Small Businesses Losing Money Advertising on Google Ads

Small business owners Google Ads lead generation is no longer viable and they say they can no longer compete on Google Ads to get sales

May 23rd, 2022

There is a very familiar concern among business owners regarding advertising their products and services on the Google advertising platform (Google Ads, previously known as Google Adwords). Ask Small business owners Google Ads lead generation being viable, and you will mostly get a negative comment regarding the cost and the ad performance.

The concern is that the pay-per-click cost is just too much now (as opposed to what it was 10 years ago, or even 2-3 years ago) and often not cost-effective to generate leads and convert to sales for a small business owner.

According to the Restaurant owner Shirley Rodriguez of BabyBirdsCafe.com, “You spend more and more with Google ads, the PPCs get more and more costly, and you keep getting squeezed further and further down the search results page. We are a successful restaurant and very popular with the local diners but we don’t have a million-dollar advertising budget to compete with bigger chain restaurants who have almost limitless ad budgets. The competition is fierce and new startups have to spend a lot of money to get customers to walk in and hence making it more expensive for everyone else to advertise. It does not help that Google is actually auctioning the PPC in real-time rather than have a fixed price that would allow us to set a budget and stick to it. We had no choice but to try to sell our business and now we are selling our Website and domain name.”, says Rodriguez.

For small business owners Google Ads lead generation, sales, and prospecting are just not cost-effective.

Many small businesses are complaining about Google Ads’ practices, or at the very least, not creating a level playing field.

Google Ads algorithm automatically insert ads from big companies into Google results page where they may not even be relevant – just because it thinks a click might result from the placement. This means that we are not in straight auctions anymore, whereby the highest bidder gets the ad placement. Additionally, Google has made it next to impossible to pre-determine what the actual price of a click is, and hence making it difficult to establish the true factors that resulted in the pricing of a click to figure out campaign cost metrics.

Liam Farrell, Director of Business Development, Anaxstar.com

Justice Department has sued what they claim to be a “monopolist Google” for violating antitrust laws, on October 2020 claiming that Google was illegally setting uncompetitive results in search and search advertising. According to eleven state Attorneys General, Google is unlawfully maintaining monopolies through anti-competitive and exclusionary practices in the search and search advertising markets causing unfair and competitive harms and alleges that Google’s anti-competitive practices have had harmful effects on businesses, competition and consumers. It is alleged in the Complaint, that Google has entered into a series of exclusionary agreements that collectively lock up the primary avenues through which users access its search engine.

For small business owners, the Justice Department lawsuit is particularly important since Google is suppressing competition in advertising, in order for Google (using its power in search results) to charge advertisers more than it could in a competitive market and to reduce the quality of the services it provides them.

Alan Baker, CEO of TrafficMeansBusiness.com agrees with Ms. Rodriguez and is concerned about the Google advertising platform, “What’s unfair about Google Ads is the way it gives the greatest prominence and ranking in search results to companies that spend the most on advertising. It’s almost like bribery. If you spend more, you will of course get more clicks, and more views (CPV or cost per view/impression), but also you get a higher ranking in the organic search. This is a double harm, we have to spend MORE money with Google Ads to get leads competing with higher spenders, but they also get more organic ranking than what we get.”, according to Baker.

Low budget campaigns are targeted deliberately to struggle, in order to fuel the conning Google algorithm that is always one step ahead of advertisers ultimately costing them more, delivering less, forcing more aggressive bidding (aesthetically) and making it difficult to meet business objectives, lead generation, and sales conversion at a profitable level.

Alan Baker, CEO of TrafficMeansBusiness.com

Another issue that makes this even more difficult to swallow is that the ads displayed by Google Ads on top of the page appear above organic search results, which are always changing based on what you have searched for. This means, it will display different results, based on how it wants to spread the paid ads over viewership rather than specific to what people are actually searching for. In other words, it is dictating what you should see based on its own algorithm to make as much money as possible. That’s because these ads are based on keywords that are selected by and specific to the businesses that bid on them, making them highly relevant to the audience that ends up viewing them, hence generating leads and the potential for conversion to customers.

This major concern is part of the antitrust claims of the Attorneys General.

The position of these ads is not randomly selected, but based on an auction driven by an algorithm to increase profitability as much as possible. Now, it’s obvious why Google hires so many PHD graduates in mathematical modelling and actuarial sciences to tweak the algorithm for the search results to increase profitability and revenue generation.

Each business bids on the most relevant keywords, and the higher bid for that keyword wins the higher spot. If you pay higher, you get more clicks, and more leads, better organic ranking, and can saturate the market. For instance, there are about 2,000 searches per month in Denver area for “Denver Personal Injury Attorney”, and cost per click for each of these 2,000 searches is about $500 per click. Yes, that is $500 per click. Since there are only limited number of searches, Google controls the way the results are displayed in order to make as much money from each click as possible by exploiting the desperation of businesses competing for such a small number of leads.

This remains to be the major concern of small business owners Google Ads lead generation.

Google Ads can be a powerful marketing media for high-spenders while a frustrating waste of money for small business advertisers with budgets of less than $5,000 per month.

Christine Albert, CEO of Valley-Internet.com, suggests that Google Ads is no longer working for her company’s clients. “We provide marketing services for our high-end server clients who want a managed marketing service that utilizes their high-end managed server infrastructure. In about 80% of cases, our small business clients get almost little to no worthwhile results from Google Ads. Our marketing services (which include Google Ads management) no longer provides a worthwhile number of leads for many of our clients. We are seeing the effectiveness of Google Ads waning for clients spending less than $2,800 per month to a level that is almost worthless, to even contemplate. Before COVID Spending $1,500 would average out to a return of about 3 to 1, meaning that for every $1 you spend, you would get back about $3 in sales/conversion. Now you would be lucky to break even”, says Albert.

In fact, Christina Albert is not the only agency complaining about Google Ads results. Not even close. Many agencies are unhappy about ROAS (return of advertising spend), with Google Ads and are concerned that budgets less than $3,500-$5,000 would result in a loss, if you include time, material, resources, sales cost, and campaigning – or at best, break even over a 6-month campaigning effort. Hence, companies with higher ad budgets would ultimately do better, exponentially.

Although some small portion of small business owners say that they are getting adequate results from their Google Ads campaigning, but it is now an industry consensuses that Google Ads, especially for new startups, are not cost effective unless you have a high ad budget.

According to Liam Farrell, Director of Business Development at Anaxstar.com, the problem is even bigger than we know. “Google’s conning platform changes under the disguise of privacy improvement, was actually a strong-handed attempt to move its customers into automated bidding system whereby advertisers’ control of their cost-per-click is now dictated by an algorithm to force unnatural competition among advertisers. This works at the detriment of local advertisers whom are being forced to compete for leads with cash-rich national brands that have high ad budget. This system automatically insert ads from big companies into Google results page (keyword search) where they may not even be relevant – just because Google’s ads algorithm thinks a click might result from the placement. This means that we are not in straight auctions anymore, whereby the highest bidder gets the ad placement. Google has made it next to impossible to pre-determine what the actual price of a click is, and even worse, it’s quite difficult to establish the true factors that resulted in the pricing of a click to figure out campaign cost metrics. Google made the changes to make as much ad revenue as possible, and this is reflected in their annual ad revenue earnings”, says Farrell.

While Google encourages and promotes marketers to use content marketing with people-centric compelling content to derive value on behalf of audiences and achieve cost-effective marketing, Google itself is using robot data mining and algorithms to increase its ad revenue from advertisers.

While Google attempts to convince online marketers to write content that are compelling which is why content marketing has become so effective to generate leads and get sales, Google itself is using every automated robot analysis of data points to optimize for highest sales revenue for ad placement for themselves. Algorithm-driven marketing to consumers, looking for patterns amidst many data points they believe constitute an audience’s purchasing behavior, is driving their advertising methodology to cost advertisers as much as possible to further increase Google’s ad revenue.

According to Nathan Levy, managing partner at iDirectIPO.com, their Google Ads campaign has been a total failure to generate a cost-effective advertising strategy. “ Our organization and its management team is experienced with marketing and we do understand that it is necessary to make sure our ad budget can get enough number of clicks per day to get at least a few leads in order to sign up a customer. In our industry, the number of leads needed to sign up a customer is about 50 leads to a signed customer. With CPC of around $20/click (most often it is much higher), this translates to about $1,000 to sign up a customer from 50 leads. However, to get a lead, it takes about 100 clicks to get a lead (some of them totally unrelated to our keywords), after constant tweaking of ad analysis and refinement. Google forces you to go through a “learning phase” which costs them none, but us plenty. Which means we have to spend $2,000 to get a lead, or $100,000 to get 50 leads to convert to a single sale. Where does this make any sense? Our service is about $10,000 in generated revenue/fees, how could we spend $100K to make $10K? And if we are unhappy with these results, then I hate to think what other business owners are faced with, like dentists, chiropractors, attorneys, contractors, restaurants, and others”, say Levy.

Allowing Google Algorithm insert ads from bigger ad spenders where the keywords searched aren’t even relevant, will result in artificially increasing the cost of the final bid so that advertisers pay more. This is an underhanded way to reward the big spenders with more traffic to their site which results in better SEO in organic search results, which means the big spenders get free traffic, or think of as, a type of discount.

This is incredibly deceptive.

Nathan Levy, Managing Partner, iDirectIPO.com

May be the time has come that Google Advertising no longer makes any sense for small to medium size businesses that have a lower ad budget, say $5,000 or less. These small business owners set an ad budget for their business based on expected results and they do factor the customer value, service demand, regional and local coverage, and even vertical into their equation. No one can claim that it is impossible to achieve results with a lower ad revenue campaign in Google Ads, BUT with lower budget, it certainly makes it quite difficult to achieve a worthwhile return on investment in advertising with Google Ads.

The lower budget expenditure campaigns are targeted deliberately to struggle to fuel the conning algorithm that is always one step ahead of advertisers ultimately costing them more, delivering less, forcing more aggressive bidding (aesthetically) and making it difficult to meet business objectives, lead generation, and sales conversion at a profitable level. Small business owners Google Ads lead generation through search engines just isn’t working cost-effectively anymore and a failure in ROI.

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