The Future of PPC Marketing

Hi, and welcome.  Questions for you...

  1. Are Average CPCs increasing or decreasing?
  2. Are you seeing better performance or worse performance with Enhanced Campaigns
  3. Are there more or fewer advertisers today than a year ago?

These are signs of the coming PPC apocalypse.

A question paid search managers should be asking themselves is:

What Does the Future of Paid Search Look Like?

In this blog post, I'll write about where I think paid search is going.  Whether you agree or disagree, it's all goooooood man.  Just chill.  Post your disagreement below.  I won't argue.  It's all in good fun.  So let's see how well I can predict the future of PPC.

Paid Search Becomes PREMIUM Advertising Medium

10 years from now, paid search Max CPCs will be at an unimaginable level (think gas prices). Avg. CPCs that used to range from $0.10 to $0.25 per click now cost at minimum $2.00 for bottom of the barrel clicks.  Now, clicks have become so expensive, the total cost of advertising via the paid search medium has leveled off to be equivalent to traditional channels such as TV, Billboard, and newspaper advertising.

Paid search is no longer a 'new' channel that smart marketers can take advantage of to generate cost-effective leads and sales from.

Market Equilibrium Occurs

Economic equilibrium occurs.  In any market you have supply and demand.  In PPC terms, supply is impressions (which are loosely related to searches depending on impression share but let's not open that can of worms).  Demand is clicks (traffic to your website) since this is a CPC pricing model.  Clicks earn the engines money.

You'll hear over and over again that CTR is the biggest factor of Quality Score.  From the engine perspective, the assumption is that if people are clicking, they find your ad relevant.  The rate at which your ad is click in relation to the number of times it shows means they can show your ad more for searches and they know the average % rate it will get clicked allowing them to determine a probabilistic model that ultimately will make them more money in the end and deliver more traffic to you.

Over time, the average CPC limit advertisers are willing to pay before sustaining losses will emerge.  While it's true that different advertisers have different conversion rates based on how 'good' their marketing is as well as their definition of what a conversion is, an overall industry average does exist.  Many advertisers now approach break-even in terms of return on ad spend using last-click attribution modeling.

Within this spectrum of advertisers, you still have the normal distribution of some advertisers with positive ROAS and some hemorrhaging  money.  Over the next years, smaller PPC advertisers adopt strategies to target long-tail, low-traffic, less-targeted keywords.  This market movement will later fill up and small advertisers simply won't be able to play the PPC game.

The supply of available highly-converting clicks vs the demand for highly-converting clicks is greatly outweighed by the number of competitors jocking for position in the marketplace.

Less Sophisticated PPC Managers = Jobless

A PPC manager job description reads more and more like an electronic trader on Wall street.  Words like portfolio and asset allocation are sprinkle about the requirements.

PPC managers are now expected to have advanced quantitative analysis skills at minimum.  A heavy background in statistics, modeling and a strong understanding of the relationship between metrics will be expected.  Other personal required characteristics are: naturally inquisitive, curious, analytical, ability to communicate advanced concepts in simple terms, proven track-record for making the right decisions, passion, independent, and an desire to be the best.

Automated marketing, algorithms, processes and systematic execution is the path of the future.

Bid Management Algorithms a MUST

Everything in PPC management boils down to making decisions: bid changes, campaign settings, ad copy active/pause decisions, negative keywords, etc.  In the coming years, algorithms will be tweaked by statisticians, mathematicians and PPC managers using heuristics based on what they think will drive maximum performance resulting in improved bottom-line results.

These programs get more sophisticated taking into account events such as a spike in new products, recent news events, seasonal patterns, etc.  Advertisers not using this bid management technology will not be able to compete against machines... at least, not effectively.

Max CPC Bids Maxed Out

Advertisers keep raising Max CPC bids - especially on those keywords that translate into leads and sales.  Over time, it will be obvious what the top converting keywords are for the majority of advertisers because the average CPCs will be astronomical.  Many advertisers will of course bid on these keywords but will rarely show if at all.

PPC managers experiencing pressure from clients about high average ad position will succumb to the pressure and pay what's needed to appear on the first page of search results.

Over time, minimum bids for any keyword will be $2.00 if you want your ad to appear on the first page of search results.  Ask yourself, overall, do you expect click prices to go down in the future or up?

No More Room for Small Businesses

Mom and pop local businesses with a small advertising budget throw money at Adwords and Bing Ads.  With Avg. CPCs high, that yields only a few clicks per day.

New advertisers starting out don't have historical data to leverage ad scheduling, device, or network data.

Gaining historical data will be much more costly in the future - and that's assuming the Mom and Pop shop sets up everything perfectly (tracking, keyword selection, ad copy call to action, ad scheduling, geo-targeting, etc.)!

No, pay-per-click is no longer a game that small businesses can play.  Reasons: competition, lack of marketing knowledge, and high cost per click prices.

Marketing Automation Done For You

Playing devil's advocate here, Adwords and Bing Ads comes out with 'done for you' cookie-cutter campaigns.  They leverage their query stream and organize high-converting queries into pre-made campaigns for every niche, industry and language.  Adwords is no longer a complex monster with nuances and intricate details you need to know.

Instead, Adwords and Bing Ads have options to select the campaign you want, set your budget and offers, and their systems do the rest.  This makes everything 'easier' and also makes them 20 million more dollars per day starting in 2018.  Think of paid search as 'press this button'.

Bidding on Thousands of Keywords No Longer an Option

Assuming Marketing Automation (press this button) doesn't happen, being able to bid on thousands of keywords to 'test' (throw against the wall to see what sticks) is no longer an option.  Too expensive.

Advertisers have to actually do keyword research and learn their market before-hand.  Hint: the keywords that convert the most are usually the most obvious!  Hint2: the Adwords keyword tool is not your friend here.

CRO Finally Deemed 'Important' by Large Companies

Big slow-moving corporations begin to come around to the concept that online conversion rate optimization (CRO) is important.  Every major enterprise has conversion rate optimization specialists whose only job is to execute and measure tests on important pages of their website.  Enterprises finally realize that landing page optimization is what determines whether the traffic converts or not.

The major players that play the PPC game and get results are the ones that align campaigns with budgets, and then align ad groups with specific landing pages for each ad group.  Each landing page is highly-optimized for the keywords within the ad group.  All ads align with the core messaging on the landing page and have context and relevancy to the keywords.  On-page elements are tested for varying button colors, headlines, calls-to-actions, promotions, and layout structure.


What do you think?  Any of this possible?  Where do you think the future of paid search is headed?

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4 Responses to “The Future of PPC Marketing”

  1. Marie Pierce August 16, 2013 at 3:44 am #

    PPCs have become popular forms of advertising these days. I just can't understand why it will become as expensive as the TV ads and billboards. I guess that is a rule in business. When demand is high, prices go up too.

    • Jarad Collier August 16, 2013 at 4:29 am #

      Perhaps it won't :) I was thinking about efficient markets where supply and demand determine the fair market value. In this case, we'd be talking about clicks and traffic. Who knows if any of this is correct though. Thanks for the comment Marie.

  2. Neale Internet August 7, 2014 at 10:33 pm #

    I have found click costs rise to unusable levels in the last few years. Plumbers for example. I have a client in a fairly small city that needs to pay $20 a click to make top 3 and Google is actually suggesting $28 a click.

    $2800 for 100 website visitors? That will be some website that can show a positive ROI on the expenditure.

    I agree with you that smaller businesses will need to find another way. It really only leaves SEO (still Google for the most part), Social Media and possibly a resurgence of traditional methods.

    Having the email of a prospect that will open your email is becoming increasingly more valuable.

    BTW own your software but still struggling to use it for small business :)

    I think it needs to be simpler.

  3. The AdWords Insider March 5, 2015 at 5:44 am #

    I call it clickflation. It eats up the profit margin of any industry that gets on the PPC band wagon. All the profit goes to Google and only the companies with deep pockets can continue to use PPC.

    Nothing against Google.I actually think they are doing a great job. My company is even a Google Partner. Hey, if you can't beat em, join em!

    The PPC Campaign Generator is about as simple as it can be considering what it does. There is a phrase that comes to mind. "You can't bring the truth down to the level of Mankind, Mankind must be raised up to the level of truth.

    Same thing is true with AdWords and in turn the PPC Campaign Generator. You can't bring AdWords (or PPC Campaign Generator) down to the level of the average computer user. No offense Neale! The users must be raised up to the level of AdWords. To do otherwise would be to comprise the power of AdWords.

    Google must spend a great deal of money and time trying to make AdWords less complex, but not at the expense of its power. Same with PPC Campaign Generator. It can not be made easier to use if it is going to be as powerful as it needs to be.

    There are still a few things I don't understand about the program as well. But I am confidant in the logic behind the application and the way it works just like I am with AdWords itself.

    Google and Jarad are together in a call of developers that their competition can only aspire to attain.

    All I can say is don't be afraid to reach out to others for help. It may not be easy to find information at the highest levels of AdWords proficiency. It's a secretive group of people for a good reason. Just like the truth is very powerful, AdWords mastery is as well. I will help anyone that needs asks. I'm easy to find.

    Robert McCulloch

    Thank you Jarad!

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