Last Updated on 2021-01-01 by ppcguybklyn
If you are new to Google Ads, in order to quickly have a basic understanding of the performance of advertising campaigns, understanding the various unique terms of keyword advertising must be one of your most important homework.
In my first PPC advertising job, I also worked a lot to fully understand these terms and performance indicators. Today I hope to use this article to help beginners of Google Ads to better understand where to start.
CTR
CTR = (Total Clicks / Total Exposures) * 100%
Click-through rate refers to the percentage of advertising audiences who will click on your ad to check your landing page after seeing the ad. This is the most basic indicator for judging the quality of our advertising copy, and at the same time we can understand whether we have reached audiences who are really interested in our website through keywords. If the click-through rate is too low, it may mean that our ad copy and keywords may not be sufficiently relevant, or the ad copy itself is not attractive enough.
Average cost (CPC, Cost – Per – Click)
Average cost = total cost / total clicks
The average cost is how much a click will cost us. Google Ads uses a bidding mechanism to determine the ranking of your ads. We must strike a balance between striving for ranking and target cost. Our job is to find the best average cost, so that we can be placed on the first page of search results in certain keywords, and also have some low-cost keywords to get enough traffic.
Quality score
Quality score is an indicator used by Google to judge the quality of our keywords. Some websites will provide a calculation formula to tell us how the quality score is calculated. But in fact, we only need to know that the quality score is determined by
- Expected click rate
- Advertising relevance
- Arrival page experience
These three factors determine quality score.
Simply put, our ad copy, keywords, and content on the landing page must be highly relevant in order to achieve a better performance in the expected click-through rate and ad relevance. The experience of reaching the page depends on our reading speed and web design. The higher the quality score, the easier it is for this keyword to achieve a higher ranking at a lower cost; similarly, the lower the quality score, the keyword may not be pushed by Google at all.
Conversion
Among all online marketing terms, conversion is probably the most confusing word for beginners. That's because the definition of conversion is entirely determined by our business model. As long as the behavior on the website is beneficial to our business, it can be regarded as a conversion.
Suppose we are operating an e-commerce website that sells shoes today, then we can treat online order purchases as a conversion; if we are operating a tuition class or online course registration website, then filling in the online inquiry form or Registration can be one of our conversions.
Conversion rate & conversion cost
Conversion rate = (total conversions / total clicks) * 100%
Conversion cost = total cost / total conversions
Similar to click-through rate, conversion rate refers to what percentage of clicks can be converted into a conversion. The conversion cost is how much it would cost us to get a conversion on average. If the purpose of our advertising campaign is to maximize conversion, then we will hope that the higher the conversion rate, the better, and the lower the conversion cost, the better.
Conversion value
The simplest conversion value is the revenue that each conversion can bring to us. If we are an e-commerce company, then the conversion value is the unit price of each of our products; if we are other types of services, then we can follow our experience or It is to build a model to help the conversion define an average value.
Advertising return on investment (Return On Ad Spend, ROAS)
The return on investment in advertising (ROAS) refers to how much we can earn for every dollar invested in advertising. There are two common ROAS formulas:
ROAS = total conversion value / total cost
ROAS = (Total Conversion Value / Total Cost) *100%
The only difference between these two formulas is whether we should treat ROAS as a percentage. I personally prefer the first one because I think it is more intuitive. When we report, we can say "Our ROAS is 5.0, which means that we can make five dollars for every one dollar invested in our advertising", and remove the trouble of explaining math to customers.
Search Impression Share
Search Impression Share = (Total number of impressions / Qualified number of impressions) *100%
Search impression share refers to what percentage of the number of exposures we should actually get. The reason for the difference in the number of impressions is that competitors who share the same keywords as us, the more intense the competition and the higher the bid, the lower the exposure weight we can get. Search impression share is the main indicator for judging the effectiveness of advertising campaigns whose main purpose is exposure. Whether we stand out from the competition is to use this to judge.
Search impression share is also a tool for judging the quality of brand word advertising campaigns. If the keywords in this advertising campaign are all our own brand words, then no one should divide the number of exposures we should get. So we usually hope that the exposure of brand word advertising activities can exceed at least 85% or even 90%.
optimization scores
The optimization score is a new indicator introduced by Google in recent years. Google will give out scores based on whether your advertising campaign complies with their optimization principles. The best way to improve the optimization score is to look at the optimization items recommended by Google in the recommended tab of the advertising campaign. It should be noted that although the optimization score is higher, the better, but an advertising campaign with an optimization score of 100 points does not mean that we can achieve 100% of the goals we want, because the success of the advertising campaign depends on the advertisement and the design of the landing page.
Application problem
After introducing the explanation of these terms, we can try to use an example to apply these indicators.
Assuming that our marketing budget today is NT$20,000, and we want the conversion cost to be NT$500, and the average click cost cannot exceed NT$20, what should our target conversion rate be?
First of all, we already know that the formula for conversion cost is
Conversion cost = total cost / total conversions
After we put the numbers into the formula, we can get
500 = 20000 / total number of conversions
Total conversions = 40
And we also know that the formula for average click cost is
Average cost = total cost / total clicks
After substituting the numbers we get
20 = 20000 / total clicks
Total clicks = 1000
Finally, because we know the formula for conversion rate is
Conversion rate = (total conversions / total clicks) * 100%
Substituting the number of conversions and total clicks we got to calculate our target conversion rate
Target conversion rate = (40 / 1000) *100% = 4%
