AdWords Tips

What's a Good Conversion Rate on Google AdWords? Average Conversion Rates by Industry

By Larry Kim October 29, 2012 Posted In: AdWords Tips Comments: 31

This post originally aggregated data from thousands of real Google AdWords from multiple industries. Due to recent changes in Google’s API policy, the original content of this blog post has been removed. If you are looking for specific conversion rate industry benchmarks for your Google AdWords account, the data can be accessed in report format through an AdWords Performance Grader report.

For more details on why our original research was removed: Important Update on WordStream's Infographic Research and AdWords Performance Grader.

All that's left now are the insights we discovered at a high level.

AdWords Conversion Rates

Google AdWords Conversion Rates

Many businesses often wonder how much mileage their industry competitors are getting with Google AdWords. This is a tough problem because the data isn't publicly available. While I was able to create a create an aggregated model based on spend we've analyzed through our AdWords Performance Grader, we're sad to tell you that this data cannot be shared without violating Google's latest terms of service. However, there's a narrative we'd wish to pass along about Google AdWords and how PPC performs as an ad medium.

The Average Conversion Rate on AdWords Varies For Search And Display

We were able to estimate an overall summary conversion rate metric for Google Search ads and Google Display Network ads. While these estimates would be useful for financial investors to evaluate the effectiveness of Google generating ad revenues compared to other internet advertising platforms, we did not feel it would be helpful to businesses actually practicing search and display advertising on Google AdWords. For this reason, we dug deeper, and analyzed the average conversion rates on AdWords by industry, Google Search, and Google Display Network.

Ultimately, the end goal was to create benchmarks that John the internet retailer selling Persian carpets or Jane the local hostel owner to evaluate how well they're advertising against companies bidding for the same ad space.

The results were delightful and shed insights on a myriad of industry differences:

  • The Google Display Network consistantly serves more ad impressions than Google Search, but these ads have a much lower click through rate.
  • In some industries, Google Display Ads outperformed Google Search ads in conversion rates
  • In others, Google Search ads had higher conversion rates than Google Display ads

In summary, a good conversion rate on AdWords varies by industry. Which leads to an unsurprising second insight.

The Average Click Thru Rate on AdWords Varies For Search And Display

In any given industry, the click through rate of Google's ads in Google Search were always higher than the click through rate on the Google Display Network. However, the average Google Display Network click through rate of any industry was still significantly higher than a Facebook ad.

The Average Cost Per Click on AdWords Revealed Conversion Opportunities

In our analysis we found a lot of industry verticals where Google's Display Network had lower average cost per click and higher average conversion rates than Google Search ads. Yes, you heard that right. There are industries where Google Display Ads are being undervalued because they are cheaper and convert better than your bread and butter search ads.

We believe this might be due to the effectiveness of Google remarketing, and the trend may even increase once dynamic remarketing becomes more widely adopted!

So How Do You Know What is a Good Conversion Rate?

If you really want to have an industry benchmark on Google conversion rates, give our AdWords Performance Grader a run. Otherwise, you should look at a metric called cost per lead. Take the average cost per click you are paying for an ad and divide it by your current conversion rate and you will arrive at cost per lead.

cost per lead equation

(e.g. If your ad's CPC is $1.00 and the conversion rate for the visitors that come through that ad is 5%, then your cost per lead is $1/.05 or $20 per lead)

Industry average conversion rates will not matter if your cost per lead metric is higher than the profit a customer can bring! Simply put, the higher the conversion rate, the less you'll be paying on PPC ads for bad leads!
 

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Comments

Monday October 29, 2012

puya (not verified) Said:

A great resource for checking what conversion numbers can be or where we should set our goals when it comes to what we want for conversion in Adwords. I've been looking for this for a while, so kudoos for publishing. 

Monday October 29, 2012

Larry Kim Said:

glad you liked it, puya!

Monday October 29, 2012

SEM pro (not verified) Said:

It would be great to see metrics on users who had their campaigns properly structured and working efficiently vs. people who tried to have someone in house guess their way through and wasted the budget.

Basically this would be more useful if it was drilled down at least 1 to 2 tiers to break out the results that pertain to campaigns and search pros that are doing everything right but would still like to improve.

All I see is I'm very good at my job!!

Monday October 29, 2012

Larry Kim Said:

SEM pro, have you tried running our AdWords Grader?

that does pretty much what you're talking about.

Monday October 29, 2012

Casey Gollan (not verified) Said:

Wow this is great stuff. In the past I've always used the Fireclick Index for benchmarking but this provides another great resource. 

I have to admit I was a bit surprised to see how high the conversion rates go on average for some industries. I remember when 3% was average across the board. It seems like more people must be engaging in conversion optimization activities... to which I say: finally! 

 

Monday October 29, 2012

Larry Kim Said:

casey - try running our adwords grader! it will give you even more targeted benchmarking than this report.

Tuesday October 30, 2012

Chande (not verified) Said:

I would like to see the difference between lead-gen and direct sale. These numbers seem a bit inflated. Also, is this conversion rate 1-per-click or many-per-click. How big is the volume of lead-gen compared to direct sales?

Thanks!

Tuesday October 30, 2012

Larry Kim Said:

Hi chande. thanks for your comment. As you know, it  is up to an advertiser to define what they consider to be a conversion. and you are correct that a conversion could be either a completed sale, or lead-generation. Therefore, i segmented the conversion rate data by industry. why? because within an industry, companies tend to (on average) define conversions more uniformly. For example, when you go to a shopping site, they generally drive to a sale, as opposed to a contact us form. I was counting all conversions in the account, so many-per-click.

 

 

Tuesday October 30, 2012

Chande (not verified) Said:

Thanks for the explanation Larry. This is very helpful.

Tuesday October 30, 2012

Jo (not verified) Said:

Larry,

Really interesting data you've got here, so thanks for sharing. However I'm finding it difficult to believe that in some industries Display can average a better conversion rate & cost per conversion than Search -- Do you have any ideas what could account for this? In my own experience conversion rates are much poorer.

Tuesday October 30, 2012

Larry Kim Said:

Hi jo, thanks for your question. i was initially surprised to see some industries where conversion rate was higher on google display network than google search. on industry that stuck out to me was travel. anecdotally, i know that i do a bunch of comparison shopping (many flight searches) before booking a flight, which could possibly explain the difference. I think it also speaks to the power of remarketing - that targeting people like shopping cart abandoners, etc. is a highly effective targeting mechanism.

Friday November 02, 2012

Guillermo Ortiz (not verified) Said:

Thanks for publishing this data. For too long it's felt like we've only had our own [client] data to analyze and use as a way to improve. It's nice to get a more tangible number to strive for. Thanks again!

Friday November 02, 2012

Ty Whalin (not verified) Said:

Jammed full of great information. The industry break down is very adequate for determining conversion rates for specific industries. Very creative, I had never thought of trying to break it down by industry. It must have take some serious man power to generate this kind of information. It does not surprise me at all that the mobile industry has such a high spend and conversion rate. This one area of industry is going to bring more to the table in years to come. The growth rate in the mobile industry is gaining ground daily and will continue to be a significant factor in the entire theater of the Internet.

Friday November 02, 2012

KC (not verified) Said:

I'd love to know what the averages are for the legal industry.

I'm pretty sure that the Cost Per Conversion would be higher than Finance but I'd love to know for sure.

Any chance you can send me those numbers?

 

Thanks

Sunday November 04, 2012

PigluBabe (not verified) Said:

this is a very intriguing info. But How can you Verify its source? Does Google provide that sort of info?

Sunday November 04, 2012

StreamDr (not verified) Said:

Hi Larry,

Really good info, seems to corroborate broadly with other studies and as you say, some data is better than none.  

Could you give me some indication as to what, in your experience, is the average cost of conversion 

in relation to the transaction?

For example, I've been able to consistently hit a 15% conversion rate, which seems quite high by your (and other)  studies,but the cost of conversion works out at roughly 18% of the sell price.  Is this good?  Our products retail at around $5, $15, $40, $70 & $100, to give you some indication.

 (This is retail, with typical retail mark ups, FYI, so profit is built in...I just would like to benchmark against others if you have that level of information to hand?)

 

Many thanks

 

Sunday November 04, 2012

Emmanuel Uduezue (not verified) Said:

Hello Mr Larry, thanks for sharing this interesting article, am new to Google Adwords and have been worried a bit on how to get really maximum performance on my conversion strategy, your article is really an eye opener on this issue.

Monday November 05, 2012

Stuart McDermott (not verified) Said:

Great article, really informative.

Tuesday November 06, 2012

Mary (not verified) Said:

With regard to the Google Display network, have you defined whether or not text ads have more conversions than image  ads?

Saturday November 10, 2012

Dat To (not verified) Said:

Always top notch content from you Larry.  Great info graphic & analysis!!  Wow over 1/2 of 2600 ppc accts had no conversion data!

At the company that i work for we count conversions of our small business clients as web forms filled, so we put the adwords tracking code on the thank you page that loads after a web from is filled out.

We recently got a 3rd party company to track phone calls coming from adwords, but the challenge is that it's not integrated and an additional cost that only a handful of small businesses want to participate in.  Do you know of a company that tracks phone calls to a website and can tell what is from adwords & other sources, and can integrate this data within an adwords account? 

With web forms we keep talking to clients and get a general ratio in different industries of phone calls to web forms, but without proper phone tracking you are flying blind on decisions.

there are so many cases where an adgroup has next to zero webforms filled/conversions/leads, but client says they are getting tons of phone calls for that.

 

Wednesday October 31, 2012

marry (not verified) Said:

Wordstream’s practice of using averages like this is potentially misleading, and meaningless to individual advertisers.

What’s a conversion?

What’s it worth – to you?

What’s your back end?

Are you earning more than you spend on AdWords clicks and conversions?

That’s the only meaningful metric – but how can you tell?

Different businesses in the same industry can bid on the same keywords, yet get drastically different results on their bottom line.

Only the individual business is in a position to assert the value of their AdWords account – and most don’t have a clue how to do that

!! Marry @ebizsubmit.com

Wednesday October 31, 2012

David Rothwell (not verified) Said:

 

I think this approach is potentially misleading, and meaningless to individual advertisers.
 
What's a conversion?
 
What's it worth - to you?
 
What's your back end?
 
Are you earning more than you spend on AdWords clicks and conversions?
 
That's the only meaningful metric - but how can you tell?
 
Different businesses in the same industry can bid on the same keywords, yet get drastically
different results on their bottom line.
 
Only the individual business is in a position to assert the value of their AdWords account - and most
don't have a clue how to do that!
 
Most small and medium businesses should not be allowed within a million miles of a website,
shopping cart, or paid advertising - because they don't have the resources to ensure profitability.
 
My clients only pay me for the value of their investment in paid advertising - and that's because they
know they are earning more than they spend by it.
 
They have unlimited budgets because the concept doesn't apply any more.

Friday November 02, 2012

Seth Winterer (not verified) Said:

Great study, thanks for sharing Larry.

Sunday November 04, 2012

Larry Kim Said:

 

Hi david. a conversion is whatever an advertiser defines a conversion as being. it could be a sale or lead generated, etc. The value to an advertiser varies greatly depending on how the conversion is defined. 
 
Nevertheless, people are often interested to know what clickthrough rates, conversion rates and cost per clicks are in their industry, and so that's why we published these benchmarks.

Sunday November 04, 2012

Larry Kim Said:

thanks for stopping by, seth! do these numbers look similar to what you're seeing at RLOC?

Tuesday October 30, 2012

PeterG (not verified) Said:

Great article! I work for an agency and spend a lot of time looking at people's historical campaigns to decide what our company will do differently to get better results. The main problem that I have with this article is how vague a conversion can actually be. I've found that unless I get very explicit explanation from the customer on what a conversion is, I'm left guessing. I've seen everything from "time on site" to "page views" being counted as conversions in campaigns. Even in some of these industries. 

Regardless, it's great to see some data being shared!

 

Tuesday October 30, 2012

Elisa Gabbert Said:

Glad you liked it Peter! This paragraph addresses the problem you describe:

Keep in mind that advertisers have control over how they define “conversions” – while Google helped advertisers complete about 13 million total conversions per day through AdWords in Q3, not all conversions are defined as completed sales. Some businesses use AdWords to generate leads, and they may count a range of different activities as leads.

There's no way around this, but we figure some data is better than no data.

Tuesday October 30, 2012

SEO Pro (not verified) Said:

Great article. Funny thing when you talk about the click through rate in Google. Yap, the Google reps are really good at optimizing accounts for CTR but when it comes to optimizing for conversions they pretty much suck. I have seen this over and over again. Conversions mean different for different businesses and for leads it will always be higher compared to a transactional one. One issue with the conversion data is that many leads can sometimes be spam but it's counted as a conversion...Is there a way arount this Larry?

Tuesday October 30, 2012

Larry Kim Said:

Hi SEO Pro! there's no way around this, but i think that it's OK as a benchmark. What i mean by this is that you'd expect a certain amount of spam leads to be present in any lead gen operation, so it's a constant, so it should just cancel itself out. meaning both your website and my data have spam leads in there, so you can just simplify and eliminate that from the equation?

Tuesday October 30, 2012

SEO Pro (not verified) Said:

Thanks Larry. If someone could find a system where you could see where the spam leads came from (display network) or certain keywords, it would be worth golden. I noticed that in the display network you usually get more spam. So with detection like this you can optimize better...some sistes may show good conversion but they are all spam or low quality..is there a way wordstream can work out such a system...if so I think many would be very interested as its a lingering problem in PPC and Google makes money from bad leads which they should not do...

 

Tuesday October 30, 2012

Larry Kim Said:

try changing your display network targeting options to retargeting/remarketing!

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