How much of your paid search budget is going to waste?

Beth Tait, Managing Director at Go Inspire Insight, addresses the issues that surround paid search advertising and the need for a more sophisticated approach...

In 2020, search advertising spend in the UK amounted to £8.37billion, according to Statista. And with a third of total e-commerce sessions generated through paid search globally, few would challenge the need for this medium on every marketer’s agenda. However, how much paid search spend is really delivering a return on investment, and how much is wasted? With many budgets under greater pressure than ever before, it is critical to be able to answer questions such as these.  

The debate so far has been focusing on optimising paid search campaigns, which is a sensible place to start. Return on investment could be improved through better understanding of what is working and what is not. However, research suggests that much more can be done on this front. A study of 2,000 Google Ads accounts, by Disruptive Advertising, found that 42.3% of account managers have no system of conversion tracking in place, and so have no indication of their campaigns’ efficiency. Another on keyword relevance found that that the average PPC account is producing all of its sales from just 12% of its keywords.

Though these analyses are clearly important for getting more out of budgets, the conversation needs to be much wider. So far, the whole discussion tends to assume that every member of a target audience should be treated the same - as if they are a net new customer. Decades ago, it was recognised that Customer Relationship Management (CRM) systems should try to replicate customer knowledge of the pre-internet era, where each customer was treated as an individual. However, this seems to have been lost in the automated world of paid search.

A more sophisticated approach to paid search would consider where – if at all – paid search fits into a customer journey. This can be achieved through a holistic understanding of the customer, both online and offline. Customers should be segmented into different types of behaviours, which also reflect their value, loyalty, and potential. Over time, this builds a picture of typical customer journeys and triggers. Through this analysis, businesses can then identify where paid search is most relevant. Yet, according to SuperOffice, less than 10% of companies have a 360-degree view of their customers, despite the availability of numerous tools that can link online and offline customer behaviour.

To get a concrete idea of just how much of paid search spend is being wasted, Go Inspire Group conducted a series of control tests with its customers between 2018 and 2020, covering the behaviours of over 500,000 consumers. The control tests were able to demonstrate typical proportional savings on paid search spend. The results of the tests were then extended across paid search budgets in a number of markets to demonstrate – in financial terms – the level of savings that could be obtained by taking a more intelligent approach to paid search in practice. A conservative estimate is that UK businesses could be saving £728.9million of their paid search budget.