Where Google Ads Fits When Search Still Controls 44% of Digital Ad Spend

Paid search is a popular advertising tool chosen by businesses across the world; it provides companies with control over their spend and can clearly demonstrate how it has influenced traffic.

Google Ads is good for businesses looking to capturing high intent consumer demand and instant visibility. So where does Google Ads fit when search still controls 44% of digital ad spend?

This article discusses why paid search still attracts a lot of advertising spend, the role Google Ads should have within the marketing funnel, when paid search is valuable and what financial metrics you should consider when scaling ad spend.

Why Does Search Still Attract So Much Advertising Spend?

Most organisations choose to allocate budget to paid search because they only pay for ads if they are effective. An effective ad appears when it is relevant to the search, showing the user has more intent. If their ad appears in a search result and generates no interest, there has been nothing gained nor lost by not allocating budget to it.

Only when the ad generates enough interest for a user to click on it does it cost the business. Whilst it may not necessarily result in a sale, it has brought someone onto the website and increased brand awareness alongside website traffic.

Google Ads also allows businesses to have more control over their budget. They can decide how much of the budget gets spent each day by easily adjusting the number of clicks they are prepared to pay for.

What Role Should Google Ads Play in the Marketing Funnel?

There are quite a few misconceptions about the role Google Ads should have within the marketing funnel as it should have a role in every section.

The top of the marketing funnel is for raising awareness and Google Ads does this by introducing new users to a brand regardless of whether they were looking for the products or service.

In the middle of the marketing funnel is consideration, where people know of the brand but aren’t making a purchasing decision. The role of Google Ads for consideration is to educate potential customers and increase trust to motivate a purchase.

The bottom of the funnel is where conversions take place, where people are prepared to make a purchase but are yet to. Google Ads can help to motivate people by having a compelling call to action and messaging, possibly or free trials and discounts.

Businesses should consider their Google Ads at each stage of the marketing funnel to generate the most brand awareness, trust and conversions, rather than focusing in in one area.

When is Paid Search Valuable?

Paid search is a useful marketing tool but it can be more valuable in specific situations.

For new businesses or companies who need quick visibility, paid search is an effective marketing channel as ads can be brought to the top of search results with real-time auctions.

This is more beneficial to businesses with a lack of organic SEO authority, as SEO can still be worked upon even during paid advertisement campaigns. Through the bidding system, firms can buy their way to the top of the search results.

Paid search is also more valuable to companies offering limited time offers or promotions as they can gain instant exposure to customers.

When Might It Be A Weaker Investment? 

Whilst paid search brings many benefits, it may not be the right investment for a business.

Google Ads is impacted by the number of people trying to reach the same customer, so the more people who want the audience, the higher the CPC is. Depending on the target audience, it may make paid search a weaker investment due to the expenditure trying to reach clients.

Alternatively, if businesses are paying more to collect customers than the lifetime value of keeping them, there may not be a good profit margin from each user.

Following on from that, those with a reduced profit margin may find paid search isn’t an effective marketing choice for their company as the CPC can quickly consume the budget.

Finally, the ad may draw people in, but poor quality landing pages or homepages means the post click experience may prevent conversions.

The Numbers to Check Before Increasing Ad Spend 

On the surface, Google Ads may appear to be generating good conversions and scaling the budget may seem the obvious decision. However, there are metrics to check first to confirm whether this is the right business.

Google only tracks front-end metrics like top-line revenue, leads and clicks; so, it is important to check some of the other business financial metrics.

Contribution Margin

Sales Revenue – Variable Costs = Contribution Margin

The contribution margin calculates the true ROAS or the profit made from ad spend.

Understanding the contribution margin can prevent companies from scaling where they are actually losing money on orders without realising.

MER – Marketing Efficiency Ratio

Total Revenue ÷ Total Marketing Spend = MER

The marketing efficiency ratio can demonstrate whether the firm is growing over a specific period of time.

When considering scaling Google Ads, comparing the growth from before using paid search can help to see if the company saw significant growth after using ads.

Customer Acquisition Cost

Total Sales & Marketing Expenses ÷ Total Number of New Customers Acquired = CAC

The customer acquisition cost is the amount the business spends on sales and marketing to win new customers.

If the cost is less than the lifetime value of a customer and the profit margin, scaling may be a possible option.

Net Profit

Operating Profit – (Cost of Goods + Day-to-Day Operating Costs + Interest + Taxes + Ad Spend + Refunds) – Net Profit

This metric provides insight into if company can afford to increase expenditure on Google Ads.

Auction Metrics

Another metric to measure is the auction metrics. They can indicate who competitors are, how the ad performs against competitors, how often ads show alongside competitors and who wins the top spot on search results.

Having this understanding may either support or raise concerns on whether investing more budget into ad spend is the right choice for the organisation.

Do Businesses Need To Choose Between Paid Search vs SEO?

In short, no, businesses don’t need to choose between SEO and paid search.

In fact, using a combination of both can complement each other, fortifying the marketing strategy. Using both methods means companies can collect both sponsored and organic traffic.

Paid search offers immediate visibility for quick leads, but SEO builds long-term, sustainable traffic that can reduce the reliance on Google Ad spend. Having the ability to reduce ad spend means the budget can be reallocated to other areas of marketing. 

The data collected can also be used from paid search to strengthen the SEO strategy.

Paid search and SEO make up for each one’s weaknesses. Whilst adding unique advantages, best practice is to use a combination of both rather than choosing one or the other.

How Much Budget Should Go Into Paid Search?

The amount of money that should be invested into paid search varies for each business as it can be influenced by individual budgets and goals.

However, by considering the number of enquiries target to the CPC for their specific industry, it can provide a rough estimate into how much companies should be spending to achieve the desired outcome.

Whilst this is a guide, it may not work for every business. Visitors may not become conversions therefore, firms may need to factor in additional spend for visitors that are just website traffic.