Is AdWords Expensive?

I recently used Google Adwords to generate some traffic to a landing page I created for a personal product I was advertising. I've been in the AdWords game since about 2005 and I've worked mostly with B2B companies, using AdWords to generate traffic and leads. I knew that by using AdWords I'd be able togenerate some quick traffic to my landing page without spending too much money. But I learned quickly that this wasn't necessarily the case.

2005 - The Online Gold Rush

What was great about 2005 and the advent of AdWords was affordability. It was a time where opportunity was ripe for businesses of all sizes to generate low cost, qualified traffic using AdWords. At that time, I had proposed to my current CEO to run an AdWords campaign to get us some leads. I remember the days of spending at most $1000/month and receiving Click Through Rates as high as 5%, plus a whole lot of traffic. But since 2005, keyword costs have increased.

Why the Increase?

There are a lot of legitimate reasons for keywords to increase in price. Much of it has to do with competition and new players entering a market. The popularity of AdWords and of using online as a way to advertise means more businesses are putting money into Google. AdWords is Google's primary source of revenue and in 2010 that number is a staggering $28B. And some may even go so far as to wonder if Google has any influence on the pricing of their keywords to increase their bottom line?

How Much Does it Cost?

It's actually hard for me to make a statistical inference that all keyword prices have gone up since 2005, due to my inability to access all of that data. But it is certain that you will find a lot of online sentiment making the case that it is indeed getting expensive. Since I can't speak on the behalf of everyone, I can only give you some personal examples and general observations from campaigns I've worked on since 2005.

Let’s take a look at some keyword pricing data:

Keyword term: wildflower seeds
Keyword Cost in 2005: $0.62*
Keyword Cost in 2011: $1.56**
Percentage Increase in Cost: 150%
*captured from a screenshot printed in Andrew Goodman's book Winning Results with Google AdWords
**keyword cost in 2011 is based on Google's own estimate using their keyword tool

Keyword term: human resources
Keyword Cost in 2005: $0.16*
Keyword Cost in 2011: $2.29**
Percentage Increase in Cost: 1293%
*captured from a screenshot printed in Andrew Goodman's book Winning Results with Google AdWords
**keyword cost in 2011 is based on Google's own estimate using their keyword tool

Keyword term: policy administration
Keyword Cost in 2008: $0.66*
Keyword Cost in 2011: $3.05**
Percentage Increase in Cost: 362%
* based on my own data from an Enterprise Insurance campaign (B2B)
**keyword cost in 2011 is based on Google's own estimate using their keyword tool

Keyword term: product development software
Keyword Cost in 2008: $0.85*
Keyword Cost in 2011*: $3.48
Percentage Increase in Cost: 309%
* based on my own data from an Enterprise Insurance campaign (B2B)
**keyword cost in 2011 is based on Google's own estimate using their keyword tool

What's Going on Here?

It's discouraging to see such dramatic price increases. If you look at the data above, it means that in 2005 you could run a campaign for the keyword 'human resources' that would cost $160 for 1000 clicks. If you ran that same campaign now it would cost $2,229, based on a single keyword. Add multiple keywords, and you get my point.

So What's the Alternative?

Fortunately, there are still ways to generate qualified traffic to your website. I'm not here to discount AdWords altogether but if you want to setup a campaign, make sure you do it carefully and optimize it well, otherwise you could burn through a lot of money quickly. Consider the other players in the industry as well like Microsoft and Yahoo.

And of course, using tools like SEO, blogging and inbound marketing are sure-fire ways to generate more qualified traffic to your site. Most of these methods are affordable and over a period of time the costs eventually diminish (considered an investment). So instead of pulling out your wallet, consider creating amazing and engaging content and getting it out to the masses.

I have to say, I didn't think the day would come where I wouldn't be a huge fan of AdWords. Frankly, it'sgetting too expensive and less democratic. The next few years should be interesting for Google.

Additional Resources
If you’re interested in learning more about using inbound marketing to drive your marketing efforts then I highly suggest you check out these resources:

Hubspot – it would be remiss of me to mention the company that pretty much put the term Inbound Marketing into our daily online lexicon. They have a ton of resources on their website and I highly suggest you check out their blog to get started.

If you do want to give AdWords a go, I would still recommend that you check out Andrew Goodman’s book called Winning Results with Google AdWords. It’s an intense ready but it still stands the test of time. And here’s an article from the Hubspot blog on Adwords: How to Maximize PPC Campaigns and Optimize Landing Pages

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About the author: Zaid Rasid is the founder of the internet marketing blog Better Social* Skills. He provides expert social media, lead generation & brand awareness advice to small and medium sized businesses. For a practical look at how online marketing can work for you, visit www.zaidrasid.com or follow him on twitter.