How to Reduce Your CAC and Keep Growing Your Revenue – Don’t Advertise in Google Ads


Summary:

  • I’m documenting these learnings after spending ~$4.7 Million USD on Google Ads.
  • Google Ventures might be funding companies that are segment leaders and in turn increase the bids for their top keywords at an average of 500% in 5 years, proof below.
  • By increasing the bids of Google Ads, it forces other companies in the segment to spend more to get to top ranking on their Ad results.
  • For every $100 raised, companies spend about $40 on advertising by this model Google is funding as well be pumping revenue back into its own pocket.
  • 84% of Google’s revenue comes from advertisement products.

Only slightly evil:

The moment you hear Google the first thing that comes to your mind is the word ‘search’ but the last time I checked, I found that Google is a media company that has a highly sophisticated profile of its users intentions with laser focus on targeting data. The advertising products in Google contribute to a very large portion of its revenue and the YOY growth is astronomical.

When you analyze their revenue you can easily conclude that Google might have drifted away from its original mission of organizing the world’s information and from its motto of ‘Don’t be evil’ to ‘become slightly evil’.

Faustian bargain:

When you decide to invest your marketing budget money in Google Adwords, it is a way of Faustian Bargain where you would have to trade your money for the promise of marketing and sales-ready quality leads. This is very true in the case of SaaS companies.

Saas companies invest a huge amount of money in GoogleAds. One of the primary metrics that drive their investment is average lifetime value of a customer (LTV). They spend an upfront marketing cost of somewhere between $100 – $1200 to acquire a customer. If we set the average selling price to $100, to break even, the customer needs to pay for at least 12 months without churning out.

The Boomerang investment theory:

What if I told you that Google is picking and funding companies via GA that will result in the following,

  • Increasing the overall bid for the top performing keywords thereby forcing competing companies to spend more and drive more revenue to GoogleAds.
  • The funded company also spends on Google Adwords and a significant portion of the money is boomeranged back to Google.

This might sound like an intriguing plot for a Netflix series but the plot is too close to reality. I have analyzed the historical CPC and the current CPC of the top performing keywords of 5 companies funded by Google and in each segment the % increase is showing an upward trend.

Is Google forcing companies to spend more? You can infer from the analysis below.

Hope by now you are convinced about the data on the Boomerang investment theory.

Stopping Adwords investment will tank growth = Myth

Most marketers fear tanked growth if a company stops investing in Adwords but the contrarian truth with evidence is that a very popular brand like Chase had its ad on almost 400,000 websites on the Google Ads content network. They reduced their targeting to just 5000 websites in Google’s content network and they found little or no change in results. You can read the entire story here.

The need for the rise of owned and earned marketing

In the last decade Google Analytics is the product that has become the holy grail when it comes to measuring the ROI and pronouncing a digital advertisement campaign to be a hit or a miss. This has led to a behaviour of marketing being reduced to a mere number game rather than an intersection of creativity, philosophy and analytics.

Marketers and growth hackers should start looking at alternative marketing channels to achieve
Product-channel fit. Investing in Google Ads is like being addicted to drugs. You might like the initial dopamine hit from the quick results of the $100 initial Google Ads credit for your first campaign but you might be investing your resources into a system that is rigged against you and it is not built to scale as you grow your company.

One of the fundamental premises of starting this blog is not to be anti-google. I have huge respect for Google as a company and what it has done to organize the world’s information. I am more interested in sharing my experiments and case studies around growth hacking and organic ways of growing using a systematic approach to content and it’s distribution.

I’ll share it all in the upcoming series of blog posts.


Author Bio
Sathish Sundar 
Sathish Sundar
Sathish is a SaaS Growth Hacker and a Professional Digital Marketer who loves unlocking the viral organic growth loop smartly. Quora Top Writer and an Affiliate Marketer when not at work.