US small businesses are spending more than double on paid search campaigns compared to a year ago. That's according to a new report out by Webvisible, which looked at how small businesses were spending their marketing dollars and how well paid search was performing in particular.
Paid search spend (those text ads you see down the side of Google), was up 159% in 12 months, with small businesses buying more keywords than ever before. Performance, measured by conversions or actions resulting from the click through, was also up, although the reasons are unclear. Maybe they have all become super-hot landing page optimizers in the last year.
Part of the reason for the increase in spend is probably because keywords just get more expensive over time. The cost of a typical paid search campaign on Google is significantly higher than two or three years ago because more companies are bidding on the same keywords. This drives CPC (cost per click) up on the keywords that typically have big volumes. Advertisers are then forced into the 'long tale', hunting for keywords that are less popular and therefore cost less. So by default, the number of keywords in a typical category buy is bound to increase.
I think this is going to become a big problem, not just for small businesses, but for any business that relies on paid search to drive the majority of their acquisitions. At some point it just won't be profitable to buy certain keywords, because the cost will outweigh the return.
Two things will happen as a result of this:
1. Advertisers will have to look to other channels to make up the difference - get better at organic search, use social media more effectively, get better at word of mouth referrals etc.
2. Landing page optimization and keyword conversion will become even more of an art. Having solid analytics and a platform that enables you to do simple A/B testing and more complex multivariate testing will be critical to stay profitable.


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