AdWords advertising ROI

[abbottsys]

I do lead generation and use adwords conversion tracking to measure my cost/lead and thus my adwords advertising roi. It works very well, and cost/lead is my primary metric for managing my adwords campaigns. For us $10/lead delivers good roi, so that's what we shoot for. I'd be interested in hearing how others manage their adwords roi.

[Shmuel]

We don't strive for leads, but actual sales. We have our own in house tracking that I use on a per adgroup basis, and am able to calculate CPA and ROI based on that. While this has worked, pretty well, we just finally implemented Google's conversion tracking, which makes my life simpler. I'm now able calculate CPA by keyword.

We calculate what's acceptable as a CPA to be about $8. However, this really is a guestimate. We have to deal with not ROI, but the lifetime value of a customer, and that number is nigh elusive. We don't deal in high dollar value items, so this is what's most important to us. Of course, we are happy with our 10-15% conversion rate with PPC...

[Mel66]

I'm doing basically the same thing as Shmuel. Lifetime value is the bottom-line metric. Further complicating the equation is the fact that the calculation of LTV varies by product due to varying costs. All that said, it's a fairly simple formula once you have all the variables, and that's how we calculate ROI.

This is true for all our marketing channels, not just Google or online.

Melissa

[AussieWebmaster]

Seems like everyone is discussing analytics lately... nice to see... I think the days of 60% plus users not tracking their spends is a thing of the past.

We track keyword and ad..... and are always testing new ads against the top performers. You start to see that some ads may have a great CTR but do not convert....

[abbottsys]

Originally Posted by AussieWebmaster

...... You start to see that some ads may have a great CTR but do not convert....

Yes indeed. I've seen this many times. That's why for us cost/conversion is the key number. We do lead generation, and after getting the cost/conversion from adwords our website then automatically follows the progress of the lead through our back-end business systems and pulls the customer's full account to get the lifetime revenue value.

So, we track our ROI all the way. This benefits us of course, but it also benefits Google. Why? Because the more ROI an advertiser can measure and the more they will spend.

[AdWordsRep]

Seems like everyone is discussing analytics lately... nice to see...

Very much agree, Aussie - and I don't just mean Google Analytics. I mean the whole move towards analyzing exactly how well one's advertising is working in terms of delivering a meaningful profit to the advertiser - using whose ever tools are employed. I even see this from extremely new advertisers. Very cool.

So, we track our ROI all the way. This benefits us of course, but it also benefits Google. Why? Because the more ROI an advertiser can measure and the more they will spend.

Agreed on both of these points as well. I'd like to add, though, that there are a lot of folks here at AdWords who get an authentic charge out of hearing from advertisers who are seeing their businesses really take off. Speaking for myself (and as someone who was on the phone with advertisers for years), I get a huge thrill out of hearing advertiser success stories (and, to be honest, even more so when they come truly small advertisers who are seeing success well beyond what they'd expected.) Believe me, it ain't all about the money - not by a longshot.

AWR

[caugas]

I think this is good great discussion. In regards to tracking and measurement.
My organization finds ease in ROI reporting. I think the AdWordReps best described our thought rational, the better the ROI the more an organization will spend - 10,000 ft level.

However, personally I grade my performance on ROI followed closely by CPO "Cost Per Order" or Cost/Sales. In using this metric, I really get a better Idea if I can push harder on the throttle or if I need to take away from the gas peddle, because I understand what the benefit of the campaign since I understand AOV & Margins. Compared to our traditional marketing acquisition, Online Advertising prospects are much cheaper, and my organization is slowly understanding this. We are a sales driving organization, leads are goods, and count for something in my opinion, but at the end of the day I am graded on sales.

[adamap]

When doing lead gen I try to find out if there are types of leads that are of more value and what keywords have a better chance of generating them. Then you can have a higher cost per conversion for that set. Conversely there are leads that are duds or not worth your time and you'll want to investigate what keywords generally generate those and either bid down or stop them all together.