Practical Ecommerce

Our experiment in eliminating AdWords

Back in the day, I managed a $500,000 annual pay-per-click advertising budget for CompactAppliance.com, a retailer of small-space appliances. That business was built on the pillars of PPC ads and sourcing from China. So I am very familiar with PPC and I also know a thing or two about product development and sourcing.

When I founded FringeSport, we launched AdWords campaigns when we launched our ecommerce site, on Shopify. At that time, we were trying to prove our business model. We were looking for revenue and not necessarily return on investment from PPC ads.

As we grew, we continued our AdWords campaigns, but we outsourced the management of them to a third party. We paid that company a percentage of ad spend in exchange for its management of our campaigns.

We were focused on growth. A year or so in, we realized that our return on ad spend — ROAS — had declined to a low level. While there was a customer acquisition argument to justify the low ROAS, we reset the ROAS higher and continued on.

This higher ROAS goal resulted in a lower level of ad spend (and less revenue) but at a more profitable rate. We continued on this path for a few years.

Recently, we became interested in multichannel funnels. We dug through our Google Analytics to see where our customers were finding us, and what channels were generating the sales. For example, a customer uses multiple channels before purchasing when she finds our site via a Google organic listing, comes back from an email campaign, and then finally purchases after clicking an AdWords ad.

We noticed that many customers coming through the AdWords channel seemed to have earlier touches from other, lower cost channels.

So we had a radical thought. Maybe most of the customers from AdWords would find us anyway, without us paying for the traffic.

This thought is heresy among my Internet marketing friends. But at FringeSport, we talked about it for months. We experimented with notching back our AdWords budget, and then spending more. Finally, we did the unthinkable: We eliminated AdWords and all PPC ads entirely.

This was a gut-check moment for me. I was terrified that all or most of our revenue would go away overnight — an overblown fear for sure, but it did cross my mind.

So what happened?

The month after we cut our PPC advertising, revenue at FringeSport.com dropped by as much as 20 percent. But our marketing expense dropped by 75 percent.

We then refocused on the blocking and tackling of ecommerce:

  • Search engine optimization;
  • Email marketing;
  • Content marketing.

And we also honed the selling skills of our employees that work directly with shoppers, such as:

  • Outside sales;
  • Retail sales;
  • Customer service.

We recently engaged a trainer in the Sandler Selling System. He has helped a lot.

And now, revenue is higher than it was with PPC ads, and our marketing spend is far lower. That said, we have worked hard on those basics of ecommerce, and there were some dark days when we were tempted to turn the faucet back on.

We will experiment with resuming PPC ads, but only with a very high ROAS — 10 to 20 percent probably — and we will manage it in house.

Has anyone else experimented with cutting PPC ads to the bone?

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  1. John Zabkowicz July 29, 2016 Reply

    Excellent article, Peter. I tend to view PPC as a crutch until you can get your site and marketing strategies are firing on all cylinders. Removing that crutch is going to be scary, and it might hurt a bit at first. However, taking this initiative forces you to grow in a manner that’s good for business. Congrats on taking this step and succeeding at it.

    • Peter Keller July 29, 2016 Reply

      @John

      Thanks for the comment! I have a bit of a nuanced view. I think we were using PPC as a crutch, but it does have a place in many businesses. We’ll definitely turn it back on in the future, but more strategically than previous.

      @Kirk

      Wow, awesome comment!

      I think you are on target with a number of these thoughts.

      We are fairly well SEOed currently, but I love your idea of supplementing that with PPC in areas that we are not well SEOed. For example, it immediately makes me wonder if we should incorporate adwords for new product launches- where we have no chance of an SEO play since the product is brand new.

      One note on the lack of ROAS goals initially- when we launched, we cared far less about ROAS, and more about proving the business model.As we matured the model (aka didn’t fail), we transitioned the the ROAS goals.

      I def don’t want to throw our previous agency under the bus- I love them and recommend them to friends (Effective Spend). Rather, our ROAS goals got crazy due to changes we made in our business model.

      Love to continue the conversation.

  2. Kirk Williams July 29, 2016 Reply

    Really interesting article. Thanks for the transparency! I run PPC for clients, so am admittedly biased, but I had some thoughts after reading through this. (By some, I mean, a freaking long comment). I’m interested to learn more from you in dialogue.

    In my opinion, I believe this was a strategy rather than PPC fail at its core.

    (1) your comments about AdWords following other channels often in attribution tracking was interesting to me. In my opinion, 2 huge benefits to PPC are (1) supplementing organic traffic in highly competitive markets (esp as SERPS go more to ads) or (2) helping lesser dominant market players establish brand and inbound strategies by driving “new” customers. People unfamiliar with the brand.

    It seems in your case (at least from what you’ve shared) that you have a fairly successful inbound strategy, and possibly even high organic rankings all around (if you can pull PPC and not completely tank things). This suggests to me that there will be some level of “sharing” with organic as you fight competition appearing above your organic slogs, but IMO the best solution would have been to focus hard on driving new traffic, and developing a strategy that would best allow for this. This will look different than simply sharing keyword lists between your organic and PPC agencies and having them bid on the top keywords out there suggested in Keyword Planner (I don’t know what your strategy is, but that is not an uncommon one to my knowledge). Since I don’t have your account in front of me, perhaps your agency was aware of this and it still failed. However, from what you noted about PPC often following other channels, it doesn’t really seem like you were taking advantage of a main benefit of PPC: driving new traffic.

    In defense of PPC sometimes showing in the Bottom of Funnel spot in conversions, is that there are times when someone has done research, investigated a product, and then types in a highly specific long-tail keyword that you might not be ranked for, but that your ads and your competitor ads do rank for. In that case, sure, other channels had a say in the matter, but that doesn’t mean having that last “say” wasn’t still important.

    (2) From your article, you know this, but TBH it was a pretty big mistake not to figure out & set hard ROAS goals from the beginning, because that directly impacts strategy. If you weren’t communicating hard profit goals, but were just asking them to find conversions, then their account management was based upon finding conversions. It can be argued that conversions should still be sought in the right places, blah blah (see previous note). But as someone who has dealt with clients who don’t set hard ROAS goals, and then come back and wonder if PPC is truly “profitable” (I don’t even know what’s profitable if they won’t tell me), I want to give your previous agency some credit here. It is difficult to know what an agency should be shooting for if you were communicating one thing primarily (get us more sales), and yet you were starting to get frustrated by a loss of profitability. Those are very different things, and they legitimately affect the way you manage things. I take more risk with bidding, ad text, and new keyword experiments with low ROAS, high sales goal accounts then I do with accounts focused more on profitability.

    If you were to begin again, I would highly suggest hiring your in-house professional, communicating hard ROAS goals (don’t put pressure on them for immediate sales volumes if you are focused on ROAS), and specifically investigating ways that PPC can supplement your current inbound strategies. That may look like finding new traffic. That may look like increasing close rates with better Bottom of Funnel long-tail terms in which you have no organic presence. That may include using inbound to build your lists, and then using remarketing to “close” more of those sales.

    Just some ideas, I apologize for the longer comment but, well, you did go after my livelihood ;) In all seriousness, I really enjoyed the article. Thanks for writing it and starting the conversation!

  3. Kirk Williams July 29, 2016 Reply

    @Peter

    That makes a bit more sense, there is always so much context behind every account that it is difficult to really identify the core issues without a lot of time and analysis! It seems like you all have been doing that, which is great. Interesting to hear your thoughts on being well-SEO-ized, because that seems to fit.

    Also, to give you an idea where I’m at, even though I represent my agency, you won’t hear me say AdWords works for every business on earth. I’ve actually agreed with a client that Facebook was best for their needs at this time in their growth (new product, low profit, high CPCs even though low competition, and not a lot of search volume/people looking for it).

    So I’m not one to just argue solely for the sake of preserving my livelihood, on the other hand I’m also one that doesn’t like to give up without “figuring it out.” In this case, there seemed to be too many unknown/off-sounding factors to bring out rather than let the post rest unanswered :)

    I wish the best to you and your business!

  4. carol July 29, 2016 Reply

    Real Estate broker Santa Fe NM. Are you of the belief that ppc equals seo placement?

    I have done ppc out sourcing for years. Trying again to work through G direct now.

  5. Chris Cahill July 29, 2016 Reply

    Thank you Peter for being so generous by sharing the inner workings of your firm.

    As a PPC consultant, I am tempted to defend the use of PPC, but I think the timing of your experiment is key here.

    At the beginning of your company, PPC most likely was instrumental in the building of the lists that you relied upon to harvest once you pulled the plug on AdWords, right?

    I can’t help but think that your presence in the paid ads space played a key role in building the trust for many of your organic visitors to click the SEO pages as well. As well as some branded search.

    As you stated, this was not an easy decision and the risk was real. Perhaps the delay in making it was the critical element to why it worked?

    I would love to know what other marketing efforts you were employing to build your lists at the early stages.

    Thanks again for sharing.

  6. Elizabeth Hollingsworth July 29, 2016 Reply

    I would rather spend money on proper SEO than on Adwords and perhaps I’m in the minority but I almost never click on Google Ads – and especially when the same company appears in organic results almost immediately below. That said, I do click often click on Google Shopping – were your PPC ads counted within that?

  7. Himanshu August 1, 2016 Reply

    If it’s a trend that your new visitors/audience/buyers also click on adwords ads at a later point in purchase journey, you can run ads only for re marketing (both Search and Display) for new customer acquisition rather than spending on ads to make them click upfront. It might save cost and also your touch points will remain intact in customer journey.

  8. Robert August 9, 2016 Reply

    Nice – thanks for sharing Peter!

  9. Carlos Rivera August 9, 2016 Reply

    I’ve cut our PPC ads to the bone and never looked back. Never open your wallets up to Google!

  10. Leonardo Pacher August 15, 2016 Reply

    Really Good Article, is very common to see a companies sacrificing its profits for a huge turnover. You have proven that is possible to increase profitability decreasing sales and turning off PPC (what is amazing) .

  11. Samuel Araki August 15, 2016 Reply

    It’s really a great topic Peter. Running an agency we’re always looking at the best solutions for our clients.

    ROAS is important, but it’s really important to know what the customer acquisition cost is across channels. Whether it’s organic, email, social media, paid search, etc.

    We’ve taken multiple clients out of Google Adwords completely (sometimes to go to reallocate to Facebook ads!), we’ve increased budget of Google Adwords for others, and it’s all based on trends and results.

    It’s a great discussion, and your move was great, because until you do it – you never know.

  12. David August 20, 2016 Reply

    It’s interesting, but would have been way better with screen captures and real figures (as most marketing blogs do when they launch experiments)