How long are AdWords campaigns still profitable?

In Germany, the profitability of AdWords campaigns, particularly in connection with the sharp rise in CPC (cost per click) costs, is the subject of heated debate. Reason enough to take a closer look at developments in the Swiss market: Although CPC costs are not yet at the German level, the percentage increase is certainly comparable. We have come to this conclusion on the basis of observations made by our customers.

Inflation in the double-digit range

As Google does not publish any data on CPC development, we have no choice but to analyze our own campaigns. In Germany, Explido.de provides the representative P-MAXX analyses. I am not aware of any similar public analyses for the Swiss market. We therefore rely on observations made by our customers. For example, we were able to observe the following for a customer from the vehicles segment in Q1 2010/2011:

- The CPC for branded keywords (search terms containing the vehicle designation or brand name) has risen by almost 50 percent to CHF 0.76 per click
- For generic keywords such as family car, leasing or test drive, the CPC increased by 125 percent to CHF 3.70 per click in the same period.

Observations with this and other clients show that the CPC for generic keywords, which are intended to appeal to potential customers at the start of the decision-making process, has become significantly more expensive. As long as more and more companies start using AdWords advertising, this trend will continue.

Swiss costs not yet at German level

The percentage price increase of the Swiss CPC is comparable with Germany. The actual prices are not (yet) at the German level, as an example shows:
- The average CPC for the keyword "car financing" was EUR 4.40 or CHF 5.35 (Explido P-Maxx study June 2010).
- In Switzerland, the CPC for the same keyword is currently CHF 3.10.
In our view, the price difference is probably due to higher demand.

No profitability without control

The massive increase in costs and the significant price differences between branded and generic keywords require careful monitoring of the profitability of AdWords campaigns. However, the price increase is no reason to do without AdWords. Rather, it is an incentive to closely monitor the performance of AdWords campaigns. Among other things, the following questions need to be answered:

- How do the individual keywords perform in terms of visitor depth, dwell time and bounce rate?
- Which keywords (groups) achieve a positive ROI (cost per lead/cost per order)?
- What influence do the "expensive" generic keywords have on the decision-making process? Do consumers find the brand via these keywords?

Only those who know the performance of their AdWords campaign down to the cost per conversion can be sure that their AdWords campaign is successful. The analysis could reveal interesting results that lead to strategy adjustments.
Imre Sinka

P-MAXX studies: www.explido.de/info-news/downloads/pmaxx/