If you use Google AdWords, you likely get a monthly report that discusses your ads’ performance. Here’s how to understand what the metrics mean and what matters for your business.
Thanks to Pexels for the featured image.
“Help! My AdWords report says ‘Your click through rate went down’!”
– Aaron Tweeton
If you get an email report from Google AdWords that says that, you might assume that’s bad. After all, you want more customers, right?
And more clicks means more customers, right?
Actually, no.
More clicks doesn’t necessarily mean more customers
More clicks means more clicks that you’re paying for. But those clicks could be for a number of reasons:
- Potential customers might click on your ad because they’re looking for your product or service.
- People might click on your ad because they’re looking for a product or service that you don’t offer. This can happen if your ad isn’t clear enough to only attract quality clicks.
- Competitors might click on your ad to see your website. Google has click fraud prevention measures, but it could still happen.
Why conversions matter
What matters most in your AdWords report are your conversions. Conversions are when a user clicks on your ad and then continues on a path that will make them a potential customer.
- If you run a local business that sells products, then a user clicking an ad and then purchasing your product could count as a conversion.
- If you run a local service business, then a user clicking an ad and then ordering your service could count as a conversion.
- If you have a business where you need to get leads, then a user clicking on your ad and then filling out a form could count.
- AdWords can also be configured to track phone calls or text messages as conversions.
How to understand the AdWords report
If you’re running AdWords campaigns, your monthly AdWords report will have snapshot metrics, some of which are:
Conversions
This is how many times someone clicked on your ad and then did something that “converts” them into a real customer. If you see a big fat ZERO, then you need to make sure that your AdWords campaigns and Google Analytics are set up to track conversions. Otherwise, you’ll have no clue how effective your ads are.
Clicks
This is how many times your ad was clicked. An increase in clicks is good if the click are leading to more conversions.
However, clicks can also increase due to:
- increased budget
- targeting higher volume keywords
- having ad copy that drives more users to click but perhaps not convert
Suppose you run a rabbit sitting service, where you will take care of people’s rabbits while they’re on vacation. If you run an ad that says “Sacramento Rabbit Sitting: Book a 5-start bunny sitter without the 5-star price tag”, then likely only people in the Sacramento area interested in bunny sitting will click your ad.
However, if you run an ad saying “Cute bunnies! Funny bunny photos inside! Plus free prizes!”, then more people might click your ad. But they likely wouldn’t convert into a customer. This is why you want to measure success of a campaign based on conversions, not clicks alone.
Impressions
This is how many times your ad appeared on search engine results or other websites, depending on whether you’re using search ads or display ads.
Like clicks, impressions alone don’t give a whole picture of whether a campaign is successful or not.
Cost-per-conversion
This is what you’re spending on average for each desired action to turn someone from clicking your ad into a customer.
If you use AdWords to get leads for local services, here’s a simple formula that can help you figure out if your cost-per-conversion is providing a good ROI:
Take the average price of your sale
Multiply by the percentage of leads that result in a completed sale
= Maximum you should pay per conversion
So if you provide a one-time service where the average sale is $100, and usually 50% of your leads result in sales, then you probably don’t want to spend more than $50 per lead, conversion or acquisition.
If your service isn’t one-time only, but recurring over many years or a lifetime, then you’ll want to calculate the lifetime value of all the services, not just one individual service.
What kind of trends do you want to see in an AdWords report?
The AdWords reports provides a great snapshot of how your ads are performing, but here are the trends you want to look for over a 6-month trend.
What trends you want to see going up
- Conversions and conversion rate: You want conversions to be increasing, and in particular, your conversion rate. If your conversion rate is dropping or looks low, then perhaps users are clicking on your ads but not feeling compelled to complete whatever action is necessary to convert to a customer. You may want to revise your ads or landing pages, making sure that they’re written so that someone clicking your ad is interested in your product or service, and then stays interested enough to complete that action.
What trends you want to see going down
- Cost-per-conversion: This is what you’re paying for each lead or potential sale you get from using AdWords.
- Cost-per-click: You also want to spend less per click. Sometimes this is done by choosing more precise, less competitive keywords. The less you’re spending per click, the more times your ad can appear which allows you to stretch your budget.
What trends might be good or bad, depending on what you want
Remember how I mentioned that I got an email saying the clickthrough rate went down. That could be good or bad, depending on the situation.
3 reasons declining clickthrough rate might be a bad sign
- It could mean you’re targeting keywords that trigger your ads, but users aren’t finding the ads relevant enough to click on them. If a potential customer is searching for “rabbit sitting” and your ad says “Cute Bunnies!”, they may dismiss it, whereas an ad that says “Local Friendly Rabbit Sitting” might get more clicks because it better matches the user’s intentions.
- It could indicate that perhaps competitors advertisers are offering better deals, or they have more compelling copywriting to attract customers. Ads that say “Top Rated Rabbit Sitting: quality care you can trust” or “Affordable Rabbit Sitting: top care without top cost” might win out clicks over “Rabbit Sitting: we feed them and scoop their poops.”
- You also might be losing to a bidding war over certain keywords. Depending on how your campaign is configured in AdWords, your daily budget and bid strategy could impact where your ads appear in search results, thus resulting in fewer clicks even though the ad is visible.
2 reasons dropping clickthrough rate might actually good
- If you’ve changed your bid strategy to something like “Target CPA (cost per acquisition)” or “Maximize conversions”, that could lower your clickthrough rate because Google is trying maximize conversions or keep the cost per acquisition under a certain number.
- Your ads might be written to produce more qualified clicks, which reduce the number of clicks but increase the likelihood of conversions. For example, suppose you provide a rabbit sitting service for $100 per day. An ad like “Rabbit sitting deals: free estimates” might result in more clicks, but then once people get your price, they may not use your service. However, an ad that says “Top rated Rabbit sitting. Friendly service starting at only $100” might generate fewer clicks because the price is right up front, but result in more conversions because the people who clicked are comfortable with your upfront price.
Why the six month trends matter
I sometimes find it difficult to interpret from the Google AdWords dashboard what is working and what isn’t, especially if there’s been a bunch of campaign changes recently. That’s why I find the six month trends included in the email report helpful to see the big picture of whether real progress is being made.
Resources for improving your Google Adwords campaigns
I’ve only scratched the surface on AdWords, so if you’d like to know more, here’s some resources I recommend:
- Google AdWords training on Lynda.com: I’ve taken the Google AdWords Essential Training course by Brad Batesole and it truly was essential training to understanding just the basics of AdWords. I still consider myself somewhat of a novice when it comes to AdWords, but taking the course gave me enough information to understand how it works and how to significantly improve existing AdWords campaigns so that not only were we tracking conversions but seeing them improve.
- Google AdWords support: If you’re running AdWords campaigns, this will help explain some of the more technical aspects like bidding strategy.
- “How to Write Copy That Sells” by Ray Edwards: Read this book if you want to improve the copywriting of your Google AdWords campaigns.
Have any questions about Google AdWords, or is there something you’d like me to cover? Let me know.