Yup, Google did it again. Last week, the company dropped a bomb on small businesses who rely on the Adwords Pay-Per-Click program, by announcing that they will no longer show ads along the righthand side of the search engine results pages (SERP). Ad spots 5-9 that used to show on the right rail will now show at the bottom of the SERP, underneath the final organic results.
To cushion the blow, the SERP will now feature a fourth ad at the top of the page, above organic results.
There’s really no way to overstate what a massive change this is for everyone in the SEM industry. But it’s going to have a more profound — and even devastating — effect on locally-oriented businesses who had relied on Adwords as a key marketing tool.
Why Google made this change is certainly a subject for debate. However, there’s no denying that there will be a barrelful of losers who directly suffer from this change. Here are just a few:
Small Businesses Who Advertise Locally
Thousands of small businesses currently use Adwords to drive leads, generate phone calls, promote downloads, or achieve any of a dozen common marketing goals. Targeted, relevant, and cost-effective, Adwords were the most obvious place to compete with larger players. Even tiny companies who ran smart campaigns could drive value out of Adwords at lower positions. That’s not going to be the case anymore.
Local SEM Providers
Big local SEM providers (you know their names), are already struggling with harsh churn problems, and are going to see their campaigns suffer tremendously. With thousands of locally-targeted clients, they could afford to bring on campaigns at scale, knowing that there were 9-10 relevant positions on a SERP for their campaigns to appear on. Now, however, these campaigns are going to be forced to increase their campaign budgets and lower their ROI expectations. It’s move to the top, or move out altogether. That’s not a message that most local SEM providers want to deliver to their clients.
With dozens of franchises in any specific DMA, there will only be 4 spots at the top of the page… and some will most likely be taken up by the national efforts of the Hondas, Fords and Mercedes of the world. That doesn’t leave a lot of room for dealerships to compete for active, in-market car-buying prospects. It’s a severe blow to these big local businesses.
Local Insurance Companies
It doesn’t take many searches to know that Geico, Nationwide, Liberty and the other national insurance companies are going to dominate the paid listings. This leaves local agents and agencies out in the cold. Those clicks are simply too expensive, and the margin of error too small for local insurance types to compete.
Dozens of companies competed to sell consumers Dish TV and similar services to local prospects. That number will soon plummet in a winner-take-all type of environment, as many of these providers relied on Adwords to drive large quantities of leads and traffic. Not anymore.
Assisted Living and Elder Care
In an inherently local business, many large networks of assisted living and elder care facilities are operating on a national or semi-national basis. They will actively crowd out smaller local operators who won’t have the budget or management systems to advertise alongside public behemoths.
And while this appears to be a sudden change, Google has been moving in this direction for some time. Over the last 36 months, they have added a number of elements for that have clearly been skewed for advertisers at the top of the SERPs. With the additions of Shopping ads, Adwords, Site Links, Call Extensions, Seller Ratings and a host of other top-friendly options, Google has given advertisers at the top of its SERPs more visual space, more clicks, and ultimately more customers.
Of course, that increase has come at the expense of its organic listings which were pushed lower on the page, and advertisers who appeared lower in the Adwords auctions.
Now, Google and Adwords have moved 100% in that direction. With only four meaningful positions at the top of the page, advertisers have to make a stark choice: effectively drop out of the paid search engine listings, or load up and compete for the top – even at costs that are sure to increase.
In some local categories, this will simply narrow the field on search results pages. The local plumber who has a strong Adwords campaign is in no danger of having a big national plumbing company entering the market and pushing them out of the SERP. There are no such big plumbing companies.
Instead, each vertical market will take the next 1-3 months to re-organize around Google’s new 4-ad dynamic. Many, many, many local advertisers will simply abandon Adwords altogether. In this way, Google will be thinning its own massive herd.
The local plumber mentioned above is going to have to worry about his competitors choosing to instead compete at the top of the page alongside him. This will force the price of clicks at the top of the pages upwards – which one suspects could be the rationale for Google’s change to begin with.
Recovering and Moving Forward
This change was an unusually well-kept secret inside Google. That this didn’t leak earlier is pretty amazing by itself. Many Google account reps and managers were completely stunned by this change late last week, and expressed varying levels of disbelief because it had such an immediate impact on the work they do directly with advertisers.
That said, there is only moving forward. Those local advertisers who were already competing at the top of Google’s pay-per-click auction are in good shape, and won’t see much immediate difference. If anything, they will see gains in clicks, conversions and revenue.
But over the next quarter, advertisers across verticals are going to re-examine their budgets and their opportunities. Being at the top of the page may well be more expensive – but it could also still be profitable.
Todd Bairstow is the Founder and a Partner at Keyword Connects, which specializes in online lead generation for remodelers and home services companies across the country. He is a popular writer and speaker for the home improvement industry and writes a blog that speaks to all things internet- and home improvement-related.