Look. Online advertising isn’t easy. Not only is it time consuming—it’s downright confusing. Why else would there be an entire industry made up of professionals who have devoted their days and years to studying the nuances of online advertising? If it were easy, every business owner would be doing it themselves, and everyone would be successful at it. Unfortunately, that’s just not the reality.
PPC is a prime example of how confusing online advertising can be to the uninitiated. With so many metrics and data points to look at, the majority of DIY users often wind up misunderstanding what they’re looking at, or they put too much emphasis on a single metric.
Here are the four most commonly misunderstood PPC metrics and what you should really know about them.
1. Click-Through Rate (CTR)
Click-through rate (CTR) measures the ratio between people who see your ad and people who actually click on it. If you only focus on CTR, which is presented as a percentage, then you’re not seeing the total number of people who are actually looking at your ad and engaging with it. A percentage is not representative of the big picture. It doesn’t give you actual numbers, and it certainly doesn’t tell you whether or not you’re getting a good return on investment.
For example, let’s say you have a 90% CTR. That sounds incredible on the surface, but what if it turns out that that 90% is really just 9 clicks out of 10 impressions? Already, you realize that those numbers aren’t very good. But it gets worse, especially if your goal is to be closing jobs and generating more revenue than what you’re paying for PPC. In this scenario, if we consider that converting clicks into customers at a rate of 10% is the standard, then you’re probably only gaining one new customer per month at best. As it turns out, that 90% CTR isn’t good at all. But if you hadn’t looked at other data points, then you would’ve had no idea and you would have continued to throw money at a flailing campaign.
Conversely, you could have a 1% CTR, which seems pretty low at first glance. However, it could turn out that you’re actually getting 100 clicks out of 10,000 impressions. And when you apply the 10% rate of converting clicks into jobs, then you should be getting around 10 jobs per month. That 1% CTR isn’t so bad, after all.
2. Cost per Click (CPC)
Cost per click (CPC) is exactly what it sounds like—it’s the amount you pay for each click. You can set your own CPC budget to not go over a certain dollar amount (either per click or as a daily average each month) if you’re concerned about keeping costs low. However, it’s important to note that focusing exclusively on your CPC will lead you to ignore other important factors, like industry standards. If your company is in a high-demand industry, then all of your competitors will be paying a high CPC. You’ll need to adjust your budget accordingly if you want to remain competitive. Saying that you only want to spend $10 per click, no matter what, won’t do you any good.
Focusing solely on CPC might also stop you from thinking outside the box when it comes to ad spending. First, think about why you want to keep costs so low. Is it because of a small budget? There are better ways to handle a small budget than by arbitrarily setting CPC limits. For instance, you could focus your ads on super-specific, targeted keywords that won’t cost too much but will get you better leads. You could also spend a higher amount for a shorter period of time (like $30 per click for the first 9 days of the month) instead of paying for clicks the entire month. If that’s still too pricey, then you might want to opt for the more economical advertising options on Facebook instead of using Google AdWords.
3. Monthly Spend
We have a lot of clients who wish to set a constant number (usually around $300) for AdWords spending each month. For budget-planning purposes, this makes sense to us. But we have a lot of clients who also say that they want their $300 budget to be spent evenly throughout the whole month. This doesn’t make as much sense to us. Frankly, it’s a terrible idea.
To a person who doesn’t deal with AdWords and countless metrics on a daily basis, it probably seems like a reasonable request: You want to make sure your money lasts the whole month. But that’s not really how AdWords works. If your budget runs out by the twentieth day of the month, that means lots and lots of people were clicking on your ads. In other words, your ads were successful.
Plus, with all of the data we collect on a daily basis, we know that there are natural spikes in impressions throughout the day and week. We want to be capturing as many clicks as possible from these spikes—but if you’ve put a cap on the amount we can spend per day, then your ads won’t reach their full potential. It’s important to stick to a monthly spending budget, but you should be flexible when it comes to how those dollars are used.
Moreover, if your budget does run out early, you’ll get the chance to decide whether you want to expand your budget before the end of the month. This would allow you to reach even more people than you anticipated. Remember, the more you spend, the more people you reach. And isn’t that the whole point?
4. Ad Position
It’s a very common myth that having the #1 ad position is the ultimate advertising goal. In truth, you really don’t need to have the #1 position—and you might spend way too much money trying to do so. Being high in the ad rankings is not always best. In fact, there have actually been studies reporting that position #10 gets more clicks than positions #4-8. It’s a surprising finding, but it makes sense when you think about your own browsing habits. Don’t you usually scan right over the middle of a page, focusing mainly on the top and bottom? As it turns out, that’s what most Internet users do, too. In many cases (especially when your monthly budget is the most limiting factor), there’s no sense in draining your budget trying to get your ad in the higher positions.
See the Forest for the Trees
The bottom line is that you have to make sure you’re looking at the full picture in addition to individual PPC metrics. While AdWords metrics are extremely helpful when taken in the right context, remember that there is inherent value in raw data, as well. The more numbers you look at, the more accurate picture you’ll have of your campaign’s performance.
What’s the underlying lesson? As Google continued to refine its search algorithms, and search engine optimization continued to adapt, we were reminded that it’s just as important for your campaign to have a solid foundation as it is for your campaign to evolve with Google’s changes.
As we’ve said before, you can compare online advertising to the slow ascent up a mountain, with the top-ranked position on Google acting as the peak. But, just like climbing a mountain, you have to start at the foothills—which, in this analogy, are local directories and Google Maps. Then, as you climb higher, you’ll reach optimized website content, social media, and PPC. The higher you climb, the more competitors you will outrank.
