DCKAP has been an early adopter and user of Google Adwords. We have got great customers using adwords. Thanks Google. However, it looks like distant past today. Our spending with google has doubled(or even tripled), however the lead inflow has reduced by half. I see a few problems.
Competition: Most of your competition is on Ad-words. Around mid 2007,there were not a lot of companies bidding for key-words. It was fun as the return on investment was great. It is concerning today as the response rate is bad.
Expensive bid rates: The bid rates are expensive. A few targeted keywords which used to cost $3 is costing $30 or more now.
Evil Clicks: Considering the high spending and low lead flow, this cannot be ruled out. Your competition clicking on your ads and you pay for it.
Extraneous Clicks: A fine example. You advertise for game developers, a school kid uses his mobile device (ipad) searches for one of your advertised keywords and clicks on your ad.