CPC? CTR? CPA? Confused?
When working with Google Ads (formerly known as AdWords) you'll face a lot of numbers and metrics. For a beginner, this can be frustrating and overwhelming but in this article, I will introduce you to 9 of the most important AdWords performance metrics.
When working with Google Ads, you should always define the overall goal of your advertising. This goal is for the vast majority more sales and revenue, but it can also be increased brand awareness. It's really important that you define this goal in order to determine which KPIs to look at when evaluating your AdWords campaigns.
To me, the core of Google Ads is data. In order to keep your performance at a high level, you need to analyze and interpret the data you get. You must customize your AdWords account including search queries, ad copy and negative keywords in order to fit the trends from your AdWords data analysis. And just to be clear: you will need to update and customize your setup an infinite number of times.
Well... If you're at a beginner level you should focus on learning the key metrics from the article and over time you will get a splendid understanding of the metrics so you at a later time can do comprehensive data analysis in Excel.
Return on Ad spend (ROAS) is one of the very first metrics I would look at in order to get an overview of recent PPC performance. ROAS is the ratio of our costs in Google Ads to the revenue generated.
Let's look at an example:
Total cost: $ 500
Conversion value (revenue): $ 3000
ROAS = 6
(3000 / 500 = 6)
Basically, ROAS is our return every time we spend $ 1 in Google Ads. With a ROAS of 6, we generate $ 6 in revenue each time we spend $ 1 in Google Ads. Return on Ad Spend is without a doubt one of my favourite Google AdWords metrics.
If you're not an e-commerce shop, you should track relevant leads. Let's assume that you work as a photographer and your business goal is relevant leads (eg. Phone Calls) from your ad campaigns in Google Ads. In this case, we should look at price per acquisition/conversion, as we cannot calculate a ROAS (no revenue figures).
The cost of each conversion is very different from industry to industry as competition, cost per click and conversion rate on the landing page are paid search metrics that will influence the results.
However, you should pay attention to how many of the relevant leads end up being customers and how much a typical job generates in revenue. Based on this, you can figure out the level of your CPA.
Return on Ad Spend and Cost per Conversion is without a doubt two very important AdWords performance metrics to look at, but it does not tell the whole truth. As ROAS simply tells you about the cost-to-revenue ratio, it's important to look at the total number of conversions.
A conversion can be defined as many different things but basically, it should be an action that creates value for our business. You'll need conversion tracking which can easily be set up via Google Analytics in order to count the number of conversions.
The number of clicks is also important to look at in order to gain an understanding of the volume in a given time period. Clicks are the essence of Google Ads and it is, therefore, essential to look at how many clicks have been purchased during the period.
Conversion Rate is the ratio of clicks and conversions. It's important to keep an eye on this metric as it's one of the most important metrics for your business. As you pay per click a low conversion rate can be a big challenge.
If you have a very low conversion rate (0,1-0,5%), it might be difficult to generate a reasonable Return on Ad Spend as we'll have too high costs for every sale.
You should compare the conversion rate from Google Ads with other channels in Google Analytics. The traffic from Google Ads should be potential customers ready for purchase (this depends on your campaign goal) and therefore the conversion rate should be at a fair level.
By looking at the number of impressions, you get an overview of which campaigns getting the most exposure. We will often experience a lot of impressions with advertising at the display network, and this is especially interesting if your campaign goal is brand awareness.
In addition, I would like to mention the PPC metric Search Impression Share. This metric is a percentage of your impression share for a given campaign, ad group or keyword.
Click Through Rate is the ratio of views to clicks. You should always keep an eye on this KPI as it shows how appealing our ad is to your audience. Ask yourself whether your ad text is interesting for your target group or your banners are trustworthy? Maybe a few small changes can improve your performance?
You should always test different ads to find the constellation where you have the highest CTR. Basically, you want to figure out what your potential customers respond best to.
What about Ad Position?
Your Ad Position has a great impact on your Click Through Rate which is why you should always look at both metrics when evaluating. A low CTR can be caused by a high ad position.
The total conversion value is relevant to keep an eye on as it can easily increase and decrease even though the number of conversions is unchanged.
How is that?
All e-commerce shops should work with their average order value (basket size) so the total conversion value over time can grow without the number of sales increasing.
Likewise, it's important to know the total conversion value (and ROAS/CPA) in order to plan how much money you should spend next month.
This metric might be a little overlooked by some advertisers and that is really a shame. When you work with your Quality Score, you can significantly reduce your costs and that's essential in order to have a profitable business.
At Obsidian Digital, we have a structured framework we use every time to build new campaigns in order to secure a high Quality Score for each keyword.
You can examine your Quality Score for each keyword and should take a closer look at the three core elements:
1) Landing page experience (your web page)
2) Ad relevance
3) Expected CTR
You should look at these elements in order to identify your focus areas.
My advice is for you to get these 9 Google AdWords metrics under your skin. They are absolutely essential for you in order for you to understand and evaluate your PPC performance.
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