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  • Writer's pictureDavid Quilici

Do Google Ads Work? The Benefits of Optimizing for Conversions

In many ways, the digital marketing landscape is like the wild west, with new online marketing channels popping up constantly. The various marketing channels, such as social media, video, organic search, and paid search, have similar but differing goals. These channels vary greatly, but all fall under the umbrella of digital marketing. Which metrics are most important will depend on the marketing channel or platform. Social media, video, and organic search often have key performance indicators (KPIs) of impressions and clicks. Impressions indicate when an ad or digital asset was seen. Clicks measure when the seen or viewed asset is clicked. When it comes to paid search (Google Ads, Microsoft Ads, etc.), a higher volume of impressions means more clicks, and every click costs money (ad spend). This is the model known as pay-per-click (PPC) marketing. In this case, clicks are not free, so more is often not better. When organic marketing KPI’s are applied to paid search strategy, it is ineffective and expensive. Success in paid search depends on properly understanding which metrics are the most important. For PPC marketing, the goals must be shifted to conversions to avoid major financial waste. A conversion is the desired action, such as purchase, phone calls, store visits, or form submission (Farley, 2018). Optimizing for conversions instead of clicks, impressions, and cost per click (CPC) is crucial for Pay Per Click (PPC) search marketers to reduce wasted ad spend, improve conversion rates, and achieve a better return on investment.



Reducing Wasted Ad Spend


Focusing on conversions instead of clicks and impressions enables the reduction of wasted ad spend. If the marketing budget is wasted on the wrong clicks, there won’t be any budget for the clicks that lead to more business (Baadsgaard, 2017). To understand how the adspend is wasted, differences between organic and PPC need to be established. For organic search engine optimization, more clicks should be better. But in paid search, each click (or visitor) has an associated cost. If paid impressions and clicks are measured the same way as organic clicks, it will result in massive, wasted money on ads. Organic search marketing is based on producing content around certain topics and keywords to produce a higher rank in search engines and more impressions. The higher volume of impressions leads to more clicks, increasing the likelihood of sales and conversions. If an article with keywords for hot tubs triggers thousands of clicks for hot tub buyers and 10,000 clicks for searches on “videos of bears playing in hot tubs,” it isn’t an issue. There is no financial loss if 10,000 organic clicks produce no sales or conversions. Paid search, however, is pay-per-click. Paying for each click to rank higher for a keyword or category is effective but can get expensive quickly.


The results can be catastrophic if the paid search strategy is focused on generating impressions and clicks instead of conversions. Depending on the industry, the average cost per click in Google Ads ranges from $1.40-$8.67, per the studies cited by Brooke Osmundson (2022). Paying for 1000 irrelevant clicks would cost between $1400-$8,670. Or $14,000-$86,700 at 10,000 irrelevant clicks. If conversions are the primary focus, then keywords are measured by how many conversions are produced, not by how many clicks are produced. This allows advertisers to stop paying for non-performing keywords. That is the quality of clicks rather than quantity. Is it worth it if a keyword generates 1000 clicks and only 1 is a conversion? That depends on the business and the conversion goal. If a paid keyword for hot tub sales generates 10,000 clicks for the search query “videos of bears playing in hot tubs” on the conservative side, that’s a $14,000 mistake. This kind of waste can happen easily in paid searches when certain keywords are too broad or the bidding strategy is set for clicks instead of conversions.


Optimizing for clicks, and CPC, makes the above scenario appear to have fantastic results. The CPC is on the low side at only $1.40 for a full ten thousand clicks. The lack of conversions reveals that all $14,000 worth of clicks was a complete waste of ad spend.

The potential waste generated by paid search is not merely theoretical. In the book Ultimate Guide to Google Ads, the author Perry Marshall (2020) discusses how his business focused on a keyword that he believed was great for business. Over the years, at least $300,000 was spent on this keyword. When a new marketing manager performed an audit of that keyword based on conversions or business produced, the keyword had never produced any business at all. $15,000 per month had been wasted for years. Further, Marshall contends that if paid clicks are not measured by the number of conversions produced, then it is likely that 80% of the clicks are wasted ad spend. Paid search strategy that focuses on conversion avoids the pitfalls of clicks and CPC-based strategy by providing context. Since conversions are the goal for a business, improving conversion rates becomes a priority for paid search.



Improve Conversion Rates


Focusing on conversions instead of clicks allows for improved conversion rates leading to more business. Jacob Baadsgaard (2017) contends that conversion rates prioritize successful marketing by avoiding irrelevant impressions and clicks. Conversion rate optimization (CRO) is the process of improving the percentage of website visitors that convert. As shown previously, optimizing for more clicks can lead to massive financial waste. But focusing on conversion rates, paid search campaigns (ads, keywords, etc.) can be graded based on how often they lead to conversions. The click is the means to get conversions, not an end unto itself. To understand why conversion rates matter, some scenarios need to be examined. A paid search campaign spending $1,000 for 1,000 clicks and having a conversion rate of 1% will generate 10 conversions at the cost of $100 per conversion. Improving a conversion rate to 2% will generate 20 conversions from the same volume of clicks (1000) at a cost per conversion of $50. The business can get twice as many converters for the same ad spend. Over time, conversion rates can be improved (Farley, 2022) by revising ads and keywords. Getting a campaign to a 5% conversion rate, with $1000 for 1000 clicks, would generate 50 conversions at only $20 each. See the following Table 1 on the impact of conversion rates:


Table 1: Conversion Rates Comparison


If judged by clicks and ad spend alone, they are all equal at 1000 clicks and $1000 spent. Expanding into conversions and conversion rates shows a dramatically different output. Only when accounting for conversions can the difference in performance be realized. Whether evaluating keywords, ad headlines, evaluating ad by conversion rates reveals where the focus should be to drive more business. Increasing paid search conversion rates from 1% to 4% is not a long shot. Conversion rates between 1-4% are the global average for all website traffic (Foster, 2022). Paid search grants the ability to only pay for keywords and headlines that are high converting.


Furthermore, raising the conversion rate makes the number of clicks and cost per click (CPC) a secondary issue. The quality of impressions, clicks and CPC are measured by their conversions and conversion rates (Baadsgaard, 2019). Improving conversion rates by reducing low-performing paid keywords, impressions will fall, leading to fewer clicks. With the proper perspective, this should not be alarming. It’s a good thing. In fact, based on Table 1, a keyword at 5% conversion rate needs only 200 clicks to achieve 10 conversions, while a 1% conversion rate requires 1000 clicks. Evaluating CPC reveals that it also becomes a non-factor as conversion rates rise. The same ad spend of $1000 can have very different results. With a 1% conversion rate, it takes 1000 clicks at $1 each to generate 10 conversions. These conversions cost $100 each. Raising the conversion rate to 2% with only 750 clicks raises the CPC to $1.33 and yields 15 conversions for only $66.50 each. Judging by clicks and CPC alone, the campaign with 2% conversions sounds worse. It has 250 fewer clicks, and each click costs 33% more. But, those 750 clicks produced more business, and the cost per conversion was lowered. For a visual representation, see Table 2:


Table 2: Conversion Rates and CPC


Optimizing for conversions instead of clicks enables conversion rate optimization, which leads to more conversions. More conversions enable better return on investment.



Achieving Better Return On Investment (ROI)


A paid search strategy that focuses on conversions can effectively raise ROI by spending the marketing budget in the right place. Increased conversions and conversion rates enable a business to “land more customers without necessarily generating more traffic or increasing your marketing budget” (Foster, 2022). By redirecting marketing dollars from low converting to high- converting ads, the ROI begins to rise. Table 2 above demonstrates how raising conversion rates from 1% to 5% cuts the cost per conversion in half. That can either lead to scaling or reducing ad spend. A 50% reduction in cost per conversion means that the budget goes twice as far. Making decisions based on conversion data enables optimization, leading to better ROI.


A paid search strategy centered around conversions enables campaigns to be evaluated by the ROI or return on ad spend (ROAS) produced. The fundamental purpose of tracking conversions is to establish and optimize for ROI or ROAS (Baadsgaard, 2019). As shown previously, the CPC was not a valid means of determining the efficacy of paid search ads. The cost per conversion fell based on the conversion rate, not the volume of clicks or the CPC. If the value of each conversion is determined, then the ROI can be calculated. ROI is calculated as ROI= (Revenue - Cost) / Cost. For simplicity’s sake, the following conversions will be calculated as purchases with a revenue value of $100 each. Ten conversions at $100 cost per conversion have an ROI of 0%. It doesn’t matter if the clicks cost $1 or $10 each. The bottom line is the conversions and the ROI.


Table 3: Conversion Rates and ROI


In table 3, notice how Ad 1 has the most clicks and the lowest CPC and yet breaks even. Ad 3 has the highest CPC, and the least clicks yet bring in twice as much as is spent with an ROI of 100%. A marketer focusing on clicks and CPC would cut Ad 2 and Ad 3 above and spend the entire budget on Ad 1 to only break even, at best. But a marketer making the decision based on conversions, conversion rates, and then ROI could move the Ad 1 budget to the better- performing ads. Turning the focus to conversions means conversion rates can be improved, and the return on investment can be elevated.



Conclusion


Optimizing for conversions instead of clicks, impressions, and cost per click (CPC) is crucial for Pay Per Click (PPC) search marketers to reduce wasted ad spend, improve conversion rates, and achieve a better return on investment. In paid search, impressions, clicks, and CPC only tell part of the story and lead to massive waste in ad spend when applied as KPIs. Focusing on conversions, non-converting keywords, and ads reduces wasted marketing budget. Optimizing for conversions leads to higher conversion rates, reducing conversion costs. Higher conversion rates and lower cost per conversion enable the use of the ad spend that can then maximize the ROI.



Works Cited


  1. Baadsgaard, J. (2017, January 5). Are your paid search ads making the right impression? Retrieved from Search Engine Land: https://searchengineland.com/paid-search-ads- making-right-impression-265909

  2. Baadsgaard, J. (2019, November 27). Back to Basics: Understanding Your Paid Search Metrics. Retrieved from Search Engine Land: https://searchengineland.com/back-to-basics- understanding-your-paid-search-metrics-325799

  3. Farley, N. (2018, May 21). PPC Guide: Conversion tracking and what you can measure. Retrieved from Search Engine Land: https://searchengineland.com/guide/ppc/tracking- and-measurement/ppc-conversion-tracking

  4. Farley, N. (2022, February 1). What Is PPC-Pay Per Click Marketing. Retrieved from Search Engine Land: https://searchengineland.com/guide/what-is-paid-search

  5. Foster, J. (2022, October 12). Conversion Rate Optimization (CRO): How To Get Started. Retrieved from Search Engine Journal: https://www.searchenginejournal.com/conversion-rate-optimization-guide/403219/

  6. Osmundson, B. (2022, March 7). What’s A Good Google Ads CTR/CPC/CPA In 2022? [STUDY]. Retrieved from Search Engine Journal: https://www.searchenginejournal.com/data-whats- good-ctr-cpa-conversion-rate-adwords-2018/248947/

  7. Perry Marshall, M. R. (2020). Ultimate Guide to Google Ads: Vol. Sixth edition. Entrepreneur Press.

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2 comentários


Matthew Scheppmann
Matthew Scheppmann
06 de fev.

Great read, David!

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David Quilici
David Quilici
06 de fev.
Respondendo a

Thank you, Matthew!

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