Measuring the ROI on AdWords

Measuring the ROI on AdWords

Have you ever wondered about your Return On Investment (ROI) on Google AdWords? Research shows that businesses make an average of $2 in revenue for every $1 they spend on advertising. This can vary across the board, of course, but everyone in business has the same goal in mind: how to get the highest ROI for the lowest investment amount.

The Value Of AdWords Might Be Higher Than You Think

Spending money on AdWords ads without knowing what search terms to target, the best bid price, or how to measure your revenue seems counterproductive. If you don’t know your ROI, you don’t know if it’s worth your money to continue. It’s not difficult to know what AdWords ads are doing in terms of impressions and clicks, and even a portion of your sales can be linked to AdWords clicks directly. But the complexity of discovering sales from direct click attributions can be misleading. Some customers:

  • Click without making the final purchase
  • See the ad, don’t click on the paid link, but make the purchase anyway
  • Don’t even see the ads, but still make the purchase
  • See the ad, but wait a few days to make the final purchase
  • View several of your AdWords ads before making the final purchase

The bottom line is, AdWords ads might hold a higher value than what the numbers are showing. If you connect sales only to the direct clicks, you might be missing out on the big picture. Using last-click attribution can leave you with an overestimation of some AdWords ads, and underestimation of others.

Google AdWords shows its value by the profit you see from sales it generates. Estimating the value of the ads comes from understanding the relationship between the AdWords impressions and clicks to sales.  This means you’ll need a predictive model that finds the complex patterns in your marketing activity that ultimately drive your sales.

An Example In Tracking

A popular money-lending company uses AdWords to attract new customers to apply for loans. They use three AdWords search terms to drive sales and they know that those terms are successful because when they change any of them, sales begin to fall. Plus, some customers say that they saw the ads a few times, but did not click on them. Those ads resonated with the customer, however, and fueled their decision to apply at a later date.

This loan company can use a tracking program that plots daily clicks versus sales to see patterns, but it can be tricky to determine which AdWords are driving the sales. There can be delays between AdWords impressions, clicks, applications, and approvals. A company like this needs a predictive model that allows for time delays.

Using a time series model, you can get a prediction for a specific day based on the values of a range of historical dates.  The goal is to have a model that can find the daily sales based on clicks and impressions of the previous week. From this point, you can view what happens to future sales when impressions and clicks are higher or lower. If every 2 additional clicks on one of your search terms predicted that sales increase by 1, that means you’re achieving the results of the average AdWords user.  

Automation Is Easier 

Building these models to predict the success of Google AdWords might seem difficult, but the advancement of automation has made things easier. Results can come in an hour as opposed to a week, and that can have a big impact on your marketing going forward. To discover the ease of linking AdWords to direct sales to measure your ROI, contact today.