How to Read the Numbers in Google AdWords

Online there are only two things that matter. Traffic and conversions. While that might seem over simplified it still holds true.

Traffic is the people who come to your website. Conversions are the number of people who take a specific action on your website. A common conversion would be making a sale or getting an additional lead into your sales funnel.

First lets talk about traffic before I dive into talking about Adwords and how to read the numbers associated with your account.

Traffic

Traffic is the word we use to describe people coming to your site. This might seem elementary and if that is the case you might consider scrolling down the page to find more of the advanced material covered in this post.

Many people think they have a traffic problem with their website but the fact is there is no such thing as a traffic problem. Anyone can get traffic through Google, Bing, Facebook and other paid media. Now they might have a free traffic problem and that will just take some significant hard work to overcome.

Traffic is the easiest thing in the world to get but what gets complicated is getting the right traffic to your site. I have said it many times before when you are marketing to everyone you are marketing to no one and in the paid ads world that is a very expensive mistake. In paid marketing we need to target the right keywords to make sure that we are getting in front of the right people.

In Google AdWords we use keywords to get our ads in front of the right people. When selecting keywords you will need to be specific. For example, I am running ads for two kung fu schools right now and their keywords are words like martial arts, kung fu, karate and Tae Kwon Do. You might be wondering why would you target karate or Tae Kwon Do for a kung fu school? Well it is simple, In the United States most people who are searching for a martial arts school don’t know the difference between the arts so they call everything Karate or Tae Kwon Do never realizing that their is a massive difference between the arts. Because these folks don’t know the difference they aren’t looking for kung fu in the search engines they are looking for Karate classes as a general term vs a specific way to find something.

Your target market is any group of people who have bought a product similar to yours in the past. In most cases, if someone has bought a product similar to yours in the past then they will likely purchase a product similar to yours again in the future. Of course, that depends on the product but overall this is true.

AdWords

After defining who you are going to market to you will need to start running ads based on keywords that your target audience is searching for. Google has a great keyword tool to help determine what keywords people are searching for.

Once you have chosen your keywords you will need to write some ads. The ads in Google have a number of different pieces to them that I can’t get into in this article.  A basic ad has a headline that can be 25 characters long and two description lines that can have a total of 35 characters. There will also be a display URL which is the URL that your potential clients see and the final URL which is where your potential clients will be directed when they click on the ad.

Once you have your ads up and running you will need to watch your numbers and your budgets. Just a quick disclaimer here, the above information is not sufficient to start running ads. You will need more education than what I have provided to run profitable AdWords campaigns.

The numbers that you really need to watch are your bids, Impressions, Clicks, Click Through Rate (CTR), Average Position, Conversions and Cost per Conversion. Lets take a look at each of these individually and break down what they are and why they are important.

Bids

Bids are how much money you are willing to spend when someone clicks your ad in Google. It is rare that you will actually spend the amount that you bid though. The way that Google AdWords charges you is only partially based on the amount that you bid.

Google has something called your quality score and that determines how much you will spend and what position your ad will appear in when someone types your keyword into Google search. Your quality score has three basic factors to it. The amount you bid, the relevancy of the ad and the quality of your landing page.

The most important thing to remember is that Google wants your ad to be be relevant. If your keyword is Poodle Care and your website is about cats it is unlikely that Google will even let your ad run. Google wants consistency from the keyword, to the ad you’re running, to the landing page. In other words, if your keyword is poodle care then your ad should be about poodle care and the landing page that your potential clients land on should also be about poodle care.

Obviously your bid matters in Google’s eyes but not as much as you might think. Google actually doesn’t view you as their customer! From Google’s perspective you put the money up for them but it is the person searching who is clicking the ad and therefore they are the ones spending the money on your behalf. Google doesn’t get a single penny of your money unless the end user clicks the ad so their experience is the most important thing to Google.

Your bid should be raised and lowered based on the the data in the AdWords interface. At the keyword level there is a tab that says search terms. In this tab you can see the exact phrases people have typed into Google to find your ad. If any of the keywords in this interface are not relevant to your search you should ad them as negative keywords. The other data in the keyword section will tell you what keyword is getting you the most impressions (Ad Views).

This is a key concept that you must understand, conversions happen at the keyword level and on your landing page. The ad itself is just a bridge to get the person searching for your product or service over to your website to see the offer you’re making. In order to understand whether or not you should raise or lower a bid or even pause a keyword is all located in the data at the keyword level of your AdWords account. I want to come back to bids another time because they are a complex matter.

Impressions

There is something important to note here. Impressions don’t matter. It doesn’t matter how many times someone sees your ad if they never click it. The only reason to track impressions at all is to see how many people are seeing your ad in comparison to how many people actually click it. Impressions are used to calculate the click through rate or percentage of people who click your ad. If you have 100 impressions and one click  you have a 1% click through rate. The click through rate does have relevance however so lets talk about that.

Clicks and Click Through Rate

Like I said the only important thing about your impressions is the ability to determine your click through rate. The number of clicks divided by the number of impressions and then multiplied by 100 will give you your click through rate as a percentage. What this tells us is whether or not the ad you’re running is effective. If 300 people see you ad (impressions) and 3 click the ad (clicks) your ad has a 1% click through rate.

Typically, I tend to see around 2-3% click through rates in AdWords. Remember this only matters to measure the effectiveness of the ad you wrote. If your ad has a low click through rate you might want to write another ad and test to see which ad is more effective. Once you have determined if one ad is more effective than another, pause the less effective ad and write a new one. Constantly test new ads and keep the most effective one running. you really need a minimum of 300 impressions to tell if an ad is getting a good click through rate. The larger the data set the more accurate the information will be in determining the quality of the ad you’re running.

Conversions

You must track conversions. The way to do that is to go to the tools tab in your AdWords interface and click the conversions link. You will get a piece of code that you will need to put onto the “Thank You” page after the customer completes the action that you want them to complete. So if you are selling widgets you would put the code on the page that thanks them for their purchase once they have gone through the financial transaction. If you are gathering leads the codes will be placed on the page that your web visitor lands on once they fill out your lead capture form.

Conversions are the most important piece of the whole AdWords interface. The conversion numbers tell us how effective our landing page is and how effectively we chose our keywords. If 30% of the people who click the ad buy your product or become a lead I would consider that effective, depending on the industry and the price point of the product. The higher the percentage the better though.

In my view a high click through rate but a low conversion rate means you are throwing money out the window. The way to improve your conversion rate is to change your landing page or change your keywords and ad copy to be consistent.

Imagine you are searching for a Mexican restaurant in your local area. You fire up Google, search for Mexican restaurant and the ad says Mexican restaurant but when you click  on the ad you find that it is an Italian restaurant that happens to have tacos, What would you do? Obviously, you would head straight back to Google to search for Mexican restaurants again… This is why consistency and specificity is important to Google and to you. After all if your ad is not relevant to the keyword you chose the end user leaves your site and Google still charges for the click! Everyone, Google, you and your potential customers want your ad to be exactly what they are searching for.

Conclusion

Impressions only matter to determine the click through rate. The click through rate determines the effectiveness of the ad you’re running. Conversions determine how effective your landing page is. The amount of money you make is all in these numbers and now you know how these numbers interact and the story they tell.