NOT CTR and NOT ROI">Google AdWords Tip: Optimize for Leads NOT CTR and NOT ROI
December 18th, 2006 by Mike Reining Read more about Conversion Rate, Google AdWords, Pay per click advertisingIn one of our recent posts we had an active discussion on whether it is better to optimize your click-through-rate (CTR) or your conversion rate (ROI). I would say that the answer is neither or both depending on how you look at it.
How can I say that?
First of all, it goes without saying that you should NOT optimize your Google Ads for the maximum number of clicks. It is easy to write ads that get lots of clicks but that have a pathetic conversion rate. So, at a minimum, you have to watch both.
Seondly, you should not just optimize for ROI because ROI ignores volume! For example, you might end up writing an ad that has a pathetic click-through-rate but that converts brilliantly. From an ROI stand point you have a winner. You only spend very little on the campaign and saw a big profit margin.
However, at the end of the day, you are not happy with visitors (high CTR) and you are not happy with just a few highly profitable sales (high ROI).
So what should you do? The answer is actually quite simple. Do the math! Just plug your numbers into a spreadsheet so see which ad is getting you the most leads and sales so that you can optimize for total profits which is what you are going after.
How do I do this? Let me walk you through an example. Here are two ads we just tested:
One ad performs far better in terms of CTR and the other ad performs far better in terms of ROI (it has a higher conversion rate). Net, net, which one is better?
When the answer is not obvious then we use a little tool that I like to call the PPC Optimizer. I just plug the key numbers into the PPC Optimizer to calculate the number of leads per thousand impressions that I get with each ad.
For the two ads above the results look like this:
Now you can instantly see that the ad with the lower CTR and the higher conversion rate delivers 1.64 leads for every thousand impressions while the other ad only delivers 1.35 leads. That is a difference of over 20%. Surely in this case I much rather keep the ad with the lower CTR because it delivers more leads at a lower cost.
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About the Author
Prior to MindValley Media, Mike was the Head of New Ventures Strategy at eBay where he conceived of the strategies that led to the investment in Craigslist, the launch of Kijiji.com and the acquisition of Skype.
Mike has an MBA from Stanford and previously worked for the Boston Consulting Group. He is also a certified Google AdWords Professional.
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Vishen Lakhiani
I just started reading your blog, it has a lot of useful information! I was wondering where could I get my hand on these adcopy testing tools? I just got started in PPC advertisting and believe the tool you’re using could help me out a lot. I also would like more information on the PPC Optimizer tool that you used in this post.
Keep up with the great post!
Hi! I am glad to hear that you are enjoying our blog. You can check out our free AdWords Optimzer tool at:
http://adwords.clickmuse.com
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If I have three different AdWords PPC ads for a given keyword, AdWords “optimizes” by seeing which has the best CTR, and that ad gets shown the most.
The problem is, in one Ad Group I have like this, the ad that gets shown 87% of the time does have the best CTR, but the worst conversion rate and the highest CPC.
Another ad that AdWords shows only 4% of the time does not have the high CTR, but the conversion rate is high and the CPC is low.
I think Google likes lots of high-priced clicks. They don’t seem to optimize for my best conversion rate or lowest CPC.
What do you think?
Correct. Google only optimized for CTR. At least for now. That’s how they make the most money in the short term so it makes sense why they would focus on this.
If you are spending a lot, then do not let Google optimize your ads. Use a tool such as the AdWords Optimizer (http://adwords.clickmuse.com) to help you rapidly optimize your ads.