When setting up a google adwords campaign, one needs to start looking at metrics to understand how efficient that particular campaign is. But what are these metrics? In this article we will discuss this issue.
Impressions. Impressions is the number of times our ad shows up in google.
Clicks. Clicks are the number of clicks that we received from the impressions.
Click through rate. Click through rate is the number of clicks divided by the number of impressions. This essentially gives as a percentage of the efficiency of our ad. A way to optimise this metric is to improve our quality score.
Quality score. This is the relevance that our ad-keyword-landing page has in the eyes of google. This metric is quite important because it tells us how good is the particular interplay between these three elements.
Conversion. This is the raw number of conversions we had for a particular campaign. We need to define what we mean by conversions
Conversion Rate. This is the number of clicks divided by the number of conversions. Say we had 20 clicks to our website and of these we had 2 conversion. Then the conversion rate would be 10%. In order to understand what our conversion rate is we need to track and define conversions.
Cost per Acquisition. The cost per acquisition is determined by dividing the cost per click by the conversion rate.
Total Cost. This is the total cost that a particular campaign has spent.
Cost per Conversion. This is calculated by dividing the total cost by the number of conversions. Say we spend 200 dollars and we made 2 conversions. Then our cost per conversion is 100 dollars.
Return on Investment. This is one of the key metrics we need to understand. It takes into account the profit that we make for each product and the amount that we spend on our adwords campaign.
We want to have a clear understanding of how much is the profit for a particular product. And this requires that we take into account everything that goes into creating and selling a product prior to the adwords campaign cost. Once we have this number then we need to add a new variable: the cost per conversion.
What the cost per conversion allows us to understand is how much it actually costs us to make a conversion.
Return on investment is Profit minus CPC divided by CPC.
Net profit. Net profit gives us a better assessment of what we are making in terms of revenue because it brings volume into the analysis. Net profit is calculated by multiplying the number of conversions by the profit per conversion minus the total cost.
Where to do these calculations?
Campaign level gives you the overall view of your account. But this can be done at the ad group level or keyword level.