How Much Revenue Does Google Local Service Ads Drive for HVAC Contractors?
A Google Local Service Ads Case Study
We’ve written extensively about the revenue flow metrics (Match Rate, Booked Job Rate, Cost per Booked Job, Average Ticket, Return on Ad Spend, etc.) for channels like Google and Bing PPC as well as Facebook, but today’s newsletter is about Google Local Service Ads and how they perform for HVAC contractors.
We used our data-matching software to match leads from Google Local Service Ads to measure the following data from those leads:
Closed Revenue
Revenue Potential (the sum of Open Estimates, Sold + Scheduled Jobs, and Closed Jobs)
Average Ticket
# of booked jobs
% of new customers
Quality Lead Rate
For those of you who need a quick refresher, local service ads show up in Google’s search engine results at the top of the page in a sponsored section.
You can see what it looks like below when I searched for “ac installation near me”:
This is great digital real estate and pairs nicely with organic and pay-per-click strategies. Google Local Service ads (GLSAs) are pay-per-lead as well, and while this requires some manual work, you can get credited for unqualified leads to ensure you only pay for valid leads.
Before we go any further into the revenue generated by Google Local Service Ads, you are probably thinking:
“Since there are FOUR different ways customers can find my business on Google (PPC, Organic, GLSAs, Google Business Profile / Map Pack) isn’t this just a way to get me to spend more money?”
We get this question all the time and you’re probably thinking that one channel cannibalizes another.
However, you’re protected from that because with Google PPC, you pay only when someone clicks on your ad, for GLSAs you only pay for leads, and organic is free (minus SEO agency fees).
It’s also important to remember that customers want choices and if you want to maximize demand capture, making investments in all sub-channels of Google is a good idea.
While it’s not quite public information, informed guesses suggest that Google handles 5.6 billion search queries per day and Google, just like all of us, are looking to maximize revenues by selling its digital real estate. They have the attention (for now) that warrants such a wide array of paths to advertise your business to their customers.
Keep in mind, the below data is from just 1 HVAC contractor spending on Google Local Service Ads as a case study. We will grow this data-set in the future, but for now take it with a grain of salt as performance will vary based on market area.
Google Local Service Ads Drove a 38.98x Return on Ad Spend on a $813.84 Budget
From May 2022 through August 2022, for 1 client, Google Local Service Ads drove:
53 total leads (14 disputed leads that were credited back, 2 are currently in review)
37 verified and qualified leads
70% quality lead rate
$83,392.12 in revenue potential (open estimates, sold and closed jobs added together) - this was 52% of total revenue potential generated across PPC (Google and Bing) and paid Facebook ads
$31,726.94 in closed revenue
21.57% booked job rate (the percentage of leads that turned into sold or closed revenue)
$2,884.27 average ticket
95.8% of open, sold and closed revenue are from new customers
Key Takeaways of Google Local Service Ads Revenue Performance
It’s important to remember this is a case study from 1 client, so it isn’t accurate to call this data a “trend” or a “benchmark”.
My goal is to bring you value, so I view this as a set of data you can refer to if you need a gut-check on your own performance or help in deciding whether or not you want to invest in GLSAs.
I had trouble finding a case study online that tied revenue back to GSLA leads and the two that seemed to have it required some information before providing access to the data.
So please do not hesitate to copy this graphic and share it with your colleagues, friends or peers who might benefit from it.
Despite this data being from just 1 client, there were two points that really struck me:
(1) 95.8% of revenue potential came from new customers
A common question that’s asked in the industry is whether or not marketing strategies are generating revenue from new customers. What good is marketing spend if its bringing you referrals that you would have already gotten without spending $?
There are a lot of factors that determine how well a marketing strategy generates revenue from new customers, which needs to be left for another article, but we have a data point that confirms GLSAs are a conversion path for customers who haven’t spent money with your business before.
(2) GLSAs had a 21.57% booked job rate
This fascinates me the most, because we consistently see 21% - 22% booked job rates with Google PPC (from much larger data sample sizes).
I wrote about why I think you should stop focusing on wasted marketing spend the way I interpret this data reinforces that point.
1 in 5 leads from Google Local Service Ads turned into sold and/or closed revenue in this particular case study.
That’s it.
1 in 5.
80% of GSLA leads did not turn into a paying customer, but that doesn’t make this a bad marketing investment.
It generated a nearly 40x return and a relatively small budget accounted for 52% of the revenue potential across paid digital marketing channels, something I would consider a success.
However, there are still a few things to consider, which brings me to my last key takeaway:
When people see performance numbers like a 40x return on investment, you can bet that they are racing to make sure their business is spending money on Google Local Service Ads.
If you look at my screenshot above, there are “50+ HVAC Pros Nearby” in Raleigh, North Carolina, and many of them are Google Guaranteed (but I was only shown 3 results).
This means that there is a lot of competition and while you can control costs by disputing leads and tracking average tickets/closed revenue, it’s a crowded space.
There are ways to boost your chances of being the top 3 businesses featured (reviews, response rate, days/times available, and more), but marketing about attention arbitrage.
Finding ways to get customers to know about your business before they even get to a search engine can help you win before the game even starts, and finding undervalued channels that your customers spend time on, but your competitors aren’t advertising on, can also help you win.
I have more to come on how to do that, but for now, do a Google search for a service you offer, and see what the GSLA results look like. Maybe there aren’t many providers in your area or the featured businesses have low review scores . . . if that’s the case, congrats, you just found your first marketing arbitrage opportunity.
Until next time . . .
-Jon