What Happens to Google in a Recession

What happens to Google ads in a recession?

First of all, I'm not saying a recession's coming, cuz I have no idea.

What I am saying is other people are telling me a recession's coming.

And so I tend to follow the model that you want to run dual playbooks.

So you wanna prepare for the flood and you wanna prepare for the drought at

the same time you wanna continue to do that until it becomes obvious, which of

those routes you should be following.

What I will say to my younger entrepreneurs is don't ignore

it because I've been caught on the wrong side of that too.

And, that's a dangerous place to be.

So.

You know, , if there are people that are intelligent and it's their job

to know, and they're saying that something like this is possible, then

assume like something like this is possible, but don't, don't go too

far in the other direction either.

We don't wanna throw on our tenfold hat and, and, , Batten down the

hatches because that's, that's equally dangerous for obvious reasons.

For Google ADSD specifically, what I wanna do is talk through what I think,

and then maybe stress test that.

So if you disagree with anything, I'm about to say, I'd love to hear

from you in the comments please.

And thank you.

I wanna offer two.

Very specific data points.

The first one is I, I'm gonna link to an article from seeking

alpha which is a publication.

Respect when it comes to as much as I can respect any publication that's

that's publishing stock buying tips.

Google actually made money.

Their operating margins increased their earnings per share grew and

while their growth slowed, they still grew, which is, which is, that was a

difficult thing to pull off in that particular context and environment.

And during the pandemic.

Google CPCs went up on average 200%.

Ryan D had a really cool slide in his keynote presentation at TNC that year

where he showed every other advertising network and it was like Facebook up

90% Pinterest up 76% TikTok up 90% or whatever, and then Google up 200%.

Here's why Google is the closest thing to instant gratification and

an advertiser can have, it's actually one of the, the disadvantages of it.

It's one of the reasons that people try to.

They try to work themselves out of being Google dependent really

quickly, which sucks for my business.

But I, I understand it.

And I do the same thing.

We rely on our podcast on our YouTube channel referrals, obviously our

community, our organic optimization.

You wanna be able to rely on all of those because the acquisition

cost of a client is cheaper.

And in many, many, many instances, you get a better client.

The flip side of that coin though, is Google is a lever that

you can pull, pull quickly and.

Most cases achieve a result faster than you're gonna be able to

achieve it in any other channel.

So in a recessive environment, money floods to Google, and you might

think to yourself, well, I'm a Google ads agency, or I'm a Google ads.

Freelancer.

That's a good thing.

careful, careful, because what it's going to do is maybe it's going to

make you a more attractive alternative when compared to other agencies.

But the other thing it's also going to do is it's going to muddy the waters

and that's, that's the wrong term.

It's gonna shake the foundation of every single client that you have.

Every client that you have regardless of the industry even in recession

proof industries is going to have to deal with an ecosystem where, , they

say rising tides floats all ships.

Well, that's true in, in a negative ecosystem too.

So if money flush comes into Google every single client that you have is

going to experience increased CPCs or.

A, an adjusted environment in one way or the other.

And what's frustrating about it is it's almost always I say this

based off of two events, but, but I actually think I'm comfortable

saying this it's transient by nature.

It has to be because you're not experiencing AGA shift in the market.

What you're experiencing is a bunch of people that are for

whatever reason, trying to.

Trying to put a bandaid on a problem.

And anytime there's death rattle money, you gotta be really

careful with death rattle money.

And what that means is, is there are going to be, is for, for specific industries.

There are gonna be people that put all of what they have left into Google

in order to see if they can survive.

And that's the thing to think.

Here's here's a quick thought experiment that we can run together.

If you are a business, pick your industry from, , I don't care, mortgage processing

to flourish shop to, , mortuary.

It doesn't matter if you're a business and you're about to go under and

you have 90 days left and you have insert any amount of money here.

If you have 10 grand or a hundred grand, where do you put it?

The answer is.

I, I don't think there's a close second.

And somebody challenged me on that too.

Like maybe you go hardcore, outbound, but even that takes time, anybody who

knows like what it takes to do outbound lead generation organically from the

ground up, you have to build a pipeline.

The, the, if, if, if you've got 90 days and a hundred grand or 10 grand or

50 grand or a million dollars, you're gonna go straight to Google and that.

The environment that you're gonna be dealing with depending

on how deep this recession goes.

And what's really interesting about it is that's gonna push

out a lot of legitimate players.

So if you're running Google ads, campaigns, especially if you're not

an agency or Google ads manager, let me flip over to just, I just

run Google ads for my business.

What could potentially happen to you is every competitor you've ever had

is going to rush into Google in order to try to capture as much market share

as they can just for survivability.

And they're gonna be bidding in a way that isn't That isn't sustainable,

but they're gonna be doing that by attention because in a lot of ways it's

like, look, I don't need to make money.

I just need to break.

Even.

I just need to move product.

I just need cashflow.

I just need to keep my people busy.

One of my clients was one of the largest, he's a sixth largest

employer in Arizona, I think.

And he, he does commercial and residential contracting and he said

for years they were doing deals.

At cost or sometimes at a loss, just because he knew he couldn't,

if he, if he didn't take on the deals, he wouldn't have a crew.

And so when, and at cruises and when the economy came back, he

wouldn't have anybody left to build.

And talent was such a difficult thing for him to attract, , German carpenter.

If you're talking about the skilled trades, those are tough folks to

get a hold of more and more so now.

And, and he understood that.

And so he kept, he was building buildings at a loss in order to.

Just keep his people busy, imagine advertising against him, right?

He doesn't need positive ROI.

He needs something else.

And, and that's the environment you get pushed into.

Look at anybody in the perishable space and a downed economy.

Anybody in the perishable space just needs to move product.

It doesn't matter if they're moving that product at a five

or 10% loss, 20% loss, 30% loss.

I'd rather take a 30% loss than a hundred percent loss.

And this.

, it's not, it's not shelf stable.

And, and there's so many examples like that where, , you get into solar

practitioners again, that just, just need to, all, all I need to do is

just make this one sale and then I'm gonna be able to, , satiate myself

in, in order to get to the next month.

Orthodont is a good example of that, where your, the value of

a potential client is so high.

That they're willing to bid up, especially for a solo practitioner that doesn't

have that great big office to run.

And, , isn't necessarily employing multiple doctors.

They can pay way more than, than you might be able to pay if you're, , running a,

a, a collection of practices or whatever.

So advertising in a recessive environment changes the key performance indicators.

It also brings in desperation and the desperation is going to, , it's dumb

money, it's dumb money and dumb money is going to cost everybody because.

The amount of money that they're willing to spend again is, is not

connected to a specific output.

The benefit we have to the dumb money is it's not sustainable.

And that which leads me to the second phase.

So the first phase in this imaginary recession that I chicken little I'm

bringing to you is you have kind of the blood on the streets moment

where everybody starts advertising.

You're now contending with all of this, but what ends up happening then?

And I've, I've actually seen this personally.

We saw this personally in the real estate investment world.

Me and my business partner had the highest performing real estate investment

campaign on the planet for seven years.

And what was interesting about it is because of where we were, when we entered

this market before we were even running as it as an agency, we were running

it as potential real estate investors.

People had abandoned Google because it got so expensive because during the

recession, everybody went straight to Google and it got so expensive and it

got so saturated that they all left.

Well, they all left at the same damn time.

And so all of a sudden, when we entered, it was a blue ocean

and it was a blue ocean because everybody had had exhausted Google.

I've actually seen the same thing happen with direct mail.

Now more recently, All the, the real estate investors left direct mail and

they all left it at the same time.

Cuz it got so saturated and so saturated and so saturated and the performance

drop and the performance and the performance drop to where they all

just said, okay, we're not doing this well, when they all left, it's now

actually a really viable marketing model or it was for the last 18 months.

So that's the thing that you need to monitor.

especially if you're a more legitimate business, the, the, the, the message

that I have for you is this is actually a pretty, pretty interesting opportunity

because there there's bloat here in the current economic situation that we're in.

And I can tell you that with integrity too, I'm not an economist, as I said

and I'm not, , a prognosticator, I don't know what the hell I'm talking

about when it comes to a lot of those things, but I do know what I'm talking

about when it comes to Google ads.

And I can tell you for the.

two years.

Definitely.

But even, even three years, I've seen some businesses that shouldn't be in business.

, people with no inventory, no value proposition, no margin, but because we're

in such a forgiving market with such free liquidity, they've been able to survive

way longer than they should have been able to survive a recessive environ.

Burns them off.

They, it burns off the dead wood.

And, and, and forgive me for saying, I hope this doesn't sound callous.

That's necessary.

It's necessary.

And for a lot of you, especially in the E eco space, you've seen this, you've

seen it to where you're like, gosh, I actually source the product, buy the

product, store the product, fill the product, deal with customer service.

I do all of these things and I'm getting priced outta my own market

by these idiot drop shippers that are willing to, to, , if they get 1.2

Roaz they're happy cuz they have no.

Costs, no overhead, no nothing.

, and, and, and they're, they're putting themselves in a position where like,

they're, they're squeaking out their little, teeny, tiny itty bitty margins,

but for them that's good enough because it's just a kid in a dorm or whatever.

So, , you take that and, and you cascade it across multiple

models in multiple industries.

And you find yourself in a position where you're like, gosh, this is actually

be really healthy for the economy.

But from a Google ads perspective, there is this limited epoch.

And I don't know how long this is, by the way, how could I, but there's this limited

EEP where things are gonna get really tumultuous and and , cost is gonna go up.

Visibility is gonna go down.

The competitive market is gonna get.

put on its head for most industries, but then as abruptly as it starts, it stops

because nobody can sustain that the death rattle money goes away, cuz people die.

And what's interesting about that is you don't know when it ends, unless

you're spending this isn't data that's publicly available, right?

Google's not gonna tell you like, oh, Hey, time to come back.

You, you actually have to find a way to, to reasonably and without damage

or detriment to yourself, you have to find a way to continue to To continue

to keep your pulse, your finger to the pulse of your particular Google

LA's economy in order to determine when it is that you should Ratt up.

And when you should go for a land grab and, and, , attempt

to achieve market share.

And that's, what's really interesting is on the other side of this, , it's the

whole Warren buffet thing of you buy fear.

You buy fear because your competitors, I promise you is a ubiquitous truth.

80% of 'em are gonna get scared and they're gonna turn it off.

Well, now you get to step.

and you get to capture that market share substantially less money

than, than you were paying before.

So a recession can be a category king maker on some levels.

If there is a recession, that's actually really good for me as an agency.

I think I'm, , if there's a recession, if there's a really strong recession,

I lose 10 or 20% of my client base.

If, for reasons that are completely outside of my control, for reasons that

don't even really pertain to advertising or marketing you lose 10 to 20% of

your client base, , solvency cash flow.

Financial issues over extension loans, especially with the fulfillment

cycles right now, the, the, the pipelines on products, those types

of things, but what happens, and I'm not telling this is advisable.

I don't think it's a good thing.

Actually, people fire, they fire their agencies and they.

All non-performance based marketing.

So SEO goes, branding goes, content goes, social goes people

are gonna cut off the things.

They can't connect directly to their pocketbook, that they can't

connect directly to ROI now.

And again, I don't think that's a good thing.

I don't think that's a good thing because , if you're an SEO agency, the

way to protect yourself from this, by the way is to show them the timeline.

Say, look, if you cut me off now, yes, you're saving your however much.

I'm charging you a month now, but in 18 months, you're

gonna see the impact of this.

Can you afford to do that?

Sometimes the answer's yes.

Sometimes the answer's no.

So connect yourself to ROI in some way, but what I will tell you, what

I think happens is people are gonna cut off all of the, I don't wanna

call 'em vanity marketing endeavors, because they're not vanity per se, but

they're not immediately monetizable.

That's how, that's how we'll contextualize this.

People are gonna cut off all of the marketing methods and are not

immediately monetizable, and they're gonna go straight to Google and I'm

gonna have access to clients that I didn't have access to before.

I'm gonna have access to, I'm gonna be able to move upstream, which

I actually saw happen in COVID.

We're gonna be able to unseat competitors that have been

playing set it and forget it.

Not really paying attention as people start to pay attention to

the bottom line more and more.

So recession is, is good for me in some instances as

predatory, that sounds is true.

However, you wanna be really careful with dangerous and desperate money.

So if you're running an agency, here's my advice to you.

You don't wanna take anybody to save me money if somebody comes to

you and they're like, Hey, look, I've got an unlimited budget.

As long as X, you wanna be.

Really careful about what X is and what promises you're making and what

you're paying attention to, because sometimes you will find that people are

hiring you just so they have somebody to blame as the ship starts to sink.

So be really careful a that you're not taking on somebody

who's just a lost cause.

And then also B you want to be really careful about the longevity

of this particular prospect, because , for agencies we're not profit.

Front loaded, , the first 3, 6, 9 months, however long it takes for you

to really make those campaigns function.

You're probably burning time, which means you're burning money.

And if you're dealing with somebody who's only gonna be with you for the six, or,

, a recession is two quarters by definition.

Now it can last longer than that, but let's say they're, , this one's shorter.

And that's what the punts are saying.

Although they're all idiots.

I hope they all drown in Nevada piss, to be honest with you.

I think that they're part of the problem they cause this

issue, but that's my saltbox.

I'll leave it alone.

you wanna be careful about those clients?

The clients that you take on that are just with you for the desperate season,

because they're gonna cost you way more time than normal client costs you.

And they're not gonna be with you for a very long time.

So that will be the thing that I'm sort of guarding against as

well during this recessive period, assuming the recessive period happens.

But I would tell people, especially people that, , if you're not an agency, if you're

just a company be careful about this is a, this is a cliche for a reason, you can't.

advertising in a down economy because you're going to kill your pipeline.

You just wanna make sure you're advertising very, very,

very, very, very efficiently.

And that doesn't necessarily mean Google ads.

It means whatever is the most bang for your buck, the most efficient model that

you can possibly isolate But you also wanna know where your levers are and

you wanna know what your acquisition campaigns look like, and you wanna know

what your conversion campaigns look like, because everybody's gonna turn off their

acquisition campaigns, because that's where the easiest place to save money

with the least amount of pain now today.

But then that means that your conversion campaigns, , whatever your sales

cycle is 90 days, then your conversion campaign, 90 days from now fails.

So pay attention to your timeline, pay attention to.

Pay attention to your sales cycle.

And know if I make this change now, today, what is this going to do?

You have to have the impact report done and then pay attention to the competitive

market in, in ecosystem, because it's gonna, it's gonna get kind of nuts if this

happens, but then it, but then it kind of stabilizes and it becomes a ghost town.

And that again is a really interesting opportunity depending on your industry.

So, anyway, I hope I haven't depressed you.

I know it's no fun to sit here and talk about or think.

a recession.

But what's less fun is being caught underwear.

So I wanna, , do my best to at least begin having this conversation.

Maybe there will be more of these.

Maybe there won't be sort of depends on how much I get yelled at.

I've lived through one already and it destroyed my business.

So I have entrepreneurial PTSD, and I'm also a little paranoid.

I saw a really funny tweet about Ray Dalio.

They said he's predicted 12 over the last three recessions, which I thought

was funny, cuz it applies to me too.

Like I always.

The flood is coming, but I, I actually think the person who

always think the flood is coming is the one who doesn't drown.

So I'd rather be more cautious and publish this than have a bunch of people make fun

of me years from now, or months from now.

Not that anybody really pays attention to what I'm saying, but what I mean?

I'd rather be wrong and careful than write and fool hearty and full

hearty, , especially given that I have 85 employees and I've gotta make

sure that I'm taking care of people.

So I'd love to know what y'all think in the comments.

That's all I got.

I'll see you tomorrow.

Wait before you go, I'm constantly looking for amazing people to come join our team.

So if you're passionate about Google ADSS and you're passionate about customer

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