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Make a quick impact with SEM
Entrepreneur, Influencer, Investor & Advisor
SEM can make an impact on your traffic immediately and is a fast way to gain traction.
The amount you should pay for SEM will depend on your business model.
As long as your SEM campaigns are profitable and you are happy with the margins, keep spending.
Lesson: Content Marketing with Neil Patel
Step #2 SEM: Make a quick impact with SEM
So if you're a company, you should consider both SEM, and SEO, right? SEO is a free strategy. SEM is a paid strategy. The reason you want to do this is, SEO can take six months to a year before you start seeing some results, while SEM on the other hand, you can start up a campaign within minutes, and actually get traction.
A good example of this is Airbnb. If you look at Airbnb in their growth, especially from the beginning, to even until now, most of their growth now may come from word of mouth, but for the first two to three years, almost all of their growth came from SEM, or paid advertising in essence, and it was mainly Google ads. So they were buying listings like New York hotels, New York apartments, live in New York for two weeks, or whatever it may be. Rent out your house. It's a quick way to actually gain traction.
Sometimes you can't make it cash flow positive, and other times you can. If you look at Airbnb, they're actually able to make it cash flow positive. Search engine marketing is kind of like pay-per-click, in which you see the free listings on the search engines. For example, if it's Google, you see the free listings in the middle, and then you see the paid on the top, and on the right. So with search engine marketing, it's all about the top and the right portion. Those are the ads, and you can end up buying them. The cost range, it can be anywhere from, let's say five cents a click, to $50 a click.
When it comes down to how much you should be willing to pay for a lead, it should be as much as it's worth to you. So, if your profit margins are, let's say $1,000, and a lead costs you $50, and it costs you $1,000 to service the customer, you now are actually losing money. But on the other hand, if it costs you $50 to acquire a lead, and $100 to service the lead, you're making $850 in profit. That's not bad. So as long as it's profitable, and you're happy with the dollar amount, or the margins, then you should keep spending. If you're willing to lose even more money to get more traffic, then you can increase how much you're willing to spend per click or per lead.
Depending on the business model, if it's SaaS, freemium, enterprise, etc., the amount that you're willing to pay varies a lot, especially in SEM. For example, if you're an enterprise, you can pay a lot for a lead. Sure, your sale cycle may be long, but a customer could be worth hundreds of thousands, if not millions, of dollars, so you can spend an arm and a leg on a lead.
If you're a freemium model, and you don't have your funnel optimized right, and you're not converting enough people from free to paid, you can't be spending $5-$10 per click, or even $10 to acquire a customer, unless your paid solution is expensive enough, and you're converting enough people to free.
So no matter what your model is, you've just got to optimize, and make sure you're spending less than what you're actually making on the back end. The best time to use paid marketing is when you know how much a customer is worth. Then from there, you can actually go spend money, and if you're able to acquire a customer for a lot less, it's worth spending more and more money, and ramping it up. If it's not, you should decrease the amount of money, and time that you spend on paid advertising.