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Are Small Businesses Turning Away From Google?

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Google's AdWords might be too expensive for small businesses these days.

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MINYANVILLE ORIGINAL As the undisputed king of online search, Google's (NASDAQ:GOOG) AdWords program has become the go-to advertising source for businesses looking to improve customer awareness.

Increasingly, however, small businesses are being priced out of AdWords due to the growing popularity and success of pay-per-click (PPC) advertising, the New York Times writes.

The Times cites the anecdotal example of vacation rental management company owner Tom Telford, who in 2001 starting using AdWords, paying Google $0.60 for every time a Web user searched for certain key words and clicked on his ad. By 2010, the cost of each click had more than doubled to $1.25, forcing Telford to cut his Google advertising budget as he experienced diminishing returns.

Research firm AdGooroo notes that 96% of PPC advertisers do not spend more than $10,000 per month. Nonetheless, it's hard for small businesses to compete with the likes of Amazon (NASDAQ:AMZN) or the University of Phoenix (NASDAQ:APOL), who spent $54 million and $37.9 million respectively on PPC advertising in the first six months of 2012.

The problem for small businesses, of course, is that Google's AdWords is undoubtedly still considered the best of all PPC advertising networks. Internet marketing blog Dollar Shower did a comparison of several leading PPC advertising networks, and concluded that AdWords was the best, followed by Microsoft (NASDAQ:MSFT) AdCenter, Facebook (NASDAQ:FB) Ads, and LinkedIn (NASDAQ:LNKD) Ads.

A solution to the budgetary quandary small businesses might face with regards to PPC advertising is perhaps to focus on obtaining higher organic search rankings through improved search engine optimization, as Telford also realized

"It hit me like a brick, because I finally understood how you get better search results by creating content around the keywords people are searching for," Telford told the Times. "As we become more relevant to Google, our quality score improves in our AdWords campaigns. This enables us to bid lower, yet because we're more relevant, we pay less per click."

"From my experience, I used to say, 'Don't spend on PPC' and instead put it all into generating organic results…. In order to come up on organic results (the best return on investment), one important tip is that you need to write a lot of good articles and share content that is relevant to what service or product you are selling," Joseph Ricard, founder of Plum Investors in Miami, Florida, suggested to the Washington Post.

The Times' feature on small businesses and their relationship with AdWords arrived just before Google announced its fiscal third quarter results, which saw the cost per click advertisers paid Google fall 15% from the same quarter a year ago, and fall 3% from the previous quarter. Analysts note, however, that the drop was tied more to Google's inability to monetize mobile search traffic. Shares of Google were down more than 7% in late Thursday trading after the company reported a 20% year-to-year drop in profit.

Twitter: @sterlingwong
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