google adwordsThis is the tale of a hubris, addiction, and greed.

Ok. It’s really the story of how I let myself be a real dumbass.

In fairness to myself, I had budgeted $7,000 for marketing tests associated with this publication’s launch. This is common practice in the direct marketing field, in fact I’ve seen campaigns lose over $250k in a new product launch. Did that mean the company was not wildly profitable? Far from it.

In fact, without investing in tests of this nature, it’s difficult to get enough information to assess the viability of any product. Nothing ventured, nothing gained right?

Still, I look at that line on my P&L and I wince.

What I Was Testing

 

I launched a Web site called Small Business Guru some time ago with the idea that it was going to be an online, paid subscription service.

I had planned to offer seminars, video tutorials, case studies, and a premium newsletter. I was going to follow the model of a service I greatly admire, MarketingProfs.

I was test marketing a concept and trying out new ideas so I went into it with the goal of learning about the market and tweaking the product offering enough to roll out a large direct marketing promotion.

I’d be lying if I said I didn’t hold the secret hope that this thing would take off like gangbusters.

Well, the truth is the whole concept was ill conceived. I misjudged the market for a paid service and the time it would take to build an audience. Marketing Profs, Duct Tape Marketing, Marketing Sherpa, they’d all been doing this for years in varying models. It took them time to build to a critical mass.

I was thinking — well, under a normal publishing model I’d get members at a certain acquisition cost and then convert them to paid subscriber fees.

 

Lemons And Lemonade

 

At least I learned something (I think).

Don’t PAY Money to Give Away a FREE Service – ‘FREE’ used to be a magic word in direct marketing. It’s above ‘New’, it’s above ‘Guarantee’. The idea was attract leads with a free newsletter and then use that newsletter to build credibility. But in this case, ‘Free’ attracted people who didn’t want to spend money.

I advertised a FREE Newsletter for Small Business Owners. Each week I was granted permission to promote my product or services as long as the majority of content was valuable to them. I also included some PREMIUM content as a teaser. Subscribers would get a taste for the paid content and then decide to upgrade at that point.

What I learned here was, don’t PAY to give someone a FREE service. But it’s the model a lot of people are following and I bet their running up against the same economic realities I did.

Watch your conversion costsConversion Cost is the average cost it take to acquire a PAYING customer. I got swept up in watching the newsletter subscriber levels grow.

At first, it was costing $30-40 per lead. After some tweaking I was able to get this in the $4-6 range. My list was growing and I loved it. But how many could I actually convert to paying customers in the time of my test? A whopping 10.

So my conversion cost ended up being $684.30 (ouch). It would have taken years of recurring revenue to earn that back. My target conversion cost at the outset was only $50 and even at that I wouldn’t have made a profit on the customer until their second year renewal.

Know your Life Time Values –LTV is basically the total revenue brought in by a customer over their years of doing business with you. I had calculated this to be around $250. A quick tab on the calculator reveals my acquisition cost of $684 per subscriber almost tripled the amount of revenue I’d have gotten out of the deal. I had calculated my target LTV at the beginning of the test so I was able to quickly assess that the campaign / product offering was not scalable.

Track Everything To A PAID Customer – The powerful aspect of an SEM campaign is that it lets you test EVERYTHING. That flexibility can be intimidating. You have to design your test in away that you can trust what the data is telling you. Did I use the wrong keywords? Was my landing page horrible?

The variables I tracked were:

  1. Keywords – Which Keywords would people click on vs. which keywords resulted in a paying customer.
  2. Bid Price – The amount of money I was willing to spend on various keywords like ‘entrepreneur’ or ‘small business help’ etc.
  3. Ad Variations – Here’s where it gets tricky. You can test different ad variations against different words. Some ads will give you a higher click through but not yield a lot of newsletter sign up. So the challenge here is finding the optimum keyword match to advertisement.
  4. Landing Page – To ad another layer of complexity the landing page can greatly affect your results. How relevant is it to the keyword / ad variation the prospect clicked on? I tested 3 landing page variations. Two for free newsletter sign up, One for immediate sell on paid subscription.
  5. Lead Sign-Up – The number of people who signed up for a newsletter.
  6. Paid Membership – The number of people who actually paid for a subscription. I tested

Monitor your keywords – Google Adwords is a powerful service. I was able to use their tracking code to monitor which keywords worked and which keywords didn’t. Having a high click through rate is great. But which keywords were more likely to get a newsletter sign up? In my case, I found that my highest click through rates — some as high as 25% — did not yield the most leads.

People were clicking on an ad based on a keyword and learning the landing page didn’t give them what they wanted.

Don’t Get Greedy On the Bidding – In some cases, and I groan to think of it, I was spending as much as $5.00 a click — (a click!) on a keyword. The keywords I was targeting were so competitive I was paying through the nose just to get in the top 5-6 positions. I had set a limit on what I was willing to spend per click and quickly (stupidly?) abandoned it. I wanted to be at the top ranked next against the big boys.

Towards the end I got smarter. Targeting the 2-3 positions as that was yielding a better newsletter sign-up percentage AND saving me a ton of cash. But by then it was too late.

(Again) Don’t Get Greedy on Daily Budgets – I started watching the newsletter sign-ups and was getting addicted to seeing it grow. I got 5 today. 12! 25! Greedy, greedy, greedy. I let my budgets eek up bit by bit just because I wanted to see the total subscriber level push up higher & higher.

Long Tail SEM Works But Is Burdensome – This whole time I was balancing content creation with marketing the service. Long Tail SEM refers to the use of very descriptive keyword PHRASES and directing them to a specific article as the landing page. So, if I wrote an article on the 4 Hour Work Week, I’d enter variations of the books title and include a link directly to the article. The article then had a hover ad which would promote the free service.

The phrases were so unique the competition on bidding was low. But so was the traffic.

All in all, this worked. But the key word phrases had to be so specific it became a pain to manage and I couldn’t afford to have someone manage it for me under my planned budget. Still had I kept at it I would have consistently got leads that would build over time.

Some Good Stuff That Came Out It

 

Google Adwords is a Microcosm. If I were to have take that $7000 and plowed it into a direct mail campaign I wouldn’t have had the wealth of information I have now. Adwords helped me understand the dynamics of my market. I know how many people are searching on specific keywords. I know which headlines are worked. I know which landing page orientations are better than others.

I also have new product ideas based on the traffic generated on different variations of this information. In fact, the test was designed to give me the confidence to do a direct mail campaign.

It’s a scalable – I could have taken the info and rolled it out to any number of search engines to expand the base. Only designing it smarter based on what I’d already learned.

It’s targeted – Any Direct Marketer will tell you — it’s LIST, OFFER, CREATIVE in that order. Each keyword is a separate list. I learned that California, New York, Texas, & Ohio were my most active respondents. If I were to do a mailing I would have focused on those geographic areas when renting a list.

But by list I mean I also knew which keyword phrases really resonated with prospects. That would have greatly helped me narrow down my specification for rolling out to other Paid services. It also would have been a powerful tool to give to my list broker when preparing a direct mail campaign.

Ad Watcher – There’s this nifty little service, www.adwatcher.com. It’s ultra-cheap and allows you compare and contrast SEM performance all the through to paid order coversion. What this means, If someone signed up for the free newsletter but purchased the subscription say 2-3 months later, I could track it all the way back to the specific service, keyword and ad which produced the order. This gave me a more comprehensive understanding of ROI.

Was it all for naught?

 

It pains me to loose money on an investment.

But was it the right move?

I had already re-oriented my sites — a paid service was a couple years down the road for me. But I knew I could get some advertising dollars and that I still had a list of prospects I could test market other products and services too.

Just as I ended by spending spree – something magical started to happen. I started getting organic leads. The whole time I was also working on my content. And that content started bring people to the site.

Organic traffic!

The funny thing is. If I hadn’t had those early rush of paid leads. I wouldn’t have had the excitement to keep plugging away on the content.

Let’s face it the pleasure (and pressure) to put out a weekly newsletter is a greatly increased when you’re writing for 500 vs. 5 people.

I know I’m rationalizing now. But as the site grows and as it gets more attention I’m enjoying it more and more. If I hadn’t had those early subscribers — many of which are still with me (thank you!) — I wouldn’t have kept at it.

I needed that to jump start the site so I could have the emotional wherewithal to put out new articles week after week.

My traffic has gone up exponentially since I stopped paying for advertisements. And man is it nice to see people come into the site and join just because they are genuinely interested in what you do.

So, would I do it again?

Hmmmmm good question. Maybe. I’m willing to invest (gamble) in a business opportunity — but I sure as heck would make sure I had a plan to on how this was going to make money a lot sooner.

2 Responses to “How I Wasted $6843 on Adwords”
  1. Kirk

    This is an excellent post, its great to get an idea of others experiences before doing some testing with google adwords myself. There is so much good information I have picked up from this. Thank you!

  2. Ed Roach

    I appreciate your honest telling of this tale. It confirmed a few suspicions I’ve had. For me adwords was a bust. It didn’t get me much in the way of signups. I’ve had more success and in some cases dramatic success posting in Linkedin groups. One such posting last week resulted in a 2000% increase in page views on my site and a fabulous two day sign-up of new subscribers.

    Let’s face it, the list is key. Opt-in is preferred, and so we strive to find effective and efficient ways of generating subscribers.

    Thank you for sharing your experiences.

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