I've spent a fair amount of time extolling the virtues of Google AdWords here on the Frog Blog, but AdWords does in fact have some limitations and I don't want my arm-flapping excitement about AdWords to obscure that fact.

Over the next few posts I'll be discussing three of the more challenging scenarios businesses face when using Google AdWords. These are scenarios that uncover some of the limitations of Google AdWords. After I've covered these three challenges, I'll offer a few tips for dealing with them, and ask you to share your ideas as well. 

AdWords is a phenomenal business tool, as I've discussed before. Revolutionary in its leveling of the playing field. Mom and Pop can play right alongside Microsoft and Wal-Mart. It's great.

But it's not for everyone.

Challenge #1: Low Ticket Items

Are you selling $1 widgets?

Let's do some (simplified - no shipping, handling, etc.) math.

Dreamland math:

• Let's say you get clicks for the rock bottom price of 5c (unlikely^[1], but possible).
• Let's say your profit margin is 50% (common). So, 50c profit per widget.
• You'd need to convert at 10% to break even. A 10% conversion to sale for most things is extremely high. Not totally impossible, but probably. You'd need to convert at better than 10% to make this profitable. Don't count on it.

Oh, and just to be fair...
Realistic math:

• You pay 50c to get clicks
• Your profit is 50c
• You have to convert 100% just to break even.

I'm going to get sneered at for saying it because there are exceptions (of course), but as a rule of thumb $19.99 is about the lowest ticket for which you can profitably use AdWords without some upselling, cross selling, backend play, high probability of repeats or other additional revenue stream.

Are there exceptions?
Of course, and here's what you'd need to be an exception:

• An unbelievable conversion rate
• A niche without any competition
• A product a bunch of people really want

Find that, and you just won the lottery.

^[1] The price you'll pay for clicks is wildly dependent upon your industry. Some industries can get away with sub-10c clicks for placement on the first page, some can't even buy clicks for less than $100. You can technically get clicks for as low as 1c, but I've never seen anything below 3c and those are extremely rare and usually don't last once the campaign gains steam. Brilliantly matched ad copy and keywords, a stellar CTR and an absence of competition can produce sub-10c clicks, but this it's rare to maintain that long term.

Next time... Challenge #2.