Here are the 10 key PPC KPIs to use.
1. Clicks: How many people clicked on your ad. If your ads are not getting clicks, you are using the wrong keywords or your ads are not compelling enough. These 3 factors are the key to the success of your campaign, as without clicks you can’t get conversions.
2. Click-Through Rate (CTR) is the total number of clicks divided by the total number of impressions. If your click-through rate is low, then it’s down to the reasons outlined for clicks. If keywords are accurate, then your click-through rate indicates the quality of your ads/ad copy. Low CTR probably means there is most likely room for improvement in your ads. Extensions, ad copy, display URLs, use of keyword insertion will all impact your CTR.
3. Quality Score
Quality Score is the most elusive KPI amongst PPC advertisers. It is a metric created by Google that tells them how relevant your ad content is, using metrics like CTR and other performance variables like landing page experience. Using the expected CTR, landing page experience, ad relevance, and ad format, Google is able to determine a campaign’s Quality Score.
Google is transparent about how Quality Score is measured by their team and why it’s necessary. Hal Varian, Google’s Chief Economist, explains how Quality Score works in the Google Ads auction in this video.
It comes down to this simple fact:
A good Quality Score (between 7 and 10) means you pay less money to advertise with Google Ads.
A bad Quality Score (6 or lower) means you pay more money.
Quality Score can affect other KPIs such as CPC and CPA.
4. Cost Per Click (CPC)
PPC advertisers know how much they can pay for an ad campaign because they typically have a predetermined budget. However, while they specify a budget and a bid when doing the setup of a PPC campaign, it doesn’t mean that this is what they will pay.
Advertisers outcompete competitors for ad positions with their bid, but pay the next highest bid price. Therefore the cost of putting up an ad and for the clicks it generates is largely determined by other competitors in the PPC auction. CPC measures exactly how much an advertiser has paid. You can measure CPC by dividing the total cost of a campaign by the number of times the ad was clicked in that campaign.
5. Cost Per Conversion/Acquisition (CPA)
Similar to CPC, you can set a cost per acquisition (CPA) when you set up your advertising campaigns. Google defines the average CPA as the price advertisers pay for every new customer they acquire, which is calculated by dividing the total cost of conversions by the number of conversions. Google determines the CPA based on your Quality Score. While the average CPA is pretty easy to digest, advertisers can also make use of Targeted CPA, a bidding technique applied during campaign set up. Targeted CPA helps advertisers set bids automatically to get as many conversions as possible, based on a set CPA determined by the advertisers’ budget.
However, to make use of targeted CPA you have to understand different bidding strategies, set up conversion tracking, and have at least 30 conversions in the last 30 days.
6. Conversion Rate (CVR)
Conversion rate is not only an indicator of campaign success, it is the reason PPC marketers are hired in the first place.
You can measure the conversion rate in Google Ads by dividing the number of conversions the campaign received by the total clicks. Since conversion rate is expressed as a percentage, if the campaign had 100 clicks and 10 conversions, 10/100 means that the conversion rate would be 10 percent.
While campaign managers always have an eye on conversions, they will often set up campaigns to optimize for clicks rather than conversions.
You can now aim for conversions based on CPA goals rather than focusing on clicks or impressions. However, to be eligible to optimise for conversions, your account must have had at least 15 conversions in the last 30 days.
7. Impression Share (CPM)
An impression occurs when a person sees your ad. It doesn’t matter whether they click on it. Looking at how many impressions a campaign generated isn’t an indicator of success because it doesn’t express how many people found your ad effective.
Impression share does add context to the reporting story by stating how much of the total impressions your ad campaigns are getting.
Determined by dividing the total impressions your campaign received by the total number of impressions your campaign was eligible for, Google says:
“Eligible impressions are estimated using many factors, including targeting settings, approval statuses, and quality. Impression share data is available for campaigns, ad groups, product groups (for Shopping campaigns), and keywords.”
Impression share gives marketers indirect competitive insight. Knowing that you have a 50 percent impression share for a keyword, tells you that your competitors own the other 50 percent.
If you increase your impression share, you are in turn decreasing the number of times your competitors’ ads are shown. If you’re looking to increase their impression share you’ll have to increase your bids and/or budgets.
8. Average Position
Google balances both paid and organic search results for almost every search query entered. Ads on Google or Bing can show at the very top of the search engine results page (SERP) in position 1, right underneath the next ad shown is in position 2, and so on.
The average position tells advertisers which position their ad is shown in most of the time. Google can’t simply give the highest bidder the first position all the time, so they determine average position based on ad rank.
Ad rank is calculated by multiplying Quality Score by an advertiser’s max cost per impression (CPM). However, since the average position is indeed an average, even knowing how to calculate it isn’t the full story since if your average position was 3, you may have been in positions 1, 4, and 6 earlier that day.
Since the first 1-3 ads are shown before even the organic search results everyone worked so hard on, many businesses advertising on Google would like to be visible right out of the gate in position 1. It makes sense to want to be in the first position, but the aim to do so is mostly one of vanity because being in the first position doesn’t necessarily mean results.
Some advertisers may have more conversions in position 4 than position 1 for whatever reason. You should use the average position to provide context around campaigns and campaign reporting, but it shouldn’t be used as a target indicator.
9. Budget Attainment
Paid search marketers are almost always given a monthly budget to run ad campaigns with. Budget attainment measures how closely that agency or individual came to achieving the budget they set out to.
Most PPC marketers don’t consider budget attainment when it comes to measuring their PPC performance, despite how much information it provides on how campaigns are being managed.
The reason why marketers tend to over or underspend the budget every month is that it’s difficult to bid consistently and maximize results with ongoing fluctuations in the PPC auction – a task that requires ongoing oversight and optimization (without the use of machine learning).
Regardless, I’m making the case that budget attainment is a KPI that PPC marketers need to think about.
10. Lifetime Value
LTV is a broad indicator of account health and of a PPC marketer’s abilities.
But calculating customer lifetime value for paid search is complex.
Companies that retain customers acquired via paid search longer will make significantly more revenue.
While LTV is a measure of a business’s customers’ lifetime with their product and/or services, it can be measured in different ways.
For example, in the case of a martech provider, LTV could be measured simply by looking at the number of days, months, or years a client stayed with the platform.
In the case of a large company like Starbucks, measuring LTV can actually be quite complex. There are numerous considerations (e.g., average customer lifespan, customer retention rate, profit margin per customer, and applied discounts).
While PPC marketers typically wouldn’t take on complex calculations of LTV like Starbucks, knowing how this KPI is measured in other departments could certainly come in handy. Just be aware that LTV means slightly different things to different marketers, but is fundamentally the same across all of them.
If you have an Google Ad account that you feel is not optimised to its full potential, contact WebResults today.