost. The same lead, in smaller cost/lead networks, sells exclusively for $50. Go figure.
Tom Ward takes it further:
The analysis should go deeper from the advertiser's viewpoint. The 2% conversion rate to a lead you discussed needs to then be taken further. What is the lead to application conversion rate? We see about 10% running through typical operations; much higher in others. Then what is the application to closing ratio? Federal Home Loan Disclosure Act data indicate less than 75% of applications actually close. At these conversion rates, $500 PER LEAD is not profitable to mortgage originators.
From what I can see as a participant in these verticals is that the people sitting on top of the PPC category here are working on two models:
- they are a huge insurance or financial institution that is effectively cutting out the middle man (to whom they would otherwise have to pay a fee of between $500 and $2500) so they can afford to advertise this way. Even if they don't make any money in direct terms, they get a branding effect. Difficult to compete with as their pockets are very deep.
- people working with a very persuasive sales letter type strategy with a deep product line. First the free report, then the credit audit, then the credit coaching and then the mortgage.
Clearly Google is doing a good job for themselves here. There was a lot of easy money to be made in AdWords a couple of years ago. There is still money to be made but it's harder and will get still harder.
The big companies are just getting started with PPC strategies and buys.
To compete we have to be smaller, lighter and smarter than they are.
And yes anyone in these vertical, we should be looking for the next rainbow as this one is fading fast.