Recently, I got into an argument with a respected colleague about how to select a winning ad in Google Adwords. You would think that it’s an easy decision, since you have just about all the data you could possibly need. However, we still managed to get into an argument on whether conversion rate mattered more or less than click-through rate. Here’s how it went down…
“Hey, Brennan, this ad you made that has the price of the service we’re selling in it has a really low click-though rate,” I said.
“Yes it does, but the conversion rate is pretty good,” Brennan (my colleague) said.
I barked back, “Who cares about conversion rates? Don’t you realize that a high click-through rate equals a low cost-per-click? Have you read anything about quality score in the last ten years, man?
I happily wallowed in my bubble of superior knowledge for a few minutes until the jabbing spear of obvious intellectual curiosity hurt enough to pay attention to.
What if conversion rate were a more important metric? I had always ignored it. partially because it was mainly a product of the landing page which had mostly always been out of my control. Sure I could put in a request to change a line of text or move an image from the left side of the page to the right side of the page, but the .001% difference it would make didn’t really seem to be worth my time when I could just change the copy of an ad and go from a 7% CTR to 15% CTR. Of course, everyone knows that the higher the CTR, the cheaper the cost per click (CPC), so why would I ever look at conversion rate?
Here’s why: The ad he created had a qualifier in it. Example:
Hey, We sell Widgets
These widgets are awesome.
Just $5 per widget! ← QUALIFIER!
The ad the was there previously looked something like this:
Hey, you like Widgets?
Sure, widgets are awesome.
We got lots of cheap widgets!
Turns out that the $5 per widget qualifier was filtering out thousands of clicks that we would have otherwise payed Google thousands of dollars for clicks from customers that weren’t even willing to spend $5 for a widget. When we actually broke down the numbers, the ad without the qualifier had a higher clickthrough rate, but the ad with the qualifier had almost four times the conversion rate. We were saving a lot of money by running the ad with the qualifier in it and filtering out non-buyers, but were the savings worth more than the potentially sales lost due to fewer people clicking on your ad. Or were we actually hurting ourselves by paying a higher cost per click for an ad with half the CTR?
After a bit of confused clucking with my colleague, we realized that the answer was staring us right in the face. Here’s what the numbers looked like…
Original Ad (No Qualifier)
Average CPC: $0.03
Conversion Rate: 0.11%
Cost per Conv: $3.39
New Ad (Qualifier)
Average CPC: $0.14
Conversion Rate: 0.78%
Cost per Conv: $1.62
The number we needed to look at is Impressions to Conversion, because it is telling us that if an ad has high CTR it is actually cheaper because enough non-converting potential customers will refrain from clicking it. Furthermore, filtering out these useless clicks allows us to raise our bids which will potentially show the ad more often and make us more money at a lower cost. The bottom line is CTR is not the holy grail of PPC. What is? It depends on your campaign’s goals. If you want to drive the most traffic at the cheapest cost, then it appears that impressions to conversions is the best indicator of a winning ad.
The big-picture takeaway is that paying attention to just one metric can be useful if you’re in the middle of a combat situation (if you’re an in-house SEM rescuing a campaign from a poorly performing enemy-combatant/agency for example), but only paying attention to that one metric can be very damaging over the long term. PPC has a lot of moving pieces, and you need to be able to juggle all of them and make sense of all of the data, otherwise you’re just a third-world dictator hiding in a drainage pipe waiting for your inevitable fate, and we all know how that ends.
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