Analytics

Commonly Used PPC Metrics: What They Will and Won't Tell You

By Elisa Gabbert May 10, 2011 Posted In: Analytics Comments: 2

Impressions

An impression, in online advertising, is an appearance of an ad on a web page. In search engine marketing, an impression constitutes an appearance of a text ad on a search engine results page. Internet advertising costs are sometimes measured in cost per impression. An impression will tell you how many people have been exposed to your brand or product.

What impressions won’t tell you: If that exposure actually left “an impression.” Search behavior tends to be a fast and reactive experience. Often users only look at one or two results on a page. Even if your ad is at the top of the list, it may be missed.

Click-Through Rate (CTR)

Your PPC click-through rate is the percentage of people who view your ad (impressions) that actually go on to click the ad. You can view your click-through rate within the dashboard of your PPC account. CTR is important to your account because it directly affects your Quality Score. It's also a measure of how targeted and effective your ads are.

What CTR won’t tell you: What happened after the click. Click-through rates only give you a snapshot of what your ad was able to do in a given slice of time. It won’t tell you whether that action resulted in long-term value. 

Tip: How to improve your AdWords click-through rate

Quality Score

Quality Score is a grade that Google applies to each keyword in your AdWords account. It's in your interest to raise your Quality Scores because Google rewards high-scoring advertisers with better ad placements for lower costs.

There are a number of factors that affect your Quality Scores, primarily:

  • The click-through rate of the keyword and matched ad
  • The relevance of the keyword to the ads in its ad group
  • The relevance of the keyword and the matched ad to the search query
  • Your account history
  • The historical CTR of the display URLs in the ad group
  • The quality of your landing page

What Quality Score won’t tell you: How much you're gaining or saving. You'll need to drill down deeper into other marketing performance metrics in order to understand what you're actually paying for each click – and whether those clicks are paying off.

Tip: Raising your Quality Scores

Conversion Rate

Conversion rate is the percentage of people who clicked on an ad that went on to complete a desired action after reaching your site. When looking at the results of your PPC campaigns, you'll see that some keywords and ads get lots of clicks but low conversions, while others may get few impressions but a relatively high percentage of conversions. How you adjust your strategy will depend on whether your goal is to increase traffic or conversions, which may vary for each ad group and campaign. Generally, optimizing your account for conversions will result in higher ROI.

What conversion rate won’t tell you: The price you pay for each conversion. It's not worth it if you pay more than you gain from the sale!

Tip: Improving your conversion rates

Cost per click (CPC)

Cost per click refers to the actual price you're paying for each click in your pay-per-click marketing accounts. A "click" represents a visit – an interaction with your company's product or service offering. Every click in a search engine marketing campaign represents attention from a person who is searching for something, using words you've deemed relevant to your business to do so.

This attention is what you're buying, as an advertiser, so it's important to note two factors:

  • What type of attention are you buying?
  • How much is that attention costing you?

What CPC won’t tell you: How your marketing spend stacks up against the long-term value of that conversion.

Cost per Conversion

Cost per conversion tells you how much you're parting with to gain a conversion. For example, if you pay $1 per click and 1 out of 100 clicks results in a conversion, you're paying $100 per conversion. This is a crucial metric to follow if ROI is top of mind (and if it's not, it should be).

What cost per conversion won't tell you: The lifelong value of a customer. Be sure you know how much real, ongoing value you get out of the first conversion – do most first-time buyers become repeat customers? Do you sell software or a service on a subscription model? Are there other recurring fees to be figured in?

Tip: Five ways to lower your cost per action

AdWords Performance Grader




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Comments

Tuesday May 10, 2011

Daily Digest for May 10th | A Blog by John A. Lee (not verified) Said:

[...] @WordStream: NEW Post: Commonly Used PPC Metrics: What They Will & Won’t Tell You: http://www.wordstream.com/node/1770 [...]

Friday May 13, 2011

PPC Weekly Roundup – Spring Cleaning Edition (not verified) Said:

[...] and want to make sure you’re taking the right approach? Elisa Gabbert at WordStream outlines common PPC metrics and some of the information they will and won’t give [...]

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