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How to Conduct Your PPC Audit: Pay-Per-Click Audit Best Practices Part One

March 17, 2011
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Paid Search Marketing

If you're a PPC agency there are some fundamentals within the campaign that you want to understand before you do anything else:

  • Margins & Profit - Before you do anything else with PPC, you want to understand what "profitable" means. If you're working on a VC-backed company willing to take a loss on each lead this might just be a target cost per acquisition (CPA), but in most cases it means a hard cost that leads a company into the black. This is the most critical single metric in your PPC campaign (and it has nothing to do with click-through rate, Quality Score, etc.!).
  • Costs & Costs Per Click - Obviously you want to be cognizant of what you're spending -- not just in the context of your cost per conversion and your margins, but also in the context of the volume you can drive for certain costs.
  • Conversions - Again the thing to think about here is volume. Getting 10 sales at $8/conversion may be preferrable to getting 20 sales at $9/conversion, but it may not. Margins and CPA are crucial, but not the only component to understand.
  • Conversion Rates - Not just how the campaign as a whole converts, but how different segments convert.

These are really your most important metrics. There is a seemingly unlimited number of ways you can slice and dice AdWords data -- marrying different metrics, looking at the output of the newest AdWords feature, and on and on. But as you first assess a campaign and try to understand what works, what doesn't and where the opportunity lies, these are the truly vital metrics.So what can you do, as a paid search manager, to turn this focus into a quick and dirty AdWords audit assessment of a PPC campaign?Step One: Ask Questions!Understand your clients' business. Not just their keywords and ad text and bids -- you need to really have a firm grasp of what they need PPC to do for them. Is the main goal acquisition, even if it means razor-thin (or even negative) margins? Where on the PPC-efficient frontier are they most comfortable living? What does the volume from PPC mean to their business?Step Two: Understand the Fundamental Economics of the CampaignWe'll use simple numbers here for the sake of demonstration, but once you know where the margins need to be (we'll say it's $10/conversion) you can start to better evaluate different components of the campaign:

  • Conversion Rate - What's the conversion rate? If it's 10% account-wide then you know that a CPC backed out of that conversion rate has to be $1.
  • CPCs - What are your CPCs? If the target CPA is $10 and the conversion rate is 10% and your average CPC is .80 you obviously have some interesting wiggle room.
  • Volume - How is the volume in the campaign? Is it an acceptable level? If you reduced the number of conversions by 20 percent but increased margins on those conversions, would the lack of volume break the back of the company or negatively impact their model somehow?

This is often fairly simple stuff, but the idea is that you need to have a firm grasp of what these numbers are and what they need to be, because this is what needs to guide your decisions as you dive deeper into the campaign and identify opportunities, strengths, and weaknesses within the campaign. You're creating a framework for future analysis. A great example of a different set of numbers providing you with really meaningful guidance would be this: what if we kept all these numbers the same but made the CPC $2.00. Now all of a sudden you're looking at an account that's hemorrhaging money. You now start to get your hands dirty inside the campaign knowing that there are two very high-level levers: CPC and conversion rate, and you need to find opportunities to move one of them.Step Three: Start SegmentingIn the next installment of this PPC audit series we'll take a look at how you can start to break down a PPC account to find opportunities for improvement.P.S. Already overwhelmed? If you're not running a PPC agency and are looking for help with your PPC campaign, the nice folks at WordStream offer this very service.

Comments

Fun with Excel Such a fine article, cutting to the heart of beginning PPC campaigns for a client or oneself. I've only done this once for a client (and several times for myself selling ebooks on the Internet). I built the spreadsheet that you describe. But the real fun comes when building an Excel spreadsheet with "goal seek". 1) Given that you know an acceptable conversion sale from the client. Let's say $65. 2) Given that the estimated CPC for the campaign is $2.30. What's a breakeven or acceptable conversion rate? The answer is .035 (avoiding any confusion, 3.5 %). If the client's average sale is $65, if the CPC is $2.30, then the acceptable conversion rate is .035 or 3 1/2 per cent. The trick is knowing how to use Excel's "goal seek" technique for the conversion rate. Thanks for the practice Tom (I hope my math was correct.)

Tom Demers
Mar 17, 2011

 Thanks Richard - this is definitely a good use case for crunching data in Excel, thanks for the comment and the note about Goal Seek!

Tom

Although you're probably very adept at Goal Seek, I have the spreadsheet if you want it. I'm sure you can contact me if you need to :)

Tom Demers
Mar 18, 2011

 Hey Richard,

Sure if you want to shoot it over we'll update the post and drop a link to it (and to whatever site you'd like to promote).

Thanks!

Tom

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