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Is Adwords Expensive? The Whiny Builder Story

google-whineI am often asked if Google Adwords is worth the cost. My answer is always the same … it depends on the numbers.

What I mean is that if, over the long term, Google Adwords advertising generates more PROFIT than it costs then it is worth the spend.

A few years a go I had a builder in my office whining about how much Adwords was costing him. I asked him what his average PROFIT was on his work (he did deck additions). He said that it was about $12,000 per contract.

I couldn’t believe it, this guy was whining about paying an average of $1.15 per click (prospect), for an average $12,000 PROFIT. This guy was a good candidate for what we call in the industry “a dead possum referral” 🙂

The rule of thumb I use is a very conservative conversion ratio of 50 to one (2%). In other words if Google Adwords is costing you 20 cents per click and the average lifetime value of a new client or customer is at lease $10, then you are crazy if you don’t trial Adwords for 3 – 6 months.

In some industries Adwords is very competitive. Anything to do with travel, accommodation, the building trades, cosmetic procedures or car hire is comparatively expensive in that the cost per click is a larger proportion of the potential profit.

In other industries like aviation maintenance, you can get buy clicks for less than 80 cents each that could result in a $200,000 sale. And for those sorts of industries the conversion rate is usually far greater than 2%. In these sorts of cases I advise to forget spending too much on SEO and throw more money at Adwords.

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