The Rise and Fall of the Narconon Internet Marketing Empire (Part 6)

If you missed the earlier segments of this series, see
Part 1, Part 2, Part 3, Part 4, or Part 5.

Google Panda and Penguin Updates
In 2011, Google began implementing a series of algorithm changes that they code-named “Panda” and “Penguin”. These updates tried to handle a series of black hat and grey hat issues that they saw web site owners were taking advantage of to exploit or manipulate search results.

To understand SEO, you have to understand Google. Google is a company. A for-profit company. In order to maintain relevance it needs to be an accurate search engine. In other words, in the past you could get results from keyword spam for almost anything. For example, let’s say you had a pet food store. And you created a website that keyword stuffed for every random keyword you could think of, including topics that had nothing to do with pet food. So, say a consumer goes to Google and types “good restaurants in Hollywood”. Well, because you’ve stuck a lot of keywords in your website, your website comes up to number one position for “good restaurants in Hollywood”. The consumer clicks on your site and thinks “Hey!! That’s for pet food” and walks away saying to themselves how inaccurate Google is. They then try out different search engines such as AltaVista, Yahoo, Ask, Bing or AOL. Google loses market share.

Google wants to be accurate, so it is forever trying to figure out how to best deliver the most accurate search results that the consumer actually wants.

Google’s Panda and Penguin updates were just another attempt at making the user experience more accurate. As a result of these updates, many treatment centers that had been were holding pretty good rank dropped in rankings almost overnight. Narconon was one of these. Prior to Penguin and Panda, almost any search for a competitive keyword in the drug rehab industry resulted in anywhere from 1-5 listings of a Narconon, FSM site or affiliate within the top 10 search results. They, and many other treatment centers, lost considerable ranking.

So what to do?

There was a two-fold response within the treatment center internet marketing industry to these updates. The first was that many of them reached out to professional SEO consultants who charged considerable costs and, ironically, are the ones that put them there in the first place. Strangely, these SEO firms just blamed it on Google and continue to charge huge rates. Treatment centers were somewhat held hostage SEO firms. Pay and survive, or go solo and succumb. The second reaction within the treatment center industry was to switch over to Paid Advertising, otherwise referred to as Pay-Per-Click advertising. They needed clients. However, they weren’t alone in this, and competition and prices got fierce.

Generally speaking, in the last 3 years, costs to compete within the drug rehab marketing industry have doubled and, in some cases, tripled in costs. Treatment centers everywhere, including Narconon, are struggling with internet marketing.

But let’s put things into perspective if you decide enter the Paid Search Advertising world.

Generating Calls on Pay Per Click (PPC) or Paid Network

Paid Advertising means that you bid on specific keywords to get certain ranking in the hope that people click on your website and call you. And when someone clicks you pay a certain amount.  And there are thousands of treatment centers out there competing for these same keywords. There are several variables and definitions that need to be understood in order to understand PPC.

Search Volume:
This is the number of times people search for a keyword. Generally the higher the search volume, the more competitive and expensive the keyword.
Cost Per Click (CPC):
The amount that you bid for your ad to be shown for a particular keyword. Some bids are as low as $.01 CPC, others are as high as $50.00 CPC for more competitive keyword.
Impressions:
The number of times your ad is shown on a particular search. In other words, if you search for “drug rehab”, the 20 listings you see (10 organic and 10 paid) are “impressions”.
Position:
The position in which your ad appears, based upon how much you bid. Advertisers want the higher positions, but they cost more.
Landing Page:
The page that the user “lands on” when they click on an ad.
Click Through Rate:
A percentage of how many times your ad is clicked on vs. being shown. Generally, average click through rates are 2-5%. This depends on how well your ad is written. In the past, Narconon’s “90% success rate” ad resulted in a very high click through rate.
Bounce Rate:
How quickly someone “bounces” off (leaves) your site after clicking on it. If you have a terrible or irrelevant landing page, your bounce rate will be high.
Quality Score:
Google assigns a quality score to your landing page. If your landing page is relevant, you get a high quality score. If it isn’t you get a low quality score. The quality score affects the amount it costs for a particular spot in rank. In other words, like my previous example, Google will allow a Pet Food Store to pay-per-click for the keyword “Good Restaurants in Hollywood”, however they will penalize the heck out of you. You will be assigned a quality score of zero, and it will cost you 10+ times the amount it would a similar competitor. This encourages advertisers to be accurate. You can be inaccurate, but you’ll really pay.
Conversion:
A lead, form filled out, or a phone call. In other words a “conversion” is a person who went to your website and actually made the effort to make the next step and contact you. Conversions are leads. Narconon usually calls them “cycles”.
Conversion Ratio:
This is an extremely important number. This is how many times people click on your site and it converts into a lead or a call. If you have a thousand people clicking on your site and no one is calling, it’s because you have a terrible landing page, or you are marketing for something irrelevant to your landing page. A good conversion ratio is 10%. A great conversion ratio is even higher.
Cost Per Conversion:
The ultimate cost for a lead. In other words, how many times someone has to click on your ad before they contact you. Based upon our previous conversion ratio, Cost Per Conversion = Cost Per Click x 1/Conversion Ratio. If your conversion ratio is 1/10 or 10% and you pay $10 per click, then your Cost Per Conversion equals $100 per Conversion.
Closing Ratio:
How many calls required to convert to an admit or a close. This was covered in greater detail in part 4.
Cost Per Close:
Cost Per Close is a formula based upon the cost per conversion and the Closing Ratio. In other words, if it costs you $20 for a lead and your closing ratio is 1 in 10, then your Cost Per Close is $200.

All of the above are variables. They can be changed by having better landing pages, getting better sales staff, and other techniques.

Some PPC Case Studies
Let’s take some of our information above and come up with some numbers. Let’s say that you are going to bid on the word “rehab”, which was, a couple of years ago, the 18th most expensive keyword to bid on (“insurance” was the most expensive) at roughly $33.00/click. This is because it has a high search volume and a lot of people search for it. Drug Rehab Facilities would like everyone who searches for that term to call them.

Now let’s calculate your relative Cost Per Conversion, or how much it will to cost you to get a single call. Generally, it’s safe to assume 10 clicks equals one conversion. Which means that each “lead” or call for “rehab” is going to cost $330.00 per call. Now, take into consideration your closing ratio. National averages are anywhere from 1 in 50 up to 1 in 100. Which means that if all you did was focus on the single keyword “rehab”, it will cost you anywhere from $16,500 to $33,000 per client in the door. Ouch.

How can this be possible? Well, it is. It’s just really expensive. However, it’s important to note that this is if you are only focusing on a single keyword, and the most expensive one at that. Most PPC campaigns include hundreds or thousands of keywords and they focus on keywords that aren’t quite so expensive. But, when you search on competitive keywords, the top 10 results are generally pretty expensive looking programs. For a time, most rehabs that were listing for the most expensive keywords were all located in Malibu and generally cost anywhere from $60,000 to $90,000 per month. They could afford to pay huge marketing costs.

A more common CPC would be $5.00 per click. Let’s re-run the numbers. $5.00 per click results in $2500 to $5000 per client in the door.

A low-end keyword would be $1.00 per click, which results in $500-$1000 per client in the door.

Some keywords cost mere pennies, but that’s due to low search volume. In other words, bidding on “Drug and alcohol treatment facility in Boise, Idaho that takes pets” would probably be only $.01 per click.

So, let’s go back to Narconon. In the past they had a really good click through rate (“90% success rate! Guarantee!!”) and a great closing ratio (1:40).

But now things have changed. Since many rehabs have been pushed into the Pay Per Click realm, the cost to compete in that arena has doubled. Narconon’s ads have become more conservative, and consequently their click through rate has dropped, since they are getting leery of lawsuits when they promote a “success rate” or guarantee. Their closing ratios are crumbling due to Black PR.

It used to cost, on average, approximately $2000-$3000 per client for a treatment center to compete nationally in the pay-per-click realm. Now, these numbers have doubled.

For a treatment center, such as Narconon, these numbers have probably more than doubled due to black PR. Some numbers are suggesting that over 50% of all qualified calls result in the caller finding Black PR, wich means their costs to compete double even again. Whereas Narconon used to have the best closing ratios, their closing ratios now are worse than traditional programs.

For traditional rehabs that are competing, if costs have doubled to compete, this means that it can cost, on average, $4000-$6000 per client on a solely pay-per-click basis. However, Narconon has a worse closing ratio. And if Narconon is losing 50% to Black PR, the average cost per close is double for Narconon what it is for a traditional rehab. With these speculative numbers, cost per close for a Narconon can shoot up to $8000- $12,000 per client.

For a $30,000 Narconon program, bringing in only $18,000-$22,000 per client can be devastating. Once they subtract the FSM and Registrar, SDE, and ABLE/INT commissions this leaves only $14,100-$18,100 per client before the program even begins. Considering that Narconon averages a 90-day stay, this yields only $4700-$6300 per month per client. If a client stays for six months, these numbers cut in half for $2350-$3150 per client/per month. When the Gross Income immediately becomes only a few thousand per client per month after commissions, it leaves Narconon in a situation where they cannot compete with 28-day, $30,000 programs that are bringing in much more on a monthly basis.

In other words, non-Narconon programs are costing an average of $4000-$6000 per client in pay-per-click costs, leaving $24,000-$26,000 per client left over to pay for the program on a monthly basis.

Of course, this is why a $30,000 28-day facility often looks like a resort and has clinicians, doctors and therapists on staff… and why many Narconon facilities look like halfway houses and have few qualified staff. Narconon isn’t alone in it’s struggles, it’s just the hardest hit right now.  But other treatment centers are shifting to survive.

Shifting in a way that Narconon can’t…

Read Part 7 of
The Rise and Fall of the Narconon Internet Marketing Empire.