THE 8 KEY METRICS THAT DEFINE YOUR ADWORDS PERFORMANCE - A WORDSTREAM GUIDE

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THE 8 KEY METRICS THAT DEFINE YOUR ADWORDS PERFORMANCE - A WORDSTREAM GUIDE

The 8 Key Metrics That Define
Your AdWords Performance

A WordStream Guide

The 8 Key Metrics That Define
WordStream Customer Success
Your Adwords Performance

As anyone who has ever managed a Google AdWords or web analytics account knows,
there are dozens if not hundreds of numbers to track when analyzing your search marketing
performance. Information is good, but information overload is paralyzing, so it’s important
to home in on the metrics that provide the most insight into your performance.

We believe that there are eight key metrics that provide an excellent overview of the
performance of an AdWords account — and that’s why we included these metrics in our free
AdWords Performance Grader reports. There’s always more data to dig into, but if you want
a quick overview of the areas that most deserve your attention, these eight metrics will get
you there.

Below you’ll find a quick explanation of each AdWords metric and why it’s important.

1. Wasted Spend

Wasted spend is a crucial metric because it has such a big impact on your overall return on
Wasted spend is a investment (ROI) — you can’t expect high profits from PPC if you’re not keeping your costs
crucial metric because down. By watching out for wasted budget, you’re making sure that your advertising dollars
it has such a big impact are well spent.
on your overall return
on investment (ROI) —
you can’t expect high The best way to reduce your wasted spend is through smart use of negative keywords. We
profits from PPC if calculate your wasted spend by tracking the number of negative keywords you’ve added to your
you’re not keeping your AdWords account in the last 90 days and then projecting how much additional money you could
costs down.
save by adding more negative keywords every month. We also compare the number of negative
keywords you’ve added to your account in the recent past to your competitors’ average. A low
relative score for this metric means that other accounts in your monthly spend range are making
better use of negative keywords than you.

Negative keywords allow you to filter out traffic that is irrelevant to your business and unlikely
to convert. By creating a negative keyword, you’re preventing your ads from displaying against
search queries that contain that keyword. By adding negative keywords on an ongoing basis,
you’re better managing your PPC spend. Bidding on non-converting keywords is a waste of
your marketing budget.

2. Quality Score

Quality Score is Google’s measure of the relevance of your keywords, used to ensure that
searchers see relevant ads and have a positive experience. The factors that determine your
Quality Score include:

    n   The click-through rate (CTR) of the keyword and matched ad
    n   The relevance of the keyword and ad to the search query
    n   The relevance of the keyword to its ad group
    n   The CTR of the display URLs in the ad group
    n   The quality of your landing page

It’s important to maintain good Quality Scores because Google uses them to determine your
ad rankings as well as how much you pay per click. (For a more in-depth look at the nuances
of Quality Score, check out our free Quality Score Toolkit.)

The AdWords Performance Grader measures your average Quality Score on an impression-
weighted basis (meaning keywords with more impressions are given more weight, so you have
a truer picture of how well your account is doing). The report also plots your Quality Score
distribution against the recommended curve.

3. Click-Through Rate

Click-through rate, or CTR, is one of the major components of Quality Score. It’s calculated by
taking the ratio of ad clicks to the total number of ad impressions. For example, if your ad gets
one click for every 100 impressions, that’s a 1% CTR.

© 2011, WordStream Inc. All rights reserved. WordStream technologies are protected by pending US patents.

There are several reasons why it’s important to strive for a high CTR including:

n A high ratio of clicks to impressions is an indication that your ads are relevant and
effective — that is, that you’re targeting the right audience with your keywords and
ad text, and searchers are responding by clicking through to your site.

n Improving your CTR will go a long way toward improving your Quality Score —
which, you may recall from the last section, has positive benefits on both your ad
rankings and your CPA.

Your free AdWords Performance Grader report tells you how your click-through rates measure
up to those of your competitors. You’ll also see a graph plotting your CTR versus ad position
on your most searched keywords.

4. Impression Share

Impression share is a measure of how often your ads are appearing for searches that are
relevant to your ads — in other words, it’s a ratio of your ad impressions to the total number
of searches for which your ad was eligible to appear. If your ads displayed for half of relevant
searches, you’d have an impression share of 50%. A low impression share means that
something is going wrong in your campaign. Your budget may be too low, or low relevance
and Quality Scores could be causing you to lose out on potential opportunities to appear to
qualified searchers.

The AdWords Performance Grader shows you your budget-weighted impression share,
meaning keywords to which you’ve designated more of your budget figure more heavily into
the equation. You’ll be able to see your acquired impression share as well as impression share
lost to budget and lost to ad rank. Improving your impression share will increase your traffic
and lead flow.

5. Account Activity

We measure account activity because it’s crucial to spend time actively working in your
It’s crucial to spend AdWords account on a regular basis in order to maintain gains you’ve made in the past and
time actively working in tackle new opportunities for growth and cost savings. If you let your accounts coast, without
your AdWords account logging in to check your campaigns, you won’t be able to put out any fires that arise — much
on a regular basis in
less add new keywords, test new ads and perform other optimizations as needed.
order to maintain gains
you’ve made in the
past and tackle new That’s why we check to see how frequently you have made changes to your account in the past
opportunities for 30 to 90 days. Key areas that we check for updates include campaigns, keywords, ad groups,
growth and cost
ad text and placements.
savings.

6. Long-Tail Keyword Optimization

Long-tail keywords are longer, more specific keyword phrases, usually containing three or
more words. Contrast this with “head terms,” which contain one or two words and are much
more general, high-volume and competitive. For example, in the transportation vertical, “used
cars” and “Jeep” would both be considered head terms — extremely competitive keywords that
are very difficult to rank on. An example of a long-tail keyword in this vertical would be “used
2005 jeep wrangler.”

Long-tail keywords have low to medium search volume individually, but overall, long-tail
keywords account for most of search engine traffic. By leveraging long-tail keywords in your
PPC campaigns, you can achieve higher ROI, since long-tail keywords are less competitive and
therefore less costly. In addition, because long-tail keywords reveal more intent, you can infer
more about the searchers, and they are often later in the buying cycle and more likely to convert.

To determine whether or not you’re making good use of long-tail keywords in your AdWords
account, we look at what percentage of your impressions stem from 1-word keywords, 2-word
keywords and keywords with 3+ words. Adding more long-tail keywords to your campaigns
usually increases click-through rates and conversion rates while lowering costs.

7. Text Ad Optimization

What does it mean to optimize your text ads? Specific, targeted ads tend to get better rankings
and higher click-through rates. So it’s important to write a unique ad for each keyword. In fact,
you should be testing multiple ads by running them at the same time to see which version
performs best, in terms of CTR and conversions. By continually testing and tweaking your ads
over time, you’ll be able to increase clicks and lead volume over time while improving Quality
Scores and driving down costs.

The AdWords Performance Grader looks at your total number of active text ads as well as
the number of text ads you’ve written per ad group, and compares these figures to similar
advertisers. If you have fewer text ads per ad group than the average AdWords user, your
results may be suffering.

Your free report also provides a quick overview of your best and worst performing ads in
terms of impressions, clicks, CTR, and average position.

8. Landing Page Optimization

Landing pages, similar to text ads, need to be very targeted and specific in order to perform
well. A well-crafted landing page is a key element of the PPC equation; this is where you
convert clicks into sales. Without effective landing pages, your ROI will suffer. Features of
a strong landing page include:

n Clear relevance to the keyword, the ad and the ad group
n Concise copy and a clean visual layout
n A clear call to action
n A well-designed form that leads the visitor to take the next step

Generic or poorly designed landing pages can harm your Quality Score as well as your
conversion rates, so it’s important to create specific landing pages for each ad group and test
various elements (such as button design, form length and call to action) in order to optimize
conversion rates.

The AdWords Performance Grader looks at your total number of active landing pages and
compares this figure to the average for accounts with similar budgets. You’ll also get a snapshot
of your best and worst landing pages in terms of clicks, conversions, CPA and other metrics.

Additional PPC Best Practices

There are a few more best practices that every PPC marketer should be adhering to, so the
AdWords Performance Grader checks to see if you’re following these guidelines. These best
practices include making optimal use of:

n Network targeting
n Geo targeting
n Language targeting
n Conversion tracking

n   Ad testing
    n   The modified broad match type
    n   Negative keywords
    n   Ad extensions

We believe that these are the core metrics every AdWords advertiser should be paying attention
to and striving to optimize in order to get the best results at the lowest costs. When was the last
time you ran a report on these all-important metrics?

About WordStream

WordStream Inc. is a provider of software and services that help search marketers maximize
the performance of their PPC and SEO campaigns, driving traffic, leads, and sales for lower
costs. The company’s easy-to-use PPC management software facilitates more effective paid
search campaigns by increasing relevance and Quality Scores in Google AdWords, automating
proven best practices, and delivering expert-level results in a fraction of the time. WordStream
also offers a best-in-class Keyword Research Suite for finding and organizing targeted,
profitable keywords for use in paid and organic search initiatives. In addition, WordStream
provides full-service PPC management and other value-added services to help advertisers who
are new to AdWords or strapped for time get stellar results from pay-per-click marketing.
Learn more at www.wordstream.com.

© 2011, WordStream Inc. All rights reserved. WordStream technologies are protected by pending US patents.

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