Google Recommends I Pay Them 3x as Much
So I logged in the other day to one of our clients’ AdWords accounts, and saw the following somewhat familiar sight:
This is one of our most productive accounts as far as volume of conversions goes, and our cost per conversion is staggeringly low. Out of curiosity, I took a look at what Google’s recommended budget for us was:
If you squint, you can see that our current budget is $250/day, and the recommended budget is $889.28/day - an increase of 355%! You may also notice that clicks increase by 100%, from 5,480 to 11,944.
Wait a second! So I can increase my budget by 3.5 times and get 2 times as many clicks? Awesome! Not. I’m glad I thought that one through rather than just taking the recommendation no questions asked.
I’d like to try this tactic with some of our clients: “Hi, I was just analyzing your account and I recommend that you pay us 3 times as much as you are now. . .”
All Google-mocking aside: Could there be times when increasing your budget by x amount in order to get 1/2x amount more conversions would be a smart thing to do? The answer is yes, but it depends on your profit margins. If you make $10 per lead, then paying an extra $1 per lead in order to get 100 more leads could turn out to be a great move for you. However, if you make $3 per lead, paying that extra dollar might really hurt your bottom line. They key is to find the optimal solution to the following equation:
Total Profit = Net Profit * Volume
If Volume * Net Profit is greater at a higher volume and lower net profit, then you’re good! If Volume * Net Profit is lower at a higher volume and lower net profit, then you’re not.
All I’ve got to say is Google is smart. . . I just hope I’m not as dumb as they think I am!
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