What Happens to Google in a Recession

kasim: [00:00:11] What happens to Google ads in a recession? kasim: [00:00:13] First of all, I'm not saying a recession's coming, cuz I have no idea kasim: [00:00:16] What I am saying is other people are telling me a recession's coming kasim: [00:00:18] And so I tend to follow the model that you want to run dual playbooks kasim: [00:00:22] So you wanna prepare for the flood and you wanna prepare for the drought at kasim: [00:00:24] the same time you wanna continue to do that until it becomes obvious, which of kasim: [00:00:28] those routes you should be following kasim: [00:00:30] What I will say to my younger entrepreneurs is don't ignore kasim: [00:00:34] it because I've been caught on the wrong side of that too kasim: [00:00:36] And, that's a dangerous place to be kasim: [00:00:37] So kasim: [00:00:37] You know, , if there are people that are intelligent and it's their job kasim: [00:00:39] to know, and they're saying that something like this is possible, then kasim: [00:00:42] assume like something like this is possible, but don't, don't go too kasim: [00:00:45] far in the other direction either kasim: [00:00:46] We don't wanna throw on our tenfold hat and, and, , Batten down the kasim: [00:00:49] hatches because that's, that's equally dangerous for obvious reasons kasim: [00:00:52] For Google ADSD specifically, what I wanna do is talk through what I think, kasim: [00:00:56] and then maybe stress test that kasim: [00:00:58] So if you disagree with anything, I'm about to say, I'd love to hear kasim: [00:01:00] from you in the comments please kasim: [00:01:01] And thank you kasim: [00:01:02] I wanna offer two kasim: [00:01:03] Very specific data points kasim: [00:01:04] The first one is I, I'm gonna link to an article from seeking kasim: [00:01:07] alpha which is a publication kasim: [00:01:09] Respect when it comes to as much as I can respect any publication that's kasim: [00:01:12] that's publishing stock buying tips kasim: [00:01:14] But what they reference is the fact that in the 2008 recession, kasim: [00:01:18] Google actually made money kasim: [00:01:19] Their operating margins increased their earnings per share grew and kasim: [00:01:23] while their growth slowed, they still grew, which is, which is, that was a kasim: [00:01:26] difficult thing to pull off in that particular context and environment kasim: [00:01:29] And during the pandemic kasim: [00:01:30] Google CPCs went up on average 200% kasim: [00:01:33] Ryan D had a really cool slide in his keynote presentation at TNC that year kasim: [00:01:37] where he showed every other advertising network and it was like Facebook up kasim: [00:01:41] 90% Pinterest up 76% TikTok up 90% or whatever, and then Google up 200% kasim: [00:01:45] Here's why Google is the closest thing to instant gratification and kasim: [00:01:51] an advertiser can have, it's actually one of the, the disadvantages of it kasim: [00:01:55] It's one of the reasons that people try to kasim: [00:01:57] They try to work themselves out of being Google dependent really kasim: [00:02:00] quickly, which sucks for my business kasim: [00:02:01] But I, I understand it kasim: [00:02:03] And I do the same thing kasim: [00:02:04] We rely on our podcast on our YouTube channel referrals, obviously our kasim: [00:02:08] community, our organic optimization kasim: [00:02:10] You wanna be able to rely on all of those because the acquisition kasim: [00:02:14] cost of a client is cheaper kasim: [00:02:15] And in many, many, many instances, you get a better client kasim: [00:02:19] The flip side of that coin though, is Google is a lever that kasim: [00:02:21] you can pull, pull quickly and kasim: [00:02:24] Most cases achieve a result faster than you're gonna be able to kasim: [00:02:27] achieve it in any other channel kasim: [00:02:29] So in a recessive environment, money floods to Google, and you might kasim: [00:02:34] think to yourself, well, I'm a Google ads agency, or I'm a Google ads kasim: [00:02:36] Freelancer kasim: [00:02:37] That's a good thing kasim: [00:02:39] careful, careful, because what it's going to do is maybe it's going to kasim: [00:02:45] make you a more attractive alternative when compared to other agencies kasim: [00:02:48] But the other thing it's also going to do is it's going to muddy the waters kasim: [00:02:51] and that's, that's the wrong term kasim: [00:02:53] It's gonna shake the foundation of every single client that you have kasim: [00:02:56] Every client that you have regardless of the industry even in recession kasim: [00:03:00] proof industries is going to have to deal with an ecosystem where, , they kasim: [00:03:03] say rising tides floats all ships kasim: [00:03:05] Well, that's true in, in a negative ecosystem too kasim: [00:03:07] So if money flush comes into Google every single client that you have is kasim: [00:03:12] going to experience increased CPCs or kasim: [00:03:17] A, an adjusted environment in one way or the other kasim: [00:03:19] And what's frustrating about it is it's almost always I say this kasim: [00:03:24] based off of two events, but, but I actually think I'm comfortable kasim: [00:03:27] saying this it's transient by nature kasim: [00:03:30] It has to be because you're not experiencing AGA shift in the market kasim: [00:03:35] What you're experiencing is a bunch of people that are for kasim: [00:03:39] whatever reason, trying to kasim: [00:03:43] Trying to put a bandaid on a problem kasim: [00:03:45] And anytime there's death rattle money, you gotta be really kasim: [00:03:48] careful with death rattle money kasim: [00:03:49] And what that means is, is there are going to be, is for, for specific industries kasim: [00:03:54] There are gonna be people that put all of what they have left into Google kasim: [00:03:59] in order to see if they can survive kasim: [00:04:03] And that's the thing to think kasim: [00:04:05] Here's here's a quick thought experiment that we can run together kasim: [00:04:09] If you are a business, pick your industry from, , I don't care, mortgage processing kasim: [00:04:14] to flourish shop to, , mortuary kasim: [00:04:16] It doesn't matter if you're a business and you're about to go under and kasim: [00:04:20] you have 90 days left and you have insert any amount of money here kasim: [00:04:24] If you have 10 grand or a hundred grand, where do you put it? kasim: [00:04:27] The answer is kasim: [00:04:28] I, I don't think there's a close second kasim: [00:04:30] And somebody challenged me on that too kasim: [00:04:31] Like maybe you go hardcore, outbound, but even that takes time, anybody who kasim: [00:04:37] knows like what it takes to do outbound lead generation organically from the kasim: [00:04:41] ground up, you have to build a pipeline kasim: [00:04:44] The, the, if, if, if you've got 90 days and a hundred grand or 10 grand or kasim: [00:04:47] 50 grand or a million dollars, you're gonna go straight to Google and that kasim: [00:04:54] The environment that you're gonna be dealing with depending kasim: [00:04:56] on how deep this recession goes kasim: [00:04:58] And what's really interesting about it is that's gonna push kasim: [00:05:01] out a lot of legitimate players kasim: [00:05:03] So if you're running Google ads, campaigns, especially if you're not kasim: [00:05:05] an agency or Google ads manager, let me flip over to just, I just kasim: [00:05:08] run Google ads for my business kasim: [00:05:09] What could potentially happen to you is every competitor you've ever had kasim: [00:05:13] is going to rush into Google in order to try to capture as much market share kasim: [00:05:16] as they can just for survivability kasim: [00:05:18] And they're gonna be bidding in a way that isn't That isn't sustainable, kasim: [00:05:22] but they're gonna be doing that by attention because in a lot of ways it's kasim: [00:05:24] like, look, I don't need to make money kasim: [00:05:25] I just need to break kasim: [00:05:26] Even kasim: [00:05:26] I just need to move product kasim: [00:05:27] I just need cashflow kasim: [00:05:28] I just need to keep my people busy kasim: [00:05:30] One of my clients was one of the largest, he's a sixth largest kasim: [00:05:34] employer in Arizona, I think kasim: [00:05:35] And he, he does commercial and residential contracting and he said kasim: [00:05:38] for years they were doing deals kasim: [00:05:41] At cost or sometimes at a loss, just because he knew he couldn't, kasim: [00:05:45] if he, if he didn't take on the deals, he wouldn't have a crew kasim: [00:05:47] And so when, and at cruises and when the economy came back, he kasim: [00:05:50] wouldn't have anybody left to build kasim: [00:05:52] And talent was such a difficult thing for him to attract, , German carpenter kasim: [00:05:56] If you're talking about the skilled trades, those are tough folks to kasim: [00:05:59] get a hold of more and more so now kasim: [00:06:01] And, and he understood that kasim: [00:06:02] And so he kept, he was building buildings at a loss in order to kasim: [00:06:09] Just keep his people busy, imagine advertising against him, right? kasim: [00:06:15] He doesn't need positive ROI kasim: [00:06:17] He needs something else kasim: [00:06:19] And, and that's the environment you get pushed into kasim: [00:06:21] Look at anybody in the perishable space and a downed economy kasim: [00:06:25] Anybody in the perishable space just needs to move product kasim: [00:06:28] It doesn't matter if they're moving that product at a five kasim: [00:06:31] or 10% loss, 20% loss, 30% loss kasim: [00:06:35] I'd rather take a 30% loss than a hundred percent loss kasim: [00:06:37] And this kasim: [00:06:39] , it's not, it's not shelf stable kasim: [00:06:40] And, and there's so many examples like that where, , you get into solar kasim: [00:06:46] practitioners again, that just, just need to, all, all I need to do is kasim: [00:06:49] just make this one sale and then I'm gonna be able to, , satiate myself kasim: [00:06:53] in, in order to get to the next month kasim: [00:06:54] Orthodont is a good example of that, where your, the value of kasim: [00:07:00] a potential client is so high kasim: [00:07:03] That they're willing to bid up, especially for a solo practitioner that doesn't kasim: [00:07:06] have that great big office to run kasim: [00:07:07] And, , isn't necessarily employing multiple doctors kasim: [00:07:11] They can pay way more than, than you might be able to pay if you're, , running a, kasim: [00:07:15] a, a collection of practices or whatever kasim: [00:07:17] So advertising in a recessive environment changes the key performance indicators kasim: [00:07:21] It also brings in desperation and the desperation is going to, , it's dumb kasim: [00:07:25] money, it's dumb money and dumb money is going to cost everybody because kasim: [00:07:32] The amount of money that they're willing to spend again is, is not kasim: [00:07:36] connected to a specific output kasim: [00:07:38] The benefit we have to the dumb money is it's not sustainable kasim: [00:07:40] And that which leads me to the second phase kasim: [00:07:42] So the first phase in this imaginary recession that I chicken little I'm kasim: [00:07:47] bringing to you is you have kind of the blood on the streets moment kasim: [00:07:53] where everybody starts advertising kasim: [00:07:56] You're now contending with all of this, but what ends up happening then? kasim: [00:07:59] And I've, I've actually seen this personally kasim: [00:08:01] We saw this personally in the real estate investment world kasim: [00:08:03] Me and my business partner had the highest performing real estate investment kasim: [00:08:05] campaign on the planet for seven years kasim: [00:08:07] And what was interesting about it is because of where we were, when we entered kasim: [00:08:11] this market before we were even running as it as an agency, we were running kasim: [00:08:15] it as potential real estate investors kasim: [00:08:20] People had abandoned Google because it got so expensive because during the kasim: [00:08:24] recession, everybody went straight to Google and it got so expensive and it kasim: [00:08:30] got so saturated that they all left kasim: [00:08:33] Well, they all left at the same damn time kasim: [00:08:35] And so all of a sudden, when we entered, it was a blue ocean kasim: [00:08:38] and it was a blue ocean because everybody had had exhausted Google kasim: [00:08:42] I've actually seen the same thing happen with direct mail kasim: [00:08:44] Now more recently, All the, the real estate investors left direct mail and kasim: [00:08:48] they all left it at the same time kasim: [00:08:50] Cuz it got so saturated and so saturated and so saturated and the performance kasim: [00:08:53] drop and the performance and the performance drop to where they all kasim: [00:08:55] just said, okay, we're not doing this well, when they all left, it's now kasim: [00:08:57] actually a really viable marketing model or it was for the last 18 months kasim: [00:09:00] So that's the thing that you need to monitor kasim: [00:09:02] especially if you're a more legitimate business, the, the, the, the message kasim: [00:09:07] that I have for you is this is actually a pretty, pretty interesting opportunity kasim: [00:09:10] because there there's bloat here in the current economic situation that we're in kasim: [00:09:14] And I can tell you that with integrity too, I'm not an economist, as I said kasim: [00:09:18] and I'm not, , a prognosticator, I don't know what the hell I'm talking kasim: [00:09:21] about when it comes to a lot of those things, but I do know what I'm talking kasim: [00:09:23] about when it comes to Google ads kasim: [00:09:24] And I can tell you for the kasim: [00:09:26] two years kasim: [00:09:27] Definitely kasim: [00:09:28] But even, even three years, I've seen some businesses that shouldn't be in business kasim: [00:09:33] , people with no inventory, no value proposition, no margin, but because we're kasim: [00:09:37] in such a forgiving market with such free liquidity, they've been able to survive kasim: [00:09:45] way longer than they should have been able to survive a recessive environ kasim: [00:09:49] Burns them off kasim: [00:09:50] They, it burns off the dead wood kasim: [00:09:52] And, and, and forgive me for saying, I hope this doesn't sound callous kasim: [00:09:54] That's necessary kasim: [00:09:55] It's necessary kasim: [00:09:56] And for a lot of you, especially in the E eco space, you've seen this, you've kasim: [00:09:59] seen it to where you're like, gosh, I actually source the product, buy the kasim: [00:10:02] product, store the product, fill the product, deal with customer service kasim: [00:10:05] I do all of these things and I'm getting priced outta my own market kasim: [00:10:08] by these idiot drop shippers that are willing to, to, , if they get 1.2 kasim: [00:10:14] Roaz they're happy cuz they have no kasim: [00:10:17] Costs, no overhead, no nothing kasim: [00:10:19] , and, and, and they're, they're putting themselves in a position where like, kasim: [00:10:22] they're, they're squeaking out their little, teeny, tiny itty bitty margins, kasim: [00:10:26] but for them that's good enough because it's just a kid in a dorm or whatever kasim: [00:10:28] So, , you take that and, and you cascade it across multiple kasim: [00:10:32] models in multiple industries kasim: [00:10:33] And you find yourself in a position where you're like, gosh, this is actually kasim: [00:10:35] be really healthy for the economy kasim: [00:10:37] But from a Google ads perspective, there is this limited epoch kasim: [00:10:40] And I don't know how long this is, by the way, how could I, but there's this limited kasim: [00:10:44] EEP where things are gonna get really tumultuous and and , cost is gonna go up kasim: [00:10:50] Visibility is gonna go down kasim: [00:10:51] The competitive market is gonna get kasim: [00:10:53] put on its head for most industries, but then as abruptly as it starts, it stops kasim: [00:10:58] because nobody can sustain that the death rattle money goes away, cuz people die kasim: [00:11:03] And what's interesting about that is you don't know when it ends, unless kasim: [00:11:06] you're spending this isn't data that's publicly available, right? kasim: [00:11:09] Google's not gonna tell you like, oh, Hey, time to come back kasim: [00:11:11] You, you actually have to find a way to, to reasonably and without damage kasim: [00:11:18] or detriment to yourself, you have to find a way to continue to To continue kasim: [00:11:22] to keep your pulse, your finger to the pulse of your particular Google kasim: [00:11:26] LA's economy in order to determine when it is that you should Ratt up kasim: [00:11:30] And when you should go for a land grab and, and, , attempt kasim: [00:11:33] to achieve market share kasim: [00:11:33] And that's, what's really interesting is on the other side of this, , it's the kasim: [00:11:38] whole Warren buffet thing of you buy fear kasim: [00:11:41] You buy fear because your competitors, I promise you is a ubiquitous truth kasim: [00:11:45] 80% of 'em are gonna get scared and they're gonna turn it off kasim: [00:11:47] Well, now you get to step kasim: [00:11:49] and you get to capture that market share substantially less money kasim: [00:11:53] than, than you were paying before kasim: [00:11:56] So a recession can be a category king maker on some levels kasim: [00:12:01] If there is a recession, that's actually really good for me as an agency kasim: [00:12:03] I think I'm, , if there's a recession, if there's a really strong recession, kasim: [00:12:06] I lose 10 or 20% of my client base kasim: [00:12:09] If, for reasons that are completely outside of my control, for reasons that kasim: [00:12:12] don't even really pertain to advertising or marketing you lose 10 to 20% of kasim: [00:12:15] your client base, , solvency cash flow kasim: [00:12:18] Financial issues over extension loans, especially with the fulfillment kasim: [00:12:21] cycles right now, the, the, the pipelines on products, those types kasim: [00:12:24] of things, but what happens, and I'm not telling this is advisable kasim: [00:12:29] I don't think it's a good thing kasim: [00:12:30] Actually, people fire, they fire their agencies and they kasim: [00:12:37] All non-performance based marketing kasim: [00:12:40] So SEO goes, branding goes, content goes, social goes people kasim: [00:12:45] are gonna cut off the things kasim: [00:12:46] They can't connect directly to their pocketbook, that they can't kasim: [00:12:49] connect directly to ROI now kasim: [00:12:50] And again, I don't think that's a good thing kasim: [00:12:52] I don't think that's a good thing because , if you're an SEO agency, the kasim: [00:12:56] way to protect yourself from this, by the way is to show them the timeline kasim: [00:12:58] Say, look, if you cut me off now, yes, you're saving your however much kasim: [00:13:01] I'm charging you a month now, but in 18 months, you're kasim: [00:13:05] gonna see the impact of this kasim: [00:13:06] Can you afford to do that? kasim: [00:13:07] Sometimes the answer's yes kasim: [00:13:08] Sometimes the answer's no kasim: [00:13:09] So connect yourself to ROI in some way, but what I will tell you, what kasim: [00:13:12] I think happens is people are gonna cut off all of the, I don't wanna kasim: [00:13:16] call 'em vanity marketing endeavors, because they're not vanity per se, but kasim: [00:13:21] they're not immediately monetizable kasim: [00:13:23] That's how, that's how we'll contextualize this kasim: [00:13:25] People are gonna cut off all of the marketing methods and are not kasim: [00:13:27] immediately monetizable, and they're gonna go straight to Google and I'm kasim: [00:13:30] gonna have access to clients that I didn't have access to before kasim: [00:13:32] I'm gonna have access to, I'm gonna be able to move upstream, which kasim: [00:13:35] I actually saw happen in COVID kasim: [00:13:36] We're gonna be able to unseat competitors that have been kasim: [00:13:40] playing set it and forget it kasim: [00:13:41] Not really paying attention as people start to pay attention to kasim: [00:13:43] the bottom line more and more kasim: [00:13:45] So recession is, is good for me in some instances as kasim: [00:13:48] predatory, that sounds is true kasim: [00:13:50] However, you wanna be really careful with dangerous and desperate money kasim: [00:13:54] So if you're running an agency, here's my advice to you kasim: [00:13:56] You don't wanna take anybody to save me money if somebody comes to kasim: [00:13:59] you and they're like, Hey, look, I've got an unlimited budget kasim: [00:14:01] As long as X, you wanna be kasim: [00:14:04] Really careful about what X is and what promises you're making and what kasim: [00:14:07] you're paying attention to, because sometimes you will find that people are kasim: [00:14:10] hiring you just so they have somebody to blame as the ship starts to sink kasim: [00:14:14] So be really careful a that you're not taking on somebody kasim: [00:14:19] who's just a lost cause kasim: [00:14:20] And then also B you want to be really careful about the longevity kasim: [00:14:26] of this particular prospect, because , for agencies we're not profit kasim: [00:14:30] Front loaded, , the first 3, 6, 9 months, however long it takes for you kasim: [00:14:33] to really make those campaigns function kasim: [00:14:36] You're probably burning time, which means you're burning money kasim: [00:14:39] And if you're dealing with somebody who's only gonna be with you for the six, or, kasim: [00:14:42] , a recession is two quarters by definition kasim: [00:14:45] Now it can last longer than that, but let's say they're, , this one's shorter kasim: [00:14:48] And that's what the punts are saying kasim: [00:14:49] Although they're all idiots kasim: [00:14:50] I hope they all drown in Nevada piss, to be honest with you kasim: [00:14:52] I think that they're part of the problem they cause this kasim: [00:14:55] issue, but that's my saltbox kasim: [00:14:56] I'll leave it alone kasim: [00:14:59] you wanna be careful about those clients? kasim: [00:15:01] The clients that you take on that are just with you for the desperate season, kasim: [00:15:05] because they're gonna cost you way more time than normal client costs you kasim: [00:15:08] And they're not gonna be with you for a very long time kasim: [00:15:10] So that will be the thing that I'm sort of guarding against as kasim: [00:15:12] well during this recessive period, assuming the recessive period happens kasim: [00:15:15] But I would tell people, especially people that, , if you're not an agency, if you're kasim: [00:15:18] just a company be careful about this is a, this is a cliche for a reason, you can't kasim: [00:15:25] advertising in a down economy because you're going to kill your pipeline kasim: [00:15:29] You just wanna make sure you're advertising very, very, kasim: [00:15:31] very, very, very efficiently kasim: [00:15:33] And that doesn't necessarily mean Google ads kasim: [00:15:35] It means whatever is the most bang for your buck, the most efficient model that kasim: [00:15:38] you can possibly isolate But you also wanna know where your levers are and kasim: [00:15:43] you wanna know what your acquisition campaigns look like, and you wanna know kasim: [00:15:45] what your conversion campaigns look like, because everybody's gonna turn off their kasim: [00:15:47] acquisition campaigns, because that's where the easiest place to save money kasim: [00:15:49] with the least amount of pain now today kasim: [00:15:51] But then that means that your conversion campaigns, , whatever your sales kasim: [00:15:54] cycle is 90 days, then your conversion campaign, 90 days from now fails kasim: [00:15:57] So pay attention to your timeline, pay attention to kasim: [00:16:05] Pay attention to your sales cycle kasim: [00:16:06] And know if I make this change now, today, what is this going to do? kasim: [00:16:10] You have to have the impact report done and then pay attention to the competitive kasim: [00:16:12] market in, in ecosystem, because it's gonna, it's gonna get kind of nuts if this kasim: [00:16:16] happens, but then it, but then it kind of stabilizes and it becomes a ghost town kasim: [00:16:21] And that again is a really interesting opportunity depending on your industry kasim: [00:16:23] So, anyway, I hope I haven't depressed you kasim: [00:16:26] I know it's no fun to sit here and talk about or think kasim: [00:16:29] a recession kasim: [00:16:30] But what's less fun is being caught underwear kasim: [00:16:32] So I wanna, , do my best to at least begin having this conversation kasim: [00:16:36] Maybe there will be more of these kasim: [00:16:36] Maybe there won't be sort of depends on how much I get yelled at kasim: [00:16:39] I've lived through one already and it destroyed my business kasim: [00:16:42] So I have entrepreneurial PTSD, and I'm also a little paranoid kasim: [00:16:45] I saw a really funny tweet about Ray Dalio kasim: [00:16:47] They said he's predicted 12 over the last three recessions, which I thought kasim: [00:16:51] was funny, cuz it applies to me too kasim: [00:16:52] Like I always kasim: [00:16:53] The flood is coming, but I, I actually think the person who kasim: [00:16:55] always think the flood is coming is the one who doesn't drown kasim: [00:16:58] So I'd rather be more cautious and publish this than have a bunch of people make fun kasim: [00:17:02] of me years from now, or months from now kasim: [00:17:04] Not that anybody really pays attention to what I'm saying, but what I mean? kasim: [00:17:06] I'd rather be wrong and careful than write and fool hearty and full kasim: [00:17:13] hearty, , especially given that I have 85 employees and I've gotta make kasim: [00:17:16] sure that I'm taking care of people kasim: [00:17:17] So I'd love to know what y'all think in the comments kasim: [00:17:19] That's all I got kasim: [00:17:20] I'll see you tomorrow kasim: [00:17:22] Wait before you go, I'm constantly looking for amazing people to come join our team kasim: [00:17:26] So if you're passionate about Google ADSS and you're passionate about customer kasim: [00:17:29] success, please go to so late.com/apply kasim: [00:17:33] And we'd love to see you as a part of the solutions 18 kasim: [00:17:35] Also, if you like this video, give us a thumbs up kasim: [00:17:38] Let's the YouTube algorithm know that we actually know what we're kasim: [00:17:40] doing and don't forget this job kasim: [00:17:42] We shoot a video every single day, and I don't want you to miss out on any kasim: [00:17:46] Lastly, if you have questions, comments, concerns, confessions, or kasim: [00:17:49] you just hate my face, my voice, go ahead and nose up in the comments kasim: [00:17:52] We get very little human interaction and even the heckling is something kasim: [00:17:56] that I kind of get a kickoff kasim: [00:17:57] So thank you so much for watching kasim: [00:17:59] Thank you for being subscribers kasim: [00:18:00] If you're a subscriber, don't forget to apply kasim: [00:18:02] If you're interested in working at solutions eight,