I want to comment on a phenomenon I’ve noticed happening recently in pay-per-click search engine advertising. That is the instances of advertisers on Google bidding up to the stars for certain keywords.

I have seen instances where advertisers, in competing with other advertisers, have driven keywords up to $50 per click or more.

From my perspective in managing ten accounts for clients, I think everybody has to take a deep breath on this. Obviously, advertisers will compete against one another for that coveted top spot, or even one of the top three spots. And of course the amount of traffic one gets from that top spot or one of the top three is usually much higher than when you let your ads drop down lower.

But think about the long term effects on the industry you are in. Once those bids are driven up to a certain point, pretty much all the advertisers lose. It’s only Google that wins at that point. And even they won’t win for long, because when bids reach a certain point, it is no longer viable to advertise on Google AdWords for that product or service.

It’s kind of like real estate. It’s nice when you’re a homeowner and home prices are skyrocketing, but after a while it gets to the point where nobody can afford a home.

I have seen companies and even whole industries priced out of using AdWords. And yet some businesses still plug along, paying too much for their clicks and for the leads. My advice is take it easy on the bids.