What Can the Gecko Teach us About Google Paid Search Advertising?
Geico spends a lot of money on advertising. It’s likely about $2 billion a year with around $100 million of that on paid search ads through Google Ads. But I heard a story that said when Berkshire Hathaway bought Geico, Warren Buffet ran the numbers and thought Geico was under-spending on advertising based on the lift the campaign was providing.
Anyway, whether you think $100 million is a lot or a little to spend on paid search ads, one thing’s for sure- the big insurance players spend so much on Google that they inflate costs dramatically. In this post I’ll look at which business categories have inflated costs and what that teaches us about Google Ads in general.
To start, check out this chart showing average cost-per-click on Google Ads by industry. (May 2021, U.S. dollars; Source- Statista). You can see that the average cost-per-click for the insurance industry is $20.12. That’s high! Other inflated categories include online education, and legal. So what’s going on in these categories?
Why is insurance such a hot category for paid search ads?
In the insurance category, it’s not just Geico driving up costs, it’s the competitive heat generated by giants competing for customers including Geico, Progressive and State Farm. Remember that Google Ads sets prices by auction with buyers in hot categories bidding them up.
So why is insurance such a hot category? First, insurance is a product that everyone needs so the universe of potential buyers is gigantic. Second, insurance isn’t sold in stores so if you need some you’re going to search online for information about it. And third, insurance companies have mastered the conversion of browsers into buyers at a velocity that enables them to get a consistent return-on-investment even if they have to pay $20.12 for an initial click.
What other categories are like insurance?
Online education is one, and it shares the characteristics of consumer insurance- it’s widely needed, the selection process is information intensive, and browsers can be profitably converted into customers at a high rate.
The average cost-per-click for online education to be $13.20. But that’s actually a bargain. If you’re competing to sell “online MBA programs” you’re going to pay $40.62 per click!
The legal profession also uses Google Ads heavily and bids up costs. Here’s one eye-popping example: the search term “mesothelioma lawsuit” cost $170.99 per click! Sadly, this reflects law firms seeking plaintiffs who are ill from asbestos. In general, though, the legal profession has similar advertising dynamics as insurance- a large number of potential customers, an information-intensive purchase, and big money to be made.
What can you learn from these examples?
· If you’re a small player in one of the highly competitive categories like insurance, you’re going to have to be very selective in which keywords you can afford to buy. For example, maybe you buy “insurance broker near me” which costs $11.65 versus “car insurance quotes” which cost $58.84.
· Second, if you’re in one of these inflated categories, you’ll need to do the math on ROI to see if you can you get a return on your investment at all- even if you’re buying the less expensive search terms.
· Lastly, the Google Ads paid search marketplace is very volatile. Prices can change dramatically overnight as competitive advertisers pile in or pull back. So it’s important to monitor campaigns weekly to ensure that your share of voice is maintained.
This post was written by John Walker, Principal at J. Walker Marketing, a marketing consultancy. Contact John directly to discuss your marketing challenges.