To optimize your Google Ads, you need to monitor and respond to click-through rates, costs per acquisition, and returns on ad spend. This can be complex, so many companies find it worthwhile to hire a Google Ads management agency. Regardless if you hire someone or do it yourself, tracking Google Ads metrics is absolutely necessary to advertising success.
Why Metrics Matter
In a way, the wealth of information and specificity available to businesses today is a double-edged sword. Google Ads allows for incredible precision in the kind of ad, the target audience, and even the specific time it's delivered.
However, this means you need to be very precise about what and when and who you aim for. Monitoring the right KPIs (key performance indicators) can help you:
Identify underperforming ads
Adjust content to respond to underperformance
Maximize profitability
The most expensive ad in the world is worthless if it doesn’t work. What’s of real value is being able to tell what is breaking through and what isn’t.
KPIs to Watch
Click-Through Rate (CTR)
The first measure of an ad working is does a user engage with it. CTR is a simple number, measuring the percentage of visitors who click on an ad when they see it.
A high CTR obviously means it resonates with the audience in some way. A low CTR could mean a number of things. Expertise is needed to know if the messaging is mismatched with the user, if the design is weak, if more incentive is needed, or something else.
CTR is expressed as a percentage calculated by dividing the number of clicks your ad receives by the number of times it was shown. If your ad was shown one hundred times and it was clicked on ten times, its CTR would be 10%.
Conversion Rate
The second measure of an ad working is conversion. It might feel like a success to have a high CTR, but once the user is linked to your site, what do they do? Maybe you want them to make a purchase, fill out a form, register an account, or download content. If they leave without doing any of those things, something went wrong.
This doesn’t necessarily mean the ad was a failure. It could mean your website design needs to be simplified or you need a clearer call-to-action.
Conversion rate is reached by dividing the number of conversions by total number of ad interactions during the same time period. If your ad had 1,000 interactions and fifty conversions, the conversion rate would be 5%.
Cost Per Acquisition (CPA)
All the above could go right–a user could see your ad, click on it, and do what you hoped they would–and the ad might still be a failure. This is where money comes in.
CPA measures how much it costs to get one customer. If your average customer generates $100 in revenue, but your CPA is $100, you’re spending money just to break even.
This is why metrics are so important. You might see your sales jump after an ad buy, but until you dial in on the specific audience that’s driving those sales and stop wasting money on excess advertising, you’re not maximizing your profit.
Return on Ad Spend (ROAS)
Related to CPA, ROAS calculates how much your business earns for every dollar you spend on advertising. For example, a ROAS of 500% or 5:1 means your company makes $5 for every $1 spent.
This is different from CPA, because CPA doesn’t directly consider the revenue generated. You might have an idea of how much each customer might bank you on average, but CPA doesn’t take that into account.
The target ROAS for your company depends on your business model and margins, especially as they relate to the size of orders and how important each individual customer is to your revenue.
Turning Metrics into Success
Understanding Google Ads metrics can be challenging, especially because there’s no single correct number every business should strive for. Every measure of success looks different for each company.
This is where the experts at BERK Labs can help. With our experience working with Google Ads and creating winning campaigns based on KPIs, we can make sure your money is well spent and help your business achieve its goals.
If you need an example of our expertise, check out our advice on how to get more leads from your website!