PPC as a Luxury, not a Business Model

by Jesse on February 16, 2009

I’ve recently been dealing with a client that has been dealt the bad hand of seeing success through ppc advertising. Before I was involved with the company they picked up a consultant that suggested they start spending some money on PPC to drive traffic to their then new company, they explored the medium and saw an increase in sales (revenue, and I stress the difference between revenue and profit here). That consultant has long since parted ways but what he left behind was an everlasting twinkle for PPC in the eyes of the decision maker at the company.

Now let me preface what I’m going to say here with a caveat, I absolutely believe in PPC advertising, I think that there is a time an a place for it, I’m simply telling one story where it may or may not have been the best option.

The issue was that as the company grew they began to scale based upon total traffic and revenue, much of which was supplied by PPC advertising. In booming times the company was able to grow using both the organic traffic (which they had solidified through very good SEO practices) and also the aforementioned PPC traffic which cost the company a sizable amount. The company hired staff to deal with the new volume of sales and everything was good.

Then we entered this most recent economic downturn and things slowed down. Now this had two effects; one, sales were down based on the reluctance of users to purchase in the marketplace which reduced income, and two, advertising dollars were drying up as what revenue was being brought in was used for payroll and other mandatory expenses. So ad dollars were down, which lead to even less sales and even less revenues which led to less ad dollars… you get the picture.

The company has been forced to lay off several people and make major cuts in a lot of areas, including online marketing consulting, needless to say I have more time to deal with other clients. The decrease in sales based on a poor economy could likely not be avoided, but could a different approach to PPC make a difference in the situation this company is in?

Over the past couple years the amount of organic traffic to the site had dramatically increased and the previous online marketing consultant hustled to increase PPC spending to keep the ratio equal. Had they decided to decrease PPC spending while organic traffic increased they would not have been so susceptible to the decrease in consumer spending, as well as keeping the cash that they spent on PPC through those years.

The main point of this post is to convey that PPC makes sense in many situation, mainly for new sites that are trying to get established in a marketplace before their organic rankings take off, but does it make sense for an established company that ranks well organically to structure their business model and staffing numbers based on that traffic. When times are good and money is flowing PPC advertising can be a nice boost to increase overall cashflow (if the ROI works with the current site and conversion rates), but I stress the importance of not overstaffing based on those good times so when things slow down, you can pull the ads, conserving some cash, and still have a solid traffic base from all that hard SEO work you did early on. You did do that hard SEO work early on didn’t you?

Technorati Tags: Consulting, PPC

{ 1 comment… read it below or add one }

social media consultant guy February 17, 2009 at 1:23 pm

definitely think that ppc and seo can be used together, there are a lot of learnings that can be applied from one to the other. i use ppc for a lot of keyword research and testing. with ppc and seo you can capture both the broad and the niche terms

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