There has been a lot of publicity in industry channels, and a lot of retweets on twitter, surrounding a search engine land article and the point of diminishing returns in paid search. The author, Josh Dreller, argues that, in world of holistic digital marketing multi channel media planning, sometimes the accountability of PPC only gets it so far, and with every campaign there is a point of diminishing return.
If I’m honest, I read the article after seeing it posted on twitter and was a little bit underwhelmed. Dreller pens the theory as something new, something never before considered, and that the paid search bubble has finally been burst! When really, any search marketer worth their salt was well aware of the point of diminishing return. Every campaign has one, and after a certain point, incremental traffic comes at a premium. You reach bands of cost in paid search which once breached, are unlikely to meet your ROI targets when analysed in isolation.
This isnt a new theory, this is something which has always been present. Whenever considering increases in PPC budget and advertiser should consider the incremental costs of the sales and the impact on ROI. It has never been a straight line equation where the more you spend the more you get, at the same cost per acquisition and if Josh Dreller has been running paid search campaigns on tis basis, Im glad I have never been a client!
Whilst the points made are true, the fact remains that in some cases, ROI isnt everything. Many industries need a critical mass of volume to stay afloat and so need to be willing to pay the additional price for the additional sales. PPC agencies should be presenting their clients with the right information and data to make their own choice. Invariably, in my experience, this is in the form of a number of forecast options for the client to choose from; x applications at x cost, or y applications at y cost. Or in the case of retail; a spend of x at an ROI of x, or an increased spend of y with a lower ROI of y, but increased revenues. I know this is what the top specialist agencies have been doing for years.
The other factor to consider is the options for the spend above the ROI threshold. Dreller mentions the alternative of spending the additional budget on other marketing, and whilst this is always an option the advertiser has, they must also consider the return they are going to get from these alternatives. For whilst the incremental PPC sales will come at an increased CPA, the chances are, this higher cost per application could still be way lower than could be achieved from other advertising activities. So whilst, in isolation, they may look expensive, they could well still be cheaper then the ones available elsewhere.
Don’t get me wrong, I am a full advocate of holistic, multi channel, media planning and effective allocation of digital budgets based on each channels merits. But the article portrays this theory as the downfall of PPC, when in reality it is something that has been present all along.
You can read Dreller’s article here