Why Are You Still Bidding for Keywords
Businesses around the world are allocating a significant percentage of their digital advertising budgets for search ads. However, these businesses realize that cost per click (CPC) bidding is not inspiring conversions as much as it generates a profit for Google. This has led many marketing professionals and ad buyers to conclude that fixed CPC advertising for keywords holds the key to maximizing ROI.
While Google generated 70.9% of its revenue (or $134.81 billion) in 2019 from Google Ads , wild discrepancies exist between the CPC that businesses pay. These inconsistencies lead to overpriced keywords being bid on, while a fixed CPC solution prioritizes keyword data to pinpoint purchase intent and generate conversions.
This shift towards a fixed pricing structure occurs because CPC discrepancies can largely be attributed to the bidding model established by Google. 5.6 billion searches are carried out on Google every day. Although they are numerous, there is still a scarcity of searches relative to any given keyword being conducted on a daily basis. This fact, coupled with Google’s CPC bidding model, naturally results in serious competition due to the law of supply and demand. As a result, bidding for CPC drives up the costs of keywords across many industries.
Let’s take a closer look at how Google determines its CPC and how a fixed CPC solution can reduce the cost of digital advertising campaigns.
Google Ads and The CPC Bidding Model
Google Ads are priced around a pay per click (PPC) model, which means that you’re only paying for the actual visits to your site due to the keywords you bid on. The PPC model is beneficial for companies of all sizes, which is why 74% of brands state that PPC plays a considerable role in driving business.
A primary factor in how Google determines the cost of a keyword is how often it is searched. Because of this, pricing is variable, and the CPC associated with each unique keyword is different. While the average CPC in the U.S. is $1-$2 , keywords in highly competitive industries with customers on the considered purchase path can be priced much higher.
The Functionality of a Google Ads Auction
Once the keyword is purchased, the placement of an ad is based on two fundamental pieces of information, the specified maximum bid for the keyword, and the quality score assigned to the ad by Google. Ad extensions and ad formats also receive consideration from Google and affect where an ad gets listed within search results, which can help secure a better ranking at a lower cost. What is important to keep in mind here is that this process has many variables that are out of your control. You can set your bid and optimize your website and ad formats, but the bidding process opens avenues for the competition to outperform you with a slightly higher budget or a more optimized website.
The actual auction occurs every time a search query occurs containing a keyword you placed a bid on. The bid that you place within Google Ads establishes the maximum CPC that you are willing to pay, which means you might pay less, but you’ll never pay more. You don’t know how many clicks you’ll receive or how much purchase intent the user clicking your ad has, but you know the most you’ll pay for each click. This process is linear, which means the only touchpoint that you have with a potential customer is the impression received the moment they execute a search. Whether that impression inspires a click and ultimately results in conversion is another story.
You might decide that a few specific keywords hold immense value and potential for your business, so you choose to place high bids on those keywords. Despite the amount that you decide to bid, your competitors can still rank higher in search results. This is a result of Google’s quality score. Google determines the quality score by studying your ads and website and deciding the relevancy of this content to the individual that submits the search query. Fortunately, this score is not set in stone and can be improved upon. However, it can be a variable that throws a wrench into the gears of an already expensive PPC campaign.
Ad extensions are the third piece of this bidding model puzzle, as Google looks at this additional information placed in your ad and estimates how it will impact performance. This information can include phone numbers and secondary links. These extensions are meant to improve relevancy and are another variable that can alter the ranking of your ad within search results.
When a click occurs, the cost is finally determined using this formula: the ad rank of the business below you divided by your quality score plus $.01. For Google ads to be effective and to see an ROI, you must understand all of these components of the bidding model and how they impact CPC.
Ultimately, this process can be extremely prohibitive if your keywords are expensive, and your target audience is conducting multi-channel and non-linear searches. The variables presented offer both an opportunity and a challenge depending on your competition and how optimized your ad campaign is. The bottom line is that Google Ads are designed to maximize profit per click for Google and not offer businesses ROI.
ReverseAds & The Fixed CPC Model
Google has most definitely become the industry standard for PPC advertising; however, a disruptive new solution is emerging that abandons the highly competitive bidding process. ReverseAds is pioneering this fixed CPC model designed to drive total ROI and not just drive up pricing via bidding wars. This solution is extremely cost-conscious as it is delivered at half the cost of Google Ads.
Fueled By Data
Delivering a fixed CPC to businesses for the entire duration of a campaign means that ReverseAds is laser-focused on industry-specific data. Data is continuously acquired within every industry to ensure that the price provided is competitive and prioritizes ROI. This data is collected in real-time through a variety of data marketplaces. Additionally, top keywords are tracked at each stage of the buyer’s journey, allowing ReverseAds to improve the accuracy of the ads being served.
An industry-specific and data-driven approach makes it possible to customize pricing for each industry based on a fair rate for conversions. This approach eliminates the competition that drives up the CPC within the bidding model and generates a CPC informed by industry data. While website content still improves SEO and ad performance, price variabilities are no longer a concern, and companies can lock in a price for the duration of a campaign.
Industry conversion rates also inform the fixed CPC. While Google Ads don’t account for conversion rates (CVR) or the performance of a call to action (CTA), ReverseAds understands that these metrics are the ultimate priority. A fixed CPC model allows businesses to lock in a price for clicks and accurately predict their click-through rate (CTR), CTA, and CVR, all based on the industry data.
The industry data being used fuels the roadmap algorithm, which ReverseAds uses to plot the highest probability keywords. Probability is based on purchase intent and is matched to each stage of the buyer’s journey for each industry. This use of predictive technology improves campaign performance and prioritizes ROI, while also helping to determine which campaigns are most viable.
Marketo, a marketing automation software developer, recently ran a 60-day campaign with ReverseAds. As a B2B company, they operate in a considered purchase path industry with complex sales funnels and non-linear paths to purchase. One of their goals was to find an advertising solution that addressed these challenges and provided a more cost-effective pricing model when it came to CPC. During the campaign, ReverseAds was able to help generate 976 new leads and reduce CPA by 78%. This outperformed Google Ads, Facebook, Linkedin, and Programmatic Display by over 300% each.
The Bottom Line
Search advertising drives conversions for companies of all sizes across all industries, yet individual businesses obtain better results than others. Variable pricing makes it tough for companies to maximize ROI, as bidding for keywords always generates profit for Google but doesn’t benefit those trying to appeal to multichannel buyers on a non-linear path-to purchase. Fixed CPC advertising informed by keyword data addresses these challenges by utilizing predictive intelligence to optimize CTR and CVR. Companies including Mercedes, Subway, and Century21 have turned to ReverseAds to successfully increase clicks by upwards of 350%, at a lower CPC than Google Ads.
Media buyers seek solutions that address the new buyer’s journey and account for growing demands from both B2B and B2C customers. We empower brands to be where search results can’t be – delivering a 360º presence throughout the entire non-linear buyer’s journey. The ReverseAds cookieless solution protects customer privacy while meeting consumer demands (and behaviors) across purchase path industries who expect information and presence throughout their entire considered purchase roadmap.
If you’d like to learn how to increase your presence across multiple channels and improve your ability to appeal to considered purchase path consumers, visit https://www.reverseads.com/or email us at firstname.lastname@example.org to schedule a time to speak with a ReverseAds Data Intelligence Specialist.