Top 3 Reasons Google Adwords Accounts Become Unprofitable

Henry Gill

Head of PPC
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Very often we speak to prospective clients who are frustrated with their Google Adwords accounts: their campaigns which were once highly profitable, have become far too expensive relative to their returns, and the account as a whole has started losing money.
Below I have set out the top 3 reasons why Google Adwords accounts become unprofitable and the actions you can take to reverse this:.

1) Competitor Actions

How can competitor actions affect my Google AdWords account performance?

Competitor actions will have a direct effect on your costs, and conversion rate – so it is worth paying close attention to what your competitors are doing.

How can competitor actions affect my costs?

The price you pay per click for Google Ads is not necessarily your maximum CPC (cost per click) bid – but rather the amount your nearest competitor is willing to pay. If you don’t have any competitors this can be very low (e.g. 1p per click) provided your ads have a reasonable quality score.
If a competitor decides one day to invest heavily in Google Ads, your average cost per click can significantly rise – or your PLAs / search ads may no longer show on the first page of Google. If you have started overpaying for conversions or if your ads no longer appear on p.1 – this is very likely to affect your campaign’s profitability.

Why can competitor actions affect my Conversion Rate?

Consumers now typically visit several websites before making a purchase, and (obviously) a key factor in their buying decisions will be price. If your products are identical to a competitor – but they are undercutting you on price, your conversion rate is likely to be affected.  

What can I do to counteract competitor actions without dropping my prices?

3 strategies to gain an edge on your competitors are:

  • Aggressive remarketing adjustments: mean you will be more likely to win the clicks of returning visitors (who are further down the buyer’s journey)
  • Setting time of day / day of the week bid adjustments: will enable you to increase your bids when conversions are cheapest (and decrease bids for times of day which have a poor return on ad spend)
  • Diversify your paid traffic by using Bing and Facebook: these may be channels your competitors are not using, where the cost per click is underpriced relative to Adwords.

2) Over-Reliance on a Small Portion of Your Campaign

Am I relying on a just a few products / keywords / for my revenue?

In many accounts a minority of keywords and SKU’s (for Shopping Campaigns) are responsible for generating the majority of the conversion value. Often 95% of the conversion value (or more) will come from 5% of the SKU’s or keywords, which can cause issues.

What’s the problems with relying on a minority of “top keywords” and top products?

If you are just relying on a few keywords and products for your revenue this significantly increases your risk for issues that will damage profitability such as:

  • Products going out of stock
  • Seasonality (i.e. Certain products may only sell well at specific times of year)
  • Products becoming outdated / out of fashion
  • Competitors undercutting you and / or outbidding you on Adwords

How can I diversify my keywords for search campaigns?

In many search campaigns, the issue is not so much that there are not enough keywords in a normal campaign – but that only a very small percentage of them generate conversions. In an actively managed campaign – this will generally lead to the majority of keywords being paused – or given very low bids. In this scenario there is a diversification in the number of keywords – but not in high-quality keywords that generate conversions at a reasonable cost.

We would recommend:

  • Adding in new keywords using the Adwords “Keyword Planner” if you have a very low number of keywords in your campaign
  • Adding in long-tail variations of your “top” keywords e.g. if you sold fitness instructor courses, instead of just bidding on “fitness course” you could bid on “level 2 fitness instructor course”
  • Looking in your search terms report – to see which words and phrases generated conversions. Then adding these search terms in as exact or phrase match keywords – in new ad-groups (with Ad-Copy tailored to the new keywords)
  • Running a competitor keyword report on a tool such as SEMRush to see what your most similar competitors are prioritising – and trialling bids on these keywords

When adding in new keywords, we would recommend starting your bids below the recommended “benchmark” max CPC bid – then increasing your bids incrementally – until you are getting impressions. (That way you will not over-pay for your cost per click)

3) Ignoring Device Adjustments

What are device adjustments?

Device adjustments enable you to adapt your bids depending on “device type” i.e. you can choose to set higher bids for computer relative to mobile or tablet within a campaign.  

For example, if you find that in a certain campaign your cost is low but return on ad-spend (ROAS) is high for tablet, you could choose to set an adjustment of +20% for this device.

Why are device adjustments important?

Optimising your device bids can transform the profitability of your campaigns. In an unoptimised campaign, we often see that one device (usually mobile) is responsible for the majority of spend, but the cost / conversion is too high for this device – leading to a poor return on ad-spend for the whole campaign. Setting a lower bid adjustment for badly performing devices (often by around 30% or more) means the campaign will very quickly become much more profitable. Increasing the bid adjustments for devices which are performing at a strong ROAS can significantly increase your conversion value and profitability for the campaign as a whole.

What happens if device adjustments are ignored?

We often see that devices adjustments are completely ignored, or were only adjusted when the ads first went live. This is a huge mistake – as we have found that performance of different devices can significantly change within a matter of months. Within the last year, we have found for the first time that mobile has started outperforming desktop in the number of conversions, and mobile conversion rates have greatly improved. (Although generally conversion rates remain higher on tablet and desktop).
If we had not responded to this data by increasing mobile bid adjustments, our campaigns would have lost out on a significant proportion of revenue.

We would recommend:

  • Monitoring device performance on every campaign at least once a week
  • Making small incremental adjustments every couple of weeks.  
  • Making device adjustments of no more than 5% for a bid increase, or 10% for a bid decrease at one time
  • Consider making 3 versions of each campaign: and just bidding on one device type for each (i.e. having one campaign where you are just bidding on mobile or tablet or mobile). We have found in the long term, this is the most efficient way of monitoring bid adjustments.

Is there anything else I should do if my ROAS is poor on mobile?

Significantly reducing your mobile bids can be a very effective measure to quickly turn around the profitability of your Google Adwords campaigns.
However, if your ROAS is much worse on mobile than on computer – it would definitely be worth looking into the mobile experience. Google provide a useful free tool, so you can check if your site is mobile-friendly.

You can also look into site speed – as Google note, most sites lose half their visitors while the site is loading, so this is a crucial issue to resolve.  

Google Adwords Final Thoughts

The three points above are just some of the most significant reasons your account may be unprofitable, other “dishonorable mentions” may include:

  • Ad disapprovals (often due to landing pages no longer working)
  • SKU’s not properly filtering into the correct product groups
  • Unsystematic and irregular bid adjustments
  • Over increasing bid-adjustments for high performing products
  • Decreasing bid-adjustments for medium performing products too far
  • Not monitoring bid changes, and failing to “adjust back” where necessary
  • Ignoring time of day bid adjustments
  • Ignoring “location” bid adjustments
  • Failing to regularly add in negative keywords

If you want to skyrocket your sales with Google AdWords, book a free consultation today!

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