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Everything You Need To Know About Google's "Local Services Ads"

We see Google Ads every day in our search results, so we are very familiar with them, but Google has just introduced a different kind of advertising, "Google Local Services Ads." How is this new ad different from traditional Google ads? Should you try them for your business? How much should you expect to pay? What type of ROI should you aim for? We will try to answer all of these questions and more.

Google Ads vs. Google Local Services Ads

Even if this is the first time you've heard about Local Services Ads, you may have already seen them but not realized they are ads. In fact, many mistake them for organic search.

To better illustrate the difference between the two ads, check the image below. We highlighted "Local Services Ads" in gray and "Regular Ads" in blue.

Screenshot of remarketing feature turned on

As you can see, Local Services Ads are very prominent, and at a glance, many won't even notice the "sponsored" disclaimer. From the advertiser's perspective, the less obvious the ad, the better. Besides visual differences, what else separates these ads? The second most important difference you need to know is, with Google Ads, you are paying per click (CPC), but with Local Services Ads, you are paying per lead/call.

Let's look at this vital difference in more detail. With Google's traditional PPC Ads, you are paying for clicks (cost-per-click), a very familiar advertising model to anyone promoting their business on Google, Facebook, Yelp, Instagram, or YouTube. However, with Google's Local Services Ads, you pay for leads/calls (not clicks). 

For example, with Local Services Ads, your $1,000 budget will be calculated based on the number of phone calls you received and not how many clicks you get.

In essence, Local Services Ads bypass the click (and your website) and go directly to a phone call. This can be appealing, especially if you have a poorly implemented website. However, there are a few downsides to bypassing the website and going directly to the phone call. For example, you cannot capture email addresses (e.g., subscribe, contact us, etc.). Hence cold and warm lead nurturing becomes challenging. Also, by bypassing the website, you miss an opportunity to show your potential customers a) why you are better than your competition and b) why you are uniquely qualified to serve their needs. 

With Local Services Ads, the only difference between you and your competition is the profile picture, a snapshot of reviews, and years of experience. 

Related: Unique Selling Proposition (What Is Truly Unique About Your Business?)

Why You Should Consider Local Services Ads

There are over 1.5 billion websites online, so no matter what kind of product or service you sell, the competition is fierce. There are whole industries built on top of Search Engine Optimization (SEO), and many businesses spend enormous amounts to stay close to the top (search results). Therefore, advertising is often necessary for businesses struggling to get their product or service to surface in Google Search Results. 

If you are competing against a business with a great website and thousands of pages of valuable content, you will struggle to surface ahead of them with any short-term strategy  because there are no shortcuts with SEO; so your best chance of short-term success is advertising.

This is where Local Services Ads can be a valuable tool in boosting your leads and sales. Especially for startups and young companies attempting to compete against websites with years and, in some cases, decades of content marketing experience. 

Related: How To Grow Your Business Organically (And Why It's Difficult)

Local Services Ads Cost (Budget)

The cost per lead will significantly vary from industry to industry and from one niche to another. For example, to advertise on Local Services, an electrician will pay less per lead than an attorney. Also, an estate attorney will pay less than a business attorney. 

Here are a few examples:

Electrician

  • Location: 90814
  • Leads = 10/mo
  • Monthly Budget = $150-$230/mo

Real Estate Agent

  • Location: 90814
  • Leads = 10/mo
  • Monthly Budget = $240-$360/mo

Financial Planner

  • Location: 90814
  • Leads = 10/mo
  • Monthly Budget = $980-1,470/mo

Business Lawyer 

  • Location: 90814
  • Leads = 10/mo
  • Monthly Budget = $1,500-2,250/mo

Note: Zip code is an important factor, so you should check Google's budget planner/estimator for your specific area. 

Return On Investment (ROI)

As is the case with any advertising, the return on investment is the critical metric. Boosting your impressions/views/likes with advertising is all great, but most small businesses care more about results than building brand awareness. 

The fact that 1,000 people viewed your ad is irrelevant if they didn't take the next step (call, email, subscribe, etc.). Therefore, to calculate ROI, you have to focus on conversion numbers.

With Google Local Services ads, conversion should be calculated by the number of qualified leads and not the number of phone calls. For example, if you spent $1,000 on Google Services Ads, and received 50 phone calls as a result, then your cost per call is $20. While this is an important metric to understand, it should not be used to calculate your ROI.

To calculate your ROI, you need to subtract qualified leads from phone calls, and finally, clients/customers from qualified leads. In the example above, we received 50 phone calls - let's assume that 10 phone calls can be classified as qualified leads and people genuinely interested in our business/product/service. At this point, our cost per qualified lead is $100. 

Obviously, to a business owner or a marketing person, this number is a lot more valuable because we established (in this example) that for every $100 we spend on Google Local Services Ads, we attract 1 qualified lead. Furthermore, if we convert 50% of those qualified leads into a customer, our cost per customer is $500.  

How much you are willing to pay per qualified lead or per customer will depend on your business type and profit margin. Naturally, the higher your profit margin per customer is, the more you can spend to attract them. 

Related: How To Calculate What Your Leads Are Costing You? (Cost Per Lead)

Summary

A new advertising platform like Local Services Ads creates a unique opportunity to get in front of your customers, so you should not ignore it. It may not be a great fit for your specific business, but ignoring it would be a mistake, especially if your competitors are using these ads to promote their business.

As is the case with any new digital marketing and advertising channels, our recommendation is to dip your toes in the water (allocate a modest budget and test it) before allocating any substantial funds. You want to find out the cost-per-qualified-lead and cost-per-customer before assigning any significant budget to Google Local Services ads. 

Lastly, jumping on a new advertising platform/channel early is advantageous because you will typically pay less since the demand will be low. However, this demand (and cost) will naturally increase as more businesses learn about it. 

Related: How to Launch a Successful PPC Campaign with Google AdWords

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