When we learned of the then-new Local Service Ads (LSA), we acted quickly to get our clients’ accounts established and running. At that point it was not clear to us why Google had created this new “pond,” but we knew our clients needed to be fishing in it because LSA ads would be positioned above traditional paid ads.
Fast forward 2.5 months later and we now wish this new pond was never created. Why?
Although we have several clients that pretty much dominate the top spot in LSA, the net profit that they have made thus far from LSA ads has not overcome the loss in revenue they’ve suffered from decreased performance in traditional paid ads.
The Presence of LSA Ads Greatly Reduces the Performance of Traditional Paid Ads
After deep analysis of our clients’ data, we found distinct points in time when performance data from traditional paid ads nosedived. This included decreased click activity, decreased click-through-rates, decreased conversions and conversion rates, and massive increases in cost per conversion (See Figures 1 and 2 below).
This marked decrease in performance coincided with the full implementation of LSA ads in our clients’ locations, and in their practice areas.
Figure 1. Steep decline in clicks and conversions once LSA ads rolled out.
Figure 2. Insane increase in cost/conversion once LSA rolled out.
Why Is This Happening?
#1) The presence of Local Service Ads prevents Local Search Ads from showing. Local Search Ads are the paid ads that appear at the top of the business listings in search results (Figure 3). Because the majority of relevant queries for criminal lawyers trigger Local Service Ads, Local Search Ads are not appearing for the majority of relevant queries.
If you have or had clients who mainly occupied the top position(s) in traditional PPC, their Local Search Ads likely showed very often (if location extensions were enabled). Again, these no longer show as long as Local Service Ads are showing. We have been communicating with Google support regarding this issue and still have not received a clear answer as to whether this is intentional.
Figure 3. Local Search Ads do not appear in search results when LSA ads are present.
#2) It’s a no-brainer that any group of ads that appears above another group of ads is going to negatively affect the performance of the latter via competition. This is certainly happening as indicated by decreased click-through-rates, conversions, and conversion rates.
#3) We’ve also noticed that since LSA ads began showing, traditional paid ads are being placed under organic search results much more often than pre-LSA, are simply not being shown.
*** ABSOLUTE TOP POSITION MEANS THE #1 POSITION IN TRADITIONAL PAID ADS, BUT UNDER LSA ADS
Yes that is correct. We wondered about that and this was verified by Google customer support.
#4) Due to COVID-19, fewer people are out committing crimes (presumably). Also, as stated by some of our criminal lawyer clients, courts are scheduling new cases and re-scheduling existing cases way into the future, so those being charged with crimes are in no hurry to hire a lawyer.
What does this have to do with LSA ads? Nothing directly, but this phenomenon is further fueling the decrease in profitability of traditional paid ads because lawyers are competing for a smaller pie. Given the smaller pie as well as the decreased profitability of traditional PPC caused by LSA ads, lawyers are frantically competing.
#5) As a result of a) the smaller pie discussed in #4, b) decreased performance in traditional paid ads caused by LSA ads, c) the elimination of Local Search Ads in search results when LSA ads show and c) lawyers’ somewhat-mistaken thoughts that the pullback is being caused by their not being in the two LSA ad slots, competition has become INSANE.
The aggressiveness that we are seeing in terms of competition for the top spots in traditional paid ads is like never before. We see competitors raising their bids and using bid strategies against one another that are, at a minimum, causing them to pay more for less. Most likely, however, their endeavors are slightly profitable at best or not at all profitable. They just want to keep themselves and/or their firms afloat. This fierce dog-eat-dog competition in of itself is greatly hampering profitability.
While there is no doubt that Local Service Ads are negatively affecting the performance of traditional paid ads, it should be noted that the current conditions caused by COVID-19 are most certainly exacerbating this issue.
Moving on – another important phenomenon we’ve noticed is that, more often than pre-LSA, only a single traditional paid ad is being shown above organic results – for the top bidder. Now couple this fact with the fact that there are only two visible LSA slots.
Seemingly, Google is focusing on driving the money from the bottom to the top. That is, it seems to be trying to draw its revenue from search ads by limiting the availability of coveted positions which in turn causes the “top dogs” to drive the bids for those slots through the roof. After all, most people click the top-spots, so why not drive the money there?
The problem with this is that it potentially creates an atmosphere where smaller fish cannot compete, and profitability for the big fish diminishes.
(Side note) – Google’s Push Toward Automation is Concerning
It is somewhat clear in terms of the direction Google is going. LSA ads are driven by automation and there are few granular controls for marketers to monitor or adjust. One cannot analyze search terms, cost per click, etc.
The new Responsive Search Ads are bit of hybrid in that they allow a marketer to enter headlines and descriptions but Google’s automated system determines which of those combinations it will show to users. There is no way to see KPI data for any given combination except for impressions.
I’m sure we do not have to describe how much Google reps have been pushing automated bid strategies. Then comes the removal of the Average Position Metric, the decrease in transparency in the search terms report followed by ambiguous changes that loosen keyword matching.
I think you can see where this is going and quite frankly it is concerning.