Welcome to the ninth contribution to our SEM Beginner series, a collection of posts from our friends at Microsoft intended for those new to search engine marketing. If you are looking for some guidance to help identify, monitor and adjust the key performance indicators (KPIs) that determine how successful a PPC campaign is, guest blogger Tina Kelleher, SMB Community Manager at Microsoft, has the answers. This post was originally written by Microsoft’s Jeremy Lamothe.
Whether you are a new or experience marketer, understanding return on investment (ROI) is a key metric when running campaigns, including paid search. Each business may have several forms of measuring ROI (depending upon your business/client's objectives) including engine metrics, post click metrics and offline purchases through online advertising. It is essential to utilize web analytics to tag your site to allow site tracking. Understanding data, including key metrics, enables you as a search marketer to accurately optimize your search campaigns and web sites for optimal performance.
Today, I will discuss the basic paid search metrics (before the click) and how they are used to evaluate performance.
Average Click Through Rate (CTR) - CTR is used to judge the effectiveness of your ad copy. Search engines also use CTR as a metric to determine ad relevance. If your business/client has a well-known brand, your branded keywords and ad copy typically will have an above average CTR. Promotional campaigns, that leverage offers such as free shipping, X% off, sale, will also typically perform well. This is due to creating a sense of urgency for the user in case the offer is for a limited time. Calculating CTR is simple (clicks/impressions * 100).
If your CTR is low, it is recommended to review your past performance, ad positions (mainline positions perform best) and keywords you are bidding on. A great tool to review adCenter keyword performance is Advertising Intelligence.
Impressions and Clicks - are used to measure volume. If your end goal is to drive traffic to your website, clicks are the metric to review. If you are simply looking for users to see your search ads, impressions are the metric that show how many times a user has seen your ad.
Average Position (aPOS) - Ad position is determined on many factors including ad relevance, keyword selection and bid strategy. Typically, most users will click on a mainline ad. If your ads are relevant and not on the mainline (ads featured above natural search results), your CTR will typically be less. Optimizing ad copy and bids will help to increase average position without heavily increasing CPC's.
Average Cost per Click (CPC) - Determining success of a search campaign is dependent upon price. The less you pay for a click that converts, the higher your ROI will be. The trick is to achieve high CTR and ad position while paying a low CPC. Average CPC's will differ based on competition for the keyword, relevance and bid strategy. Average CPC calculation: Spend divided by Clicks.
Understanding the basics is important to optimize your search campaigns. As mentioned, understanding post click metrics is equally important. Next time, I will discuss post click metrics including time on site, bounce rates, form submission and purchase formulas.
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