Everyone likes to optimize PPC campaigns a bit differently. Here at AdFicient we all have slightly different strategies and approaches to achieve specific outcomes. With practically limitless data available to advertisers, it is important to figure out what metrics and key performance indicators (KPI’s) work best for you in order to measure success according to whatever your advertising goals may be. Without finding KPI’s that give you snapshots of the health of your account, you are essentially flying blind and can easily become bogged down by sifting through countless reports and spreadsheets.
Obviously goals are different across every campaign and as such KPI’s vary in usefulness depending on the outcome you wish to achieve. Finding the right metrics for each campaign is analogous to a business owner understanding the numbers that make his business tick. Profit is clearly important to a business owner, but if the factors that create a profit are misunderstood then profitability may not last for long. When it comes to PPC campaigns, many people see cost per acquisition (CPA) as a universal thermometer of success. Don’t get me wrong, CPA is very important. However, similar to profit for a business owner, it is more important to understand the factors that lead to a desired CPA in order for that CPA to be sustained.
Below I have outlined several important AdWords metrics to put to use when optimizing campaigns.
Quality Score (QS)
Ad Rank = Bid X Quality Score
Quality score is a metric you should not optimize without. It works in tandem with your bid to determine your ad rank. I track QS on an account, campaign, ad group, and keyword level for all of my accounts. Quality score is useful because it is a good way to keep your finger on the pulse of an account. If the account level QS is increasing over time, you know that the account is headed the right direction and costs are decreasing. If the account level QS is decreasing you need to figure out where and why you need to improve. It’s not the metric you need to check and act on daily, but you should always have a sense of what’s going on with it and what you can be working on to improve it.
Cost per Acquisition (CPA)
CPA = Ad Spend/Total Conversions
Cost per acquisition or cost per conversion or cost per lead or whatever you choose to call it is next on the list of key performance indicators. It is always important to set goals and determine an accurate CPA so that you can determine your overall return on ad spend (ROAS). Your CPA is your total ad spend divided by the number of conversions. This is probably the most important metric to clients as many people use it to track if they are on course for profitability. When setting a CPA goal, make sure it is calculated accurately based on costs, not just by what someone thinks they need it to be to become profitable.
Conversion Rate (CR)
CR = Total Conversions/Total Clicks
Conversion rates tell a great story and are always something that should be tracked and ideally improved. The biggest take away that I get from a conversion rate is that it tells you exactly how relevant your keyword and ad copy is to your landing page. It is tough to determine this by looking simply at a low CPA or a high CTR…
Click-Through Rate (CTR)
CTR = Total Clicks/Total Impressions
What conversion rates tell you about your landing pages, click-through rates tell you about your ads. Having high click through rates is also one of the largest factors in determining quality score which will help to bring down your cost per click while increasing your ad position. Google values CTR because if people aren’t clicking on your ad, they aren’t making any money. Actually they are… But not from your ad. One think to look out for is a high CTR with a low conversion rate. Nobody wants to pay for clicks without getting the reward of a conversion. If this is happening it’s likely your ad copy is not translating very well to your landing page and your landing page needs to be re-evaluated.
Lost Impression Share
Personally my favorite metric is search lost impression share based on rank. This is the KPI that for many of my accounts, I can use to predict the overall health of the account and see where I can improve my CPA. This metric is not included in the standard interface so to see it you have to add it at the keyword level under Customize Columns > Competitive Metrics > Search Lost IS (Rank).
Lost impression shares tells you a lot about a keyword and why it may be underperforming. Before you pause a keyword that you think isn’t working, check out its Lost IS. Often times if this number is high, you are simply out of place which can be fixed by improving your ad copy or increasing your budget.
Although everyone places different value on the metrics above, they will all be used on a daily basis by any serious PPC advertiser. Finding out what metrics are most useful to you will save you time and head aches. Learning how to interpret data and determine account health from these KPI’s is a constantly evolving process. By continuing to do this and streamlining your methods, you can avoid the endless spreadsheets and analysis paralysis, without sacrificing the overall performance of your campaigns.