The Best Google Ads Metrics For Measuring Your ROI
But that certainty also means that the level of competition is high and getting higher, which in turn means that the cost of advertising on Google can increase with time. That means you need to do more with less unless your budget increases. So continual optimization of your ads is a necessity.
But it’s essential to use the right metrics for measuring your success. So in this article, we’ll look at four of the most critical Google Ads metrics—impressions, clicks, clickthrough rate (CTR), cost per click (CPC), and conversions—and identify key related metrics for each of these that you need to be analyzing to know which ad campaigns are performing best, and which need to be refined.
1. ImpressionsAn impression occurs when your ad is shown to a user on a Google search results page, website, or mobile app.
Why do impressions matter? Ad Impressions are essential in Google Ads because they measure your ads' visibility and your target audience's potential reach. In addition, they help you understand how many people see your message, which is critical when focusing on brand awareness or a new product or service.
What should you consider when evaluating your impressions? When trying to introduce a new brand or product or elevate an existing one, you need to be conscious that your ads being seen doesn’t mean they’re making a good impression.
You need to be keeping an eye out for evidence that your ads are making a dent, whether that’s in terms of increasing search volume and traffic to your website (paid and organic), an increase in sales volume in targeted regions, or even just increased engagement with your ads.
Other metrics you should be looking at alongside your impressions:
- Impressions (Absolute Top) Percentage: Abbreviated Impr. (Abs. Top) % in Google Ads; this metric tells you how often your ad is shown in the first ad position relative to the total number of times your ad has been delivered. This metric is critical to understanding whether your ad is prominently displayed, whether it’s buried below other ads or organic results. Your brand won’t be top of mind if it isn’t at the top of the page.
- Clickthrough Rate (CTR, see #2): If you’re focused on ad impressions, then the top of the sales funnel metrics like brand awareness are likely more of a priority than conversions and other behaviors that come later in the sales journey. But knowing how often your ad is being seen doesn’t tell you how effective the message is. Later in this article, we go into detail about clickthrough rate, which measures the percentage of the time people who see your ad click on it. But concerning impressions, CTR is a critical means of understanding whether your ads are compelling. So even if brand awareness is your focus, you should keep an eye on your CTR as you identify which ads are performing best and should serve as the basis for your subsequent ad revisions.
2. Clickthrough Rate (CTR)Clickthrough rate (CTR) is a metric that measures the ratio of clicks to impressions for a specific digital ad. It’s calculated by dividing the number of clicks an ad receives by the number of times it was shown, expressed as a percentage.
Why does the clickthrough rate matter? It tells you what percentage of the people who see your ad are clicking on it. Ads with lower CTRs are less compelling than those with higher CTRs and will drive fewer leads or sales. What should you consider when evaluating your CTR? The average CTR can vary widely depending on factors such as the industry, the type of ad, the ad's placement, and the ad's quality. For example, WordStream's 2021 benchmark report shows that the average CTR for a Google Ads search ad across all industries is 3.27%.
But the inherent nature of your campaign, and the type of action you’re trying to compel, will also impact your CTR. For example, a straightforward sales ad targeting searches for “athletic shoes” is almost certainly going to have a higher CTR than an ad being run against a competitor’s brand name or an ad in which you’re promoting an alternative product that you’re trying to pitch as a replacement for what the searcher was looking for. Conversely, the more your pitch deviates from a search engine user’s expectations of the search results, the lower your CTR will be. Evaluate your performance accordingly.
If you aim to generate online leads or sales, you should also monitor how your CTR (and clicks in general) align with your conversions. For example, if you’ve been diligently revising your ads and see your clicks and CTR double, but your conversions are flat or growing at a rate that significantly lags your improvements in ad engagement, you need to step away from Google Ads and take a deeper look at the user experience on your website because you’re leading a horse to water that’s choosing not to drink from it.
On-site issues may include messaging that fails to connect with customers, confusing (or missing) calls to action, a frustrating cart system, etc.
3. Cost Per Click (CPC)Cost per click (CPC) is the amount you pay, on average, each time someone clicks on your ad.
Why does the cost per click matter? It tells you how much it costs each time someone clicks on your ads and lets you compare the cost-effectiveness of similar ads or campaigns. In addition, a high or increasing CPC can indicate an increase in competition or a decline in your ad quality score.
What should you consider when evaluating your CPC? CPC is one of the most straightforward and apparent metrics, which leads many ad managers to be overly simplistic in thinking about CPC: “Higher CPCs are bad. Lower CPCs are good.” However, appropriate use of exact and phrase match keywords, proper segregation of the keywords targeted by your ad groups, and adding new negative keywords may increase your CPCs. Even significantly.
That’s because cheaper variations on your targeted keywords may be irrelevant to your goals. For example, using broad match keywords for your basketball shoe campaign may result in Google showing your ad in the results for “Vasque hiking shoes” or for a bunch of competing athletic shoes which you only meant to target in a competitor-targeted campaign (or for your brand, which you meant to only target with a branded campaign). You may also be inadvertently showing ads for your brand.
But even for highly relevant keywords, the intent may need to be corrected. For example, if you’re an auto dealership looking to run ads against searches about the Honda CR-V, you probably don’t want to run ads against the “Honda CR-V repair manual PDF,” even though the CPC is a few pennies.
Once you’ve stripped away many of these cheap but irrelevant (or better targeted elsewhere) keywords, you may see your average CPC double, triple, or more. Once you’ve done that, you can make adjustments that will gradually bring your CPCs back down. But don’t obsess over your CPC without knowing precisely what clicks you’re paying for in the first place.
4. Cost per conversionCost per conversion is the amount you pay on average every time someone takes a desired action, such as making a purchase, filling out a form, making a phone call, or signing up for a newsletter after clicking on your ad.
Why does cost per conversion matter? First, it directly measures the cost of acquiring a lead or sale through your ad campaigns, a necessary metric for understanding the sustainability of your ad efforts.
What should you consider when evaluating your cost per conversion? First, suppose you get into the habit of taking a top-level approach to tracking your cost per conversion over time. In that case, it’s easy to lose sight of the dollar value of those conversions—especially if you have multiple types of conversions.
To avoid this problem, track your return on ad spend (ROAS). ROAS measures revenue from an ad campaign compared to the cost of that campaign. Making ROAS underpins everything you do in Google Ads. You need to understand the value of each type of conversion tracking in your Ads account.
Suppose you calculate the lead value based on a customer's revenue in the year after their first purchase. In that case, the average value of a customer is $260, and if 1 out of 20 newsletter signups become a customer, then the dollar value of a conversion is $260 / 20 = $13. In turn, if your average cost per conversion for a newsletter signup campaign is $15, you will end up with a ROAS of about 0.87, meaning that you make 87 cents for every dollar you spend on the campaign. In other words, the campaign has a negative ROI.
On the other hand, if another campaign has the exact cost per conversion ($15), but conversions are general inquiry form submissions wherein 1 out of 4 turns into customers. The dollar value of each conversion is $260 / 4 = $65. This works out to a ROAS of 4.33, or a return of $4.33 for every dollar spent—the exact conversion cost as the other campaign, but a very different return on investment.For more insights on Paid Search and how to ensure your brand is performing better than your competition, contact firstname.lastname@example.org today.