Can You Still Make Money in Lead Gen on AdWords?

By David RodnitzkyJuly 30, 2014

If a consumer needs a mortgage and doesn’t have a go-to bank or mortgage broker, the odds are high that a Google search will be the starting point to finding the right vendor. So it makes sense that any mortgage lead gen shop would want to spend as much as they possibly could on search engine marketing (SEM) on Google. Unfortunately, there are four major hurdles that will prevent the majority of lead sellers from driving much (if any) business from AdWords.
 

  1. Efficient market CPCs. It’s no secret that SEM works wonderfully for lead generation. As such, every company in your space wants as much traffic as possible from Google, and bidding is fierce. For many categories of lead gen, CPCs can cost $40 or more . . . per click! This means that if your economics are not as strong as the leaders in your field, it’s unlikely that you will get many or any clicks.
     
  2. Winner Takes All. Google has increasingly given top bidders more and more real estate at the expense of other bidders.  In the example below, notice how much extra space the top three bidders get, and notice that if you are not one of the top six bidders, you don’t even show up above the page. Translation: the rich get richer – if you were hoping to eke out clicks in position 8 or 9, you are probably out of luck.
    david screenshot[3]
     
  3. Quality Score.  Google not only factors in your CPC when determining your position in SEM but also your “Quality Score,” which is an opaque metric that loosely means “how relevant Google thinks you are.” Lead generation sites designed to get consumers to fill out a form as quickly as possible (without providing any other information) are often frowned upon by Google. As a result, Google may artificially increase your minimum CPC or the CPC you actually pay, making it even harder to compete.
     
  4. Brand Advantage.  Consumers trust brands and as a result click on their ads more frequently. This means that a brand may actually pay less to show up in a higher position in the search results. This is because Google determines your rank in SEM through a combination of CPC and click through rate (CTR). If you are willing to pay $10 per click but have a 1% CTR, Google makes $100 per thousand impressions (CPM). If a big brand is willing to pay $5 per click but has a 5% CTR, Google makes a $250 CPM. So you can get outbid just because someone else’s brand performs better.
     

Make no mistake: there are many lead generation companies spending a lot on Google SEM (the example above, for example, shows LendingTree in the top spot). These companies, however, are typically the leaders in their space and in many cases have spent considerable funds building their own brands (LendingTree, for example, does TV advertising to build their reputation). SEM is a really tough market, and only the most successful survive. While there’s no harm trying to make SEM work for your lead gen company, knowing the hurdles up front is important when setting your own expectations of success!

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