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Google Pay-Per-Click Ads: Easier (and More Expensive) than Ever!

How Google Charged Business Owners $62 Billion Extra in 2021

March 22, 2022 | Posted in: Search

Most people perform searches on a daily basis without ever thinking about how Google monetizes that service. Of all the things Google does, paid search is by far their most lucrative service. It’s a pretty simple concept: Business owners and marketing firms bid for ad positions and when users click on those ads, the business pays a fee. In 2021, ads at the top of search results brought in $209 billion dollars for their parent company, Alphabet. This was an increase of 43% (on a service they’ve been offering for over 20 years).

Statistic: Advertising revenue of Google from 2001 to 2021 (in billion U.S. dollars) | Statista
Graphics and data provided by Statista

What Happened!?!

There are two key factors that contributed to this massive shift in a seemingly unchanged service:

  1. The COVID-19 pandemic saw governments from around the world shut down and restrict businesses
    • In an attempt to make up for lost revenue, many business owners started paying for clicks
  2. Google changed their ad platform to include several “automatic” and “smart” features
    • Those features are now the default for new campaigns.
google ad tips

Understanding Google’s Auto-Bidding and “Smart” Format Ads

Originally, pay-per-click ads were a very simple concept: Ad buyers would list out the keywords or phrases they wanted to bid for and write short text-only ads for those keywords. Their next step would be to choose an amount they were willing to pay for a click on those ads. An “ad group” would always look something like the “Classic” example below:

Classic Ad Group

Repeat the following steps for each brand and product category:

Keywords: Adidas running shoes, Adidas mens shoes, Mens running shoes

Bid: $1.55/click

Ad Headline: Looking for Adidas running shoes?

Ad Description: We’ve got the newest mens styles in sizes 8-12 and for the next seven days all running shoes ship free. Supplies won’t last so visit our website today!

Ad Destination: yourwebsite.com/shoes/running/adidas/mens/

Ad groups like this are still available, but Google has removed a lot of the friction for users who don’t go looking for all of those options. Creating ad groups like the above for 100s or 1000s of products can now be done in minutes instead of hours. Without exploring the extra options available, you can create a new campaign by providing only the most basic information…

Smart Ad Campaign

Keyword Theme: Shoes

Daily Budget: $500

One-time setup:

Website: yourwebsite.com

Ad Content: Auto

For the smart campaign above, your ad text and bidding strategy would be configured automatically and your credit card would start paying for clicks in less than 24 hours. However, the performance of those clicks may be disappointing…
frustrated advertiser

In our testing, Google’s smart/automated ads tend to:

  1. Overbid and run through a budget quickly
  2. Bid on irrelevant terms (e.g. paying for clicks on “shoe repair” would not be helpful for the example advertiser but may exist within the default “keyword theme”)
  3. Include generic-sounding ad copy that isn’t persuasive to your target audience

Frequently asked questions about Google Ads

Do All Google Clicks Cost the Business Owner?

Thankfully not! The only clicks that incur a cost to the business owner are marked with “Ad” at the top of the page, in “shopping” results, or displayed as a video or image in the sidebar. In those few areas of search results, Alphabet charged advertisers over $17 billion dollars per month in 2021.

How do I get clicks without paying for ads?

Search engine optimization or “SEO” is essentially the opposite of Google Ads. Business owners can instead hire a marketing firm (like Range Marketing) to improve their website’s keyword relevance and earn top positioning in the “organic” (free) section of search results. SEO can deliver an unlimited number of clicks without incurring any extra cost to the business owner because their website is appearing organically rather than in a paid ad position.

Will I get enough clicks to grow my business without paying for them?

Absolutely! Believe it or not, the click-through rate on Google Ads is less than 2% (Source: Wordstream). The average user will subconsciously skip over the ads and click something in the organic section.

Are Google Ads always bad idea?

Not always. Depending on your budget, goals, timeline, and competitive landscape, there may be a place for Google Ads within your overall marketing strategy. Verticals with a lot of competitors (especially auto-bidders) can end up raising the cost-per-click well above what makes economic sense, but more niche businesses occasionally will enjoy low acquisition cost on Google Ads.

Can any business buy Google Ads?

No. Google has a list of banned categories and will remove your campaign if you are caught advertising any of the following:

  • Cannabis (dispensaries and related businesses)
  • Bail bonds
  • Solicitation of funds (unless by a political party, candidate, or tax-exempt charity)
  • Third party government document preparers
  • Call directories (including forwarding and recording services)
  • Third-party consumer technical support
  • HFSS F&B (High Fat Sugar Salt Food and Beverage) companies that target minors

Other verticals are restricted and subject to additional verifications before your ads can appear. This includes:

  • Locksmiths
  • Free desktop software
  • Garage door repair
  • Consumer advisories
  • Auctions
  • Event ticket sales

How do I know if Ads are right for me?

If you need help assessing whether Google Ads, SEO, or a combination of both would be the best fit for your business, don’t hesitate to ask. We don’t charge for initial consultations!

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