So Long Flat Rate Lead Cost. Bidding Mode Coming to Google Local Services Ads
Tom Waddington Tom Waddington

After several years of a flat-rate pay-per-lead pricing model in Local Services ads, Google has added a bidding mode option to some LSA accounts, giving businesses the option to choose the maximum amount they are willing to pay for a lead from their Local Services ad.
Bidding on Local Services Ads

When did this bidding mode feature appear?

Not entirely new, this bidding mode option has been in place for “professional services” Google Local Services ad for a while. The “professional services” ads are the Google Screened (as opposed to Google Guaranteed) type of LSA that are specific to legal, real estate and financial business categories. This bidding mode option is new, however, for “home services” Local Services ads (Google Guaranteed). It appears to be a beta test that will likely be fully available sometime next year according to Greg Sterling at Search Engine Land

A couple of years ago Google tested the option to pay a higher amount for a lead in LSA (1.5x the standard rate) to potentially get better placement and more leads. We had an HVAC contractor that was in this test for a while but it didn’t last long. I believe this was a very small and brief test, but this new bidding mode option test seems likely to be a permanent one.

Why is Google adding a manual bidding mode option to Local Services Ads?

I find this quote from Greg Sterling’s article interesting:

According to a Google spokesperson, “After seeing success with auction based pricing within our professional services vertical for Local Services Ads, we are excited to bring auction-based pricing as a beta to select markets for local services advertisers. We believe this model will help bring more customers to this trusted group of advertisers.”

Customers aren’t going to be aware of this change of course so the only way I see this causing more people to gravitate toward Local Services ads would be due to brand recognition. If the larger, better-branded companies are able to outbid (and outrank) the smaller ones then consumers will likely recognize the businesses and pay more attention to these ads at the top of the results. 

This, of course, would also come at the expense of traditional Google Ads and non-paid search results. But more than likely I’m just looking too much into this quote from a Google spokesperson. We know the overall goal is to increase revenue. 

How high will it go?

It will be interesting to see how much this will increase the cost per lead. The impact will vary depending on the market and vertical but I expect lead costs to still remain reasonable and worthwhile for businesses. 

Will smaller companies be able to get enough leads? Some aren’t getting enough now so they might welcome the ability to increase their bid to try to change that. And they may be successful, particularly for now if they are in the beta test and their competition isn’t. But at some point, all of the companies will be able to bid. Eventually, the HVAC contractor from the screenshot will likely look back longingly at that $25 lead cost. Hopefully, they were able to turn three years of $25 leads into a lot of lifetime customers.

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