Has the Google Adwords bubble burst?

Google Ad Words was a revolution in advertising, its unique and an effective means of small businesses reaching customers.  Google Adwords allows you to reach millions of people instantly and it only takes around 5 minutes to set up a campaign.  Perhaps one of its best features is to allow your basement business to compete with a million dollar competitor.

At the beginning bids for a keyword were low, I mean you could be getting a lead for only 3p and a quality lead at that.  However all good things must come to an end and now as peoples knowledge of Adwords increases and as big companies recognise its usefulness and marketing power it is becoming less of a bargain.

When I started my first Adwords campaign my average cost per click (CPC) was around 5p, when I did it last year it was around double that at 10p and now I am finding that it is around 25p for a second or third page add!  That means that prices are increasing by over 100% every year and its getting to the stage where you have to wonder is it really worth it?

The best way to tell of course is using the Google conversion tracker which is supposed to give you an accurate return on investment(ROI).  The problem with this tool is that its not really appropriate for all businesses, affiliate sites for example have the sales take place away from their sites so they cant track them.  This means that you have having to guess if a 30p or 50p ad is actually making you any money.

Remember that only around 35% of people who do a Google search actually click on the PPC ads so already you can see that organic results should be your main focus.  Then if you want decent traffic/conversions it is better to bid on the popular keywords.  The problem is that these keywords are now getting so highly priced that it is becoming less viable to compete on these. 

What’s happening is the big companies with the big bucks are buying the top positions on PPC, not as a means of making profit but rather to prevent any potential competitors from making profit.  These companies can afford to take a loss and spend more than they make, but for the small businesses this means they can no longer compete on a level playing field

The great thing about Adwords was that you could create a website and be competing and making money instantly.  It was a victory for David over Goliath as you had first page ranking on Google along with your competitors.  But it seems Goliath has awoken and now small businesses are soon going to have to start looking elsewhere to promote their product.