If you run a startup or small business, you’ve probably gotten email offers from Google suggesting you start running Google Ad campaigns ads for your business. Maybe they’ve even offered a coupon to entice you.
Then you start to wonder: Should we start running Google Ads right now? What’s there to lose if it’s all pay-per-click?
Google Ads could be a good investment for your startup right now or it could be a bit too early. It really all depends on your growth strategy and where you’re at financially.
Here’s our two pence:
Most startups in their early days need to take time to identify their Product-Market Fit (PMF) before it makes sense to invest in paid ads. Having PMF allows you to gain feedback from early adopters, then use these insights to improve your products and develop the right marketing message for your ads. Side note: If you’re not sure if you have product-market fit, check out this great blog post all about what PMF is and how to get it.
Having a full understanding of why and how an audience is in-market for your products can help you improve ad targeting as well as your ad message. Take a look at this recent ad for freelancer site Upwork:
They could promote their platform as the place to find cheap freelancers on-demand. But they know from market research that their audience wants top talent. So they highlight that in their ad message.
If you don’t have clear PMF, you’re probably not ready to invest in ads yet. That is unless you plan on using ads to quickly gain an initial number of users. Paying for ads to get feedback from early adopters can be worth the investment, as long as your cost-per-acquisition (CPA) is worth the insights you’ll get in the beginning.
Now, if you feel confident that you know your audience, the next step is to look at your unit economics.
Uhhh…… unit economics?
Don’t worry, Google can help if you’re lost. Here’s a quick definition:
“It is a way to measure the profitability of selling one unit of product or service. Each business model has its specific unit economics and depending on the analysis you want to do you can choose different ones” Source – Unit Economics: Is Growth the Ultimate Goal of a Startup?
So, why do you need to know about your unit economics to invest in Google Ads?
Because ads cost money, and you need to decide how much you want to spend on getting new customers. Lots of startups just think about profit margin (net income/net sales) when making bid and budgeting decisions. But really you need to know how much it costs to produce the product, provide customer service, pay your employees and rent, and keep your business afloat overall. Then you can decide how much profit margin you need, and how much you can reasonably pay to acquire customers through Google Ads. That’s what unit economics is all about.
If you have clear product-market fit and have worked out your unit economics, you’re probably ready to get started with Google Ads. But if you want paid ads to be worth the effort, you need to develop a bidding strategy that helps you work towards long-term growth goals (not short term profits).
Let’s explain this distinction using another concept popular in business and marketing called growth loops. A growth loop (also known as an acquisition loop) is a concept best described by growth expert Brian Balfour. Here’s how he defines them:
“Loops are closed systems where the inputs through some process generates more of an output that can be reinvested in the input. There are growth loops that serve different value creation including new users, returning users, defensibility, or efficiency.”
Here’s a visualisation of the concept:
Your PPC strategy, especially in the beginning, shouldn’t be about maximizing profit margins. It should be about bringing in enough revenue for you to continue the cycle of spending on ads and acquiring customers. From day one of your PPC program, it should be optimized towards allowing you to scale your advertising investment and grow.
Take a look at the average Google Ads cost per click for your industry here:
And the average click-through rate for your industry here:
Don’t be surprised if you see that CPC and CTR don’t line up compared to other industries. With an average PPC conversion rate of 4.4% across the board, know that the vast majority of people who see your ads will never click on them.
So if you want to create that growth loop we’ve been talking about, you’ll need to get a lot of ad impressions to start getting your CTR where you want it to be. That probably means investing more and bidding higher than what you think you should on keywords.
These are just general guidelines — every business is different. But the point is that especially in the beginning, there’s an important balance to be made.
Maintaining your startup’s runway is the most important thing. You don’t want to invest unnecessarily in Google Ads if they’re not going to help you take off. If you see no scalability in running Google Ads for your business right now, then it might make sense to reallocate that investment elsewhere.
If you’ve thought everything through and are ready to start Google Ads for your business, then congratulations!
Now comes the challenging part.
Working out your budget is far from the only key to success with PPC ads. You also need to use the right targeting strategies and messaging to get visibility and clicks.
For example, you need to decide if you want to bid on your own branded keywords to pay for these clicks or allow searchers to find your site organically. You can also bid on competitor keywords, showing ads that set your business apart.
You should also use proven psychological principles in your ad copy to encourage clicks. Just look at what comes up when you search for online donation platform JustGiving:
An ad for a competitor site comes up. Look at their headline. Is “No Setup or Activation Fee” the most valuable aspect of what eTransfer has to offer? Of course not. They’re using marketing psychology to eliminate reservations and get more clicks.
Google Ads is a powerful advertising platform that’s the key to growth for many new startups. All you need is the right strategy and marketing tactics to start seeing results. And if you need help, don’t hesitate to enlist the expertise of PPC professionals like us, who help startups like yours succeed with Google Ads all the time.