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Are Google Ads Profitable? · Marketing For Tradies

• 0:00
  SPEAKER_00: Are Google Ads profitable?
• 0:01
  SPEAKER_00: But not just are they profitable, are they going to be profitable for your business?
• 0:06
  SPEAKER_00: If we had a target CPA, we know that we can go into your Google Ads campaigns and create a strategy that targets that number as the maximum amount that we pay per lead.
• 0:16
  SPEAKER_00: How many clicks we can afford to get to your website to then turn them into leads and get that target?
• 0:23
  SPEAKER_00: Or can we achieve that target CPA based on the metrics or analytics that we have available to us?
• 0:29
  SPEAKER_00: But welcome to Websites That Convert, the podcast where your website stops being a liability and transforms into your greatest asset.
• 0:38
  SPEAKER_00: I'm your host Shannon and I'm going to guide you through the strategies and insights you need to build a website that not only attracts but converts.
• 0:47
  SPEAKER_00: Let's dive in.
• 0:50
  SPEAKER_00: If you have a business and you've been assessing your marketing and considering doing Google Ads, you probably are asking this question, which is, are Google Ads really profitable?
• 1:02
  SPEAKER_00: I feel like Google Ads have gotten a little bit of a bad name over the last few years with the rising costs of advertising and also some really bad providers out there not creating proper Google ads strategies and implementation plans and not properly managing accounts, which is causing this kind of belief in the market that Google Ads may not be a platform that's even worth advertising on anymore.
• 1:28
  SPEAKER_00: And that is so far from the truth.
• 1:30
  SPEAKER_00: And in today's episode, I'm going to answer the question: are Google Ads profitable?
• 1:36
  SPEAKER_00: But not just are they profitable, are they going to be profitable for your business?
• 1:40
  SPEAKER_00: We have been doing so many Google Ads audits recently, and some of the stuff that I see is absolutely shocking.
• 1:47
  SPEAKER_00: Google has this way of getting people to sign up for their platform and kind of lure you into thinking that you can set up your own campaigns.
• 1:54
  SPEAKER_00: That's one problem that we see.
• 1:56
  SPEAKER_00: They kind of try and get you to use this campaign structure called Performance Max.
• 2:01
  SPEAKER_00: It is generally a waste of time and money if you do that.
• 2:05
  SPEAKER_00: And they also entice you to spend a lot on a daily basis.
• 2:09
  SPEAKER_00: So one of the big things we're seeing at the moment are people who have created their own Google Ads accounts and have set them up incorrectly.
• 2:17
  SPEAKER_00: The other thing that we are seeing is businesses that are using Google Ads service providers.
• 2:23
  SPEAKER_00: And the unfortunate thing is that there's a lot of bad providers out there and people that aren't properly managing accounts.
• 2:30
  SPEAKER_00: And so we see a lot of incorrect targeting locations that are not relevant to the business.
• 2:37
  SPEAKER_00: For example, we saw a campaign recently for a local uh builder who was targeting in their Google ads people from India and Kenya.
• 2:46
  SPEAKER_00: Now, there's nothing wrong with targeting those countries if they're the locations that you provide the service in.
• 2:52
  SPEAKER_00: But in this case, that was not true at all.
• 2:55
  SPEAKER_00: They were servicing Sunshine Coast, Brisbane, and the Gold Coast.
• 2:58
  SPEAKER_00: So that was obviously going to be ineffective.
• 3:00
  SPEAKER_00: The other thing that we often see, whether it's people that have set up their own accounts or are using, unfortunately, I hate to say it, bad providers, bad Google Ads managers, is that they target the wrong keywords with the wrong search intent.
• 3:13
  SPEAKER_00: And again, that's just going to be a waste of money.
• 3:15
  SPEAKER_00: For example, we recently audited a short-term property management business and they provide property management for Airbnbs and other short-term rentals.
• 3:25
  SPEAKER_00: Their Google Ads account was targeting just Airbnb Melbourne.
• 3:29
  SPEAKER_00: So that may not seem problematic.
• 3:31
  SPEAKER_00: They had spent thousands of dollars on this keyword.
• 3:33
  SPEAKER_00: And as you can probably understand, is someone searching for Airbnb in Melbourne are looking for accommodation.
• 3:40
  SPEAKER_00: They're not looking for a property manager for their short-term rental or Airbnb listing.
• 3:46
  SPEAKER_00: So wrong keywords, wrong locations, bad management, bad providers, and DIY accounts are some of the really unfortunate things that we have seen recently during our Google Ads audits.
• 3:57
  SPEAKER_00: So before we get into the nitty-gritty of the maths behind knowing if Google Ads is profitable, I'll just say straight up, if you want us to audit your account for you, just get in touch.
• 4:08
  SPEAKER_00: We do this 100% free.
• 4:10
  SPEAKER_00: We'll see what's going on and give you some tips that you can either implement if you are savvy in Google Ads, or we can provide more information on the Google Ads services that we provide too.
• 4:21
  SPEAKER_00: So are Google Ads going to be profitable for you and your business?
• 4:24
  SPEAKER_00: Now, in order to answer this question, there is a little bit of maths involved.
• 4:28
  SPEAKER_00: And the first piece of math that we need to do is to figure out your customer lifetime value.
• 4:35
  SPEAKER_00: This is how much each customer is worth to you when they come into your business and for as long as they stay.
• 4:42
  SPEAKER_00: We're going to use 1,000 for this example just to keep things simple.
• 4:46
  SPEAKER_00: So as we go through this, our customer lifetime value will be$1,000.
• 4:51
  SPEAKER_00: The second number that we need to know is your lead-to-sale conversion rate.
• 4:55
  SPEAKER_00: So if you have 10 leads come into your business, how many of those are you able to turn into a customer?
• 5:01
  SPEAKER_00: So let's say that you have 10 leads and you can convert five of those into a client or customer, that means your lead to sale conversion rate is 50%.
• 5:11
  SPEAKER_00: So we have a$1,000 customer lifetime value and then we have a 50% lead to sale conversion rate.
• 5:18
  SPEAKER_00: This will all make sense once we get to the next figure, which is our customer lifetime value at the lead level.
• 5:25
  SPEAKER_00: Your customer lifetime value at the lead level is going to tell us how much each lead is value to you.
• 5:32
  SPEAKER_00: And once we have that figure, we can then know how much we could potentially pay per lead and ensure that you can at least break even with your advertising, which obviously isn't the goal.
• 5:44
  SPEAKER_00: We want to make a profit, but that's the first number that we really, really need to know.
• 5:47
  SPEAKER_00: So in order to know your customer lifetime value at the lead level and how much each lead is worth to you, we take your customer lifetime value, which in the example is$1,000, and we times it by your lead to sale conversion rate, which is 50% again in this example.
• 6:03
  SPEAKER_00: And that gives us a customer lifetime value at the lead level of$500.
• 6:09
  SPEAKER_00: Now, like I said, that is your break-even number.
• 6:12
  SPEAKER_00: So if you can pay$500 per lead in your business, you're going to break even.
• 6:17
  SPEAKER_00: That is not what we want, right?
• 6:19
  SPEAKER_00: We want a business that is profitable.
• 6:20
  SPEAKER_00: And the question at hand is Google Ads going to be profitable for you.
• 6:25
  SPEAKER_00: So what we need to do with this number is by default, if we don't have the gross profit margins and things like that, and just as a general rule of thumb, we would divide this customer lifetime value at the lead level, the$500 by three.
• 6:40
  SPEAKER_00: That gives us a lot of breathing room to factor in your expenses for you to make a profit and just to have a bit of a target of how much we could pay per lead to ensure that you are profitable with your Google Ads.
• 6:52
  SPEAKER_00: So if we divide 500 by three, that gives us a number of 166.
• 6:58
  SPEAKER_00: This would be your target cost per lead or what we call target CPA, which is target cost per acquisition.
• 7:05
  SPEAKER_00: This is the most important number when it comes to Google Ads and any advertising campaigns, because this is the exact figure that we need to ensure your advertising campaign doesn't exceed to ensure that you are profitable with your Google Ads campaigns.
• 7:23
  SPEAKER_00: So if we had a target CPA, target cost per acquisition or cost per lead of 166, we know that we can go into your Google Ads campaigns and create a strategy that targets that number as the maximum amount that we pay per lead.
• 7:38
  SPEAKER_00: So if you're doing this at home, let me just recap on all the maths.
• 7:42
  SPEAKER_00: And again, if you want us to do this for you, please just reach out and we can go through the data and your potential Google Ads profit plan, as well as audit any Google Ads campaigns that you're currently running just to make sure that they are set up correctly.
• 7:57
  SPEAKER_00: And if not, we can give you pointers on how you can improve them.
• 8:01
  SPEAKER_00: But just to recap on the formula, in order to know if your Google Ads are going to be profitable for your business, you need to know your customer lifetime value, which is the value or amount of money you make per customer that comes into your business.
• 8:14
  SPEAKER_00: You need to know your lead to sale conversion rate.
• 8:17
  SPEAKER_00: So this is the number of leads that you convert into a client or customer, and then you times your customer lifetime value by your lead to sale conversion rate, and then you divide that number by three, or you divide it by your gross profit margin if you have that.
• 8:32
  SPEAKER_00: But it's much simpler just to divide it by three, and that is your starting point.
• 8:36
  SPEAKER_00: Now that we have that number, that will allow us to have a look at Google's metrics in terms of cost per click on keywords that you're wanting to target.
• 8:47
  SPEAKER_00: So if you are a physiotherapist in Brisbane, for example, uh, we would look at what that keyword costs per click, and then we would look at how much traffic your website is converting into leads to.
• 8:59
  SPEAKER_00: So what's your website conversion rate?
• 9:01
  SPEAKER_00: And then we can know how many clicks we can afford to get to your website to then turn them into leads and get that target, or can we achieve that target CPA based on the metrics or analytics that we have available to us?
• 9:16
  SPEAKER_00: But like with everything in advertising and marketing, it's a matter of estimating, testing, and optimizing.
• 9:22
  SPEAKER_00: So Google Ads, we want to just get set up with our estimation and our strategy and our profit plan.
• 9:29
  SPEAKER_00: And then we want to optimize it on an ongoing basis to get the cost per click as low as possible.
• 9:35
  SPEAKER_00: So this comes down to the competitiveness of your industry and the quality of your ads and a number of other things that Google will assess based on your industry and your account setup and your campaigns that are running and your website and all of these different things.
• 9:52
  SPEAKER_00: We want to get the cost per click as low as possible, and we want to get your website conversion rate as high as possible.
• 9:58
  SPEAKER_00: So when we can do these two things, we're going to lower the cost per lead, which means it's going to expand the amount of profit and return on ad spend that you get with your Google Ads campaigns.
• 10:12
  SPEAKER_00: So basically, we need to know what your target CPA is.
• 10:16
  SPEAKER_00: So how much can we pay per lead?
• 10:18
  SPEAKER_00: We want to ensure that we can afford to pay the cost per click that Google is asking for, and we want to get that as low as possible.
• 10:27
  SPEAKER_00: And then we want to have a high website conversion rate because it means that we're getting more of those clicks to convert into inquiries and leads and bookings for you.
• 10:39
  SPEAKER_00: So if you have those three things, if you know what your target CPA is, if you have a good strategy and know what you can afford to pay cost per click and have a website that converts, you're going to have a profitable Google Ads campaign.
• 10:54
  SPEAKER_00: But like I said, if you don't want to do all this maths yourself, if you want to get some support, if you want us to audit your existing Google Ads account or come up with a strategy specifically for you to ensure that you do get a return on investment, reach out to our team.
• 11:10
  SPEAKER_00: We can help you ensure that you are putting your money into a campaign that is going to get you results.
• 11:16
  SPEAKER_00: But I hope this episode has been helpful in understanding what it is that you need to know in order for your Google Ads to be profitable.
• 11:26
  SPEAKER_00: Thank you for listening to Websites That Convert.
• 11:28
  SPEAKER_00: If you found value in this episode, please give us a five star review on Apple Podcasts and Spotify.
• 11:34
  SPEAKER_00: Follow us on all social media, and if you're a service based business owner that's looking to double their website conversions, book a call with my team using the link below.
• 11:43
  SPEAKER_00: I'll see you in the next episode.