Join Dataflo @ SaaS Insider's India 2022 on May 26 - 27
Register Now
Imagine having the power to be seen on top of the search results and stand out from the crowd in the world’s largest search engine – Google! With Google Ads, that is precisely what brands can achieve.
Google Ads empowers businesses to maximize their return on investment and revenue by potentially reaching out to millions of people looking for similar products or services. Google’s extensive reach and network make lead generation and customer acquisition just a click away for many businesses.
Nevertheless, the process of optimizing search or display ads in Google Ads is easier said than done. Without properly tracking data and monitoring KPIs, advertisers are no different than a sailboat lost at sea!
Business decisions are very crucial. A good business decision leads to profits that compound over time. Likewise, a poor business decision starts to compound losses! Hence, eliminating guesswork and reducing the likelihood of making detrimental decisions are critical in any business.
Basing all possible decisions on relevant data helps companies measure and document their performance, thereby allowing them to devise new strategies and tweak older ones accordingly.
However, when business owners and marketing teams use tools like Google Analytics and Google Ads, it is unwise to track all metrics. Rather, only a few significant data sets should be tracked.
Such metrics that act as the main indicators for evaluating the performance of an ad group or ad campaign for the particular business are known as “Key Performance Indicators (KPIs)”.
Other reasons why data-driven decision making (DDDM) is paramount:
Here are a few important metrics that most businesses ought to track. These metrics will help companies answer the following equations (in addition to others):
Return On Ad Spend (ROAS) is a metric you absolutely have to track - regardless of the campaign type. It is the first indicator to measure the success or failure of your Google Ads.
In simple words, ROAS is a measure of how much money has been spent on advertising (which is typically the agreed ad budget) versus how much revenue has been generated from those ads.
More importantly, ROAS is a metric that is easily understandable by everybody working in the company. Several executives rely primarily on this KPI.
Here is a simple formula to calculate your Return On Advertising Spend (ROAS):
ROAS = (Amount spent on ads) / (Revenue generated from those ads)
Cost Per Click (CPC) refers to the bid amount deducted from your Google Ads account when a user clicks on your ad triggered by the keyword you bid on.
CPC is not a measure of success for your Google Ads, but it will help you budget accordingly.
Different keywords have different Costs Per Click.
Below are some factors the influence the CPC:
Digital marketers and advertisers often hunt for keywords that have a high probability of conversion, but more importantly, a low Cost Per Click (CPC).
Bidding on low CPC keywords helps brands maximize the keywords they are bidding on for a specific budget.
Cost Per Conversion (CPCon) is similar to Cost Per Click (CPC). However, CPCon primarily focuses on the conversion while CPC takes into account both conversions and clicks that do not lead to conversions. For the same reason, CPCon is typically higher than CPC in most campaigns.
When you set up conversion goals like registrations or sales, then CPCon is a more preferred metric to measure than CPC.
Of course, the lower the CPCon, the better is the campaign performance. A low CPCon indicates that the campaign is getting a better bang for the buck!
Click-Through Rate (CTR) is the metric that sheds light on how many people have actually clicked on your ads in contrast to the number of people who have viewed.
Having a good CTR helps improve the quality score of your Google Ads. Some ways to improve CTR are:
The difference between Cost Per Acquisition (CPA) and Cost Per Conversion (CPCon) is very subtle.
While CPCon gives insight into all types of conversions, including registrations and clicks, CPA focuses exclusively on turning the audience into profitable customers.
Conversion rate is the metric that indicates the number of people who have successfully helped you accomplish the goal versus the total number of people who landed on your website.
For an e-commerce store, it refers to the total number of people who transacted versus the total number of people interacting with your Google Ad.
A conversion rate of 2% to 5% is typically considered to be a good benchmark.
Impressions are the number of times your ad is visible on the Google Search Network or the Google Display Network.
In the case of text search ads, not all impressions cost you money.
Every time you launch a Google Ad campaign, the algorithm estimates the approximate number of impressions you would get for those keywords.
Search Impression Share refers to the actual number of impressions received versus the estimated impressions by Google’s algorithm.
Quality Score is one of the most important metrics in any campaign as it increases the likelihood of triggering your ads on top of searches of most keywords you bid on.
Relevancy is crucial for Google Ads. Hence, using relevant keywords and specific copies, the quality score can be improved. A good quality score also helps you lower your Cost Per Click (CPC)!
The interaction rate (IR) gives you an idea of how engaging your Google Ads are. The IR is calculated as follows:
IR = (Number of advertisement interactions) / (Number of impressions)
To conclude, every business and every campaign has a different set of metrics to be measured. Measuring vanity metrics and tracking irrelevant KPIs will prove detrimental to your ads' performance on Google.
Krishna is dedicated to helping brands and startups grow through user-centric product design that helps them get the most out of their data. He acts as a conduit, understanding what customers need and then creating products that meet those needs. He is a nature enthusiast and has fondness for great music and movies.
