Google Advertising ROI Dropping Sharply

[Niche Products Ste]

Having owned an run an ecommerce business for the last 15 years I have experienced many changes. In my opinion things are getting tougher than ever and I'm fascinated to see what the next 12 months will bring.

We sell products to the UK consumer. We have seen Google pushing PPA (Google Shopping ads) more and more. The control of when these ads appear is harder to direct for merchants - search terms can't be specified just negative search terms logged against an ad. This means a list of thousands of negative search terms for each campaign - yet the weird search term triggers keep on coming after 3 years!!!

The other thing about PPA ads is they make pricing more and more transparent. Google is encouraging a race to the bottom price-wise. Can only think they want to steal business previously going to Ebay/Amazon. Great for consumers but its going to get tough out there for online retail businesses where margins are already tighter than ever.

We still recruit at a profit using google. But from a return of £10 sales per £1 spent we are now down to £5/£1. Give it one or two years and I fully expect Google to produce a return of £3/£1. This is the rate historically achieved by traditional marketing methods so why should Google be any different?

Our current spend with Google is approx £150k per year. I run it hands on having had poor experience with agency management. I'd be fascinated to hear if anyone is witnessing similar trends???

 

[Tracy Arkwright]

In the past I used Google ads, I found it too expensive

 

[Andγ]

Are you running text ads in addition to your Shopping campaigns?

 

[Gallows]

As the volume of businesses operating online increases the competition increases, keeping or increasing your slice of the online pie becomes ever more difficult (read expensive). 15 years ago the competition didn't have multi million pound online advertising budgets and teams of people dedicated to it. The online marketplace is following the same path as the B&M route before it. Large corporations using their size and power to get ahead. The amount they are willing to pay is forever pushing it (in this case advertising spend, previously it was rents) higher organisations like yourselves.

 

[Mr D]

So what is your backup plan? Can you use a portion of the money spent on one service to spend on another means of advertising?

 

[Niche Products Ste]

And - yes we are running text ads. Indeed being first on page across all our main keywords was how we built our £5 million business.
Fortunately Mr D we have already changed direction.
We used to be on Ebay/Amazon and had moved away from this when the profits dried up (we used to be able to charge £6.95 P&P three or four years ago and we could charge higher prices as there was less competition........happy days!). Earlier this year we went back onto these channels knowing ROI would be minimal but still contributory.
The big change we have made is deciding to become a wholesaler selling to the trade/ bricks and mortar stores - a huge, expensive step that has almost been like starting a new business. After a tremendous amount of work this is now looking sustainable.
I'd love to hear more thoughts of any other Adwords advertisers to my opening observations.

 

[Niche Products Ste]

Hi Gallows
I agree with what you are saying about big corporations moving into ecommerce generally. But we operate in a small niche and generally my competition is smaller players. Many are operating on very thin margins and I think next year is going to be a watershed moment......only the toughest will survive.

 

[Mr D]

And - yes we are running text ads. Indeed being first on page across all our main keywords was how we built our £5 million business.
Fortunately Mr D we have already changed direction.
We used to be on Ebay/Amazon and had moved away from this when the profits dried up (we used to be able to charge £6.95 P&P three or four years ago and we could charge higher prices as there was less competition........happy days!). Earlier this year we went back onto these channels knowing ROI would be minimal but still contributory.
The big change we have made is deciding to become a wholesaler selling to the trade/ bricks and mortar stores - a huge, expensive step that has almost been like starting a new business. After a tremendous amount of work this is now looking sustainable.
I'd love to hear more thoughts of any other Adwords advertisers to my opening observations.

There is a small operation near where I used to live, used to go drinking with the boss there.
He sold on multiple channels.
Ebay and amazon sales he used as his base, well over half his sales were from there and he was set up such that his entire base business expenses (rent, wages, business rates, van etc) were covered by his 3rd party site sales.
Which meant his other sales could be more profitable.

He used multiple advertising methods, online and offline. He still does a mailing list with a small catalogue for customers who have purchased in past 12 months and occasional mailshots to older customers.

 

[Niche Products Ste]

Fully agree with that strategy Mr D.
We have a printed catalogue that goes out with all Ebay and Amazon orders - strictly against T&C's but have been doing it since 2006 without issue. A catalogue gets mailed to all active customers and prospects.
Another very important activity is email marketing.
As has always been the case, It is imperative to get as much revenue as possible out of your existing customer base - sales via existing customers cheaper than recruitment.