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Thanks for such a full response, EGOL.

To put this in perspective, that means 90% of around $42 billion spent on AdWords in 2012 was wasted.

That's the GDP of Kenya.

The recent article from eBay about the performance of their PPC campaigns got me thinking more generally about AdWords and whether maybe the whole thing (especially in the case of eCommerce) might be a complete waste of money.

Obviously, considering Google sucked several billion dollars out of the world last year using just AdWords, I hope not, but hear me out...

There are two reasons why I think AdWords (in the case of online sale of products in a competitive market) are a waste of money:

1. In a competitive market place, the bidding system necessarily means that the cost of an ad is as high as it can be for any given keyword.

What does this mean? It means that, given all bidding parties are intelligent agents (spoiler: they're not), the price of a sale will naturally approach the profit made on that sale and no-one (except for Google) will make any profit.

e.g.
Alex bids $2 to make a $5 return ($3 profit!), so Ben bids $3 to make the same return ($2 profit!), so Carla bids  $4 ($1 profit!), until no-one is making a return at all, or at least the return is so minimal as to not be worth the effort.

This is presuming Alex, Ben and Carla are intelligent agents. If they're not, it's highly likely that they'll bid more than their return (e.g. a bid of $6 for a $5 return leading to a loss of $1). In a real world situation where you can multiply these 3 agents by 100s, there is enough stupidity and general noise in the bidding that this is bound to happen.

Result? For your bid to succeed, you have to bid so much that it's not worth bidding.

So: don't bid on AdWords and spend your marketing money on something else.

2. If it did work, we'd all be rich

Let's say I'm wrong about the above. I can find a way to guarantee a positive return on investment (Google themselves constantly go on about how you can easily track and predict your ROI).
If this were the case, surely I could go to any bank or investor and show them my proof, borrow $100tn, and make both me and them trillionaires.
Why are there so few trillionaires??

I might be missing something big here (I'm sure I am) but I just can't convince myself that the system could ever work for anyone other than Google, who are effectively hoovering up the profits of every business in the world.

Please tell me I'm wrong!

Thanks Cyrus - very helpful. I still get the feeling that getting a link from a PageRank e.g. 7 site (however relevant it is) is going to be a lot more valuable than a load of PageRank 3 sites, though maybe not as valuable as an extremely relevant PageRank 6 site...

I'm planning a link-building campaign, and I've realised it'd be good to know the relative values of different PageRanks.

e.g. does a PageRank 5 site have 10 times as much effect as a PageRank 4 site? Or 100 times? Or 2 times?

I'm thinking, rather than spending ages getting 10,000 PageRank 3 links, I should just spend a bit less time trying to get a few PageRank 7+ links!

I'm even considering offering incentives to staff for getting links - to do so it would be good to be able to value each PageRank accordingly.

Any suggestions / knowledge / experience / stats gratefully received!

Alex

Hi Jennifer,

Thanks for the response. However, the "Last Index Update" on Open Site Explorer is still showing 8/14/12?

Alex

OK - thanks Keri. Not a problem, just getting excited!

Alex

I've been keeping an eye on the Linkscape update calendar and am a bit confused! There was meant to be an update yesterday, but Open Site Explorer is still showing "Last index update: 8/14/12". When will the new data reach OSE? Been doing lots of link building and want to know if my efforts have been worth it!

Any info greatly appreciated.

Thanks!

Alex

Until recently all of our product pages (we run an eCommerce site) had product descriptions copied directly off the manufacturer's sites. Obviously this isn't good from an SEO perspective, so we were planning to write our own original copy.

My question is: should we keep the manufacturer's copy too? This is often good, useful content from a customer's perspective, but obviously it's not original.

Any help appreciated!

Alex

We're working hard on improving our website right now, and would love to get the community's examples of the best eCommerce sites out there, from an SEO and a general customer-centric design perspective...

Very interesting - thanks! And makes sense. However, I can't quite get my head round how this would work in practice. Have you got any real world examples? Alex

I've been keeping an eye on the Linkscape update calendar and am a bit confused! There was meant to be an update yesterday, but Open Site Explorer is still showing "Last index update: 8/14/12". When will the new data reach OSE? Been doing lots of link building and want to know if my efforts have been worth it!

Any info greatly appreciated.

Thanks!

Alex

The recent article from eBay about the performance of their PPC campaigns got me thinking more generally about AdWords and whether maybe the whole thing (especially in the case of eCommerce) might be a complete waste of money.

Obviously, considering Google sucked several billion dollars out of the world last year using just AdWords, I hope not, but hear me out...

There are two reasons why I think AdWords (in the case of online sale of products in a competitive market) are a waste of money:

1. In a competitive market place, the bidding system necessarily means that the cost of an ad is as high as it can be for any given keyword.

What does this mean? It means that, given all bidding parties are intelligent agents (spoiler: they're not), the price of a sale will naturally approach the profit made on that sale and no-one (except for Google) will make any profit.

e.g.
Alex bids $2 to make a $5 return ($3 profit!), so Ben bids $3 to make the same return ($2 profit!), so Carla bids  $4 ($1 profit!), until no-one is making a return at all, or at least the return is so minimal as to not be worth the effort.

This is presuming Alex, Ben and Carla are intelligent agents. If they're not, it's highly likely that they'll bid more than their return (e.g. a bid of $6 for a $5 return leading to a loss of $1). In a real world situation where you can multiply these 3 agents by 100s, there is enough stupidity and general noise in the bidding that this is bound to happen.

Result? For your bid to succeed, you have to bid so much that it's not worth bidding.

So: don't bid on AdWords and spend your marketing money on something else.

2. If it did work, we'd all be rich

Let's say I'm wrong about the above. I can find a way to guarantee a positive return on investment (Google themselves constantly go on about how you can easily track and predict your ROI).
If this were the case, surely I could go to any bank or investor and show them my proof, borrow $100tn, and make both me and them trillionaires.
Why are there so few trillionaires??

I might be missing something big here (I'm sure I am) but I just can't convince myself that the system could ever work for anyone other than Google, who are effectively hoovering up the profits of every business in the world.

Please tell me I'm wrong!