Auction-based keyword advertising, or paid search marketing, is a type of advertising that operates in a similar manner to a traditional auction, with users bidding for a top position, but also contains a technical component that makes the process more than a factor of investment. Users make a maximum bid for a specific keyword or keyword phrase and the winner is the one who has the best balance between their willingness to pay for the top position and supplying content that is deemed relevant by a quality score algorithm. This balance between investment and relevancy makes this type of advertising more dynamic and creates additional data points that need to be analyzed to maintain performance. Paid search is not as simple as setting up an account and letting the campaigns run their course. You must monitor performance closely and analyze multiple variables to maintain account efficiency.
The best place to start this process is with the Cost per Click or CPC metric. Cost per click is the main payment method for search engine marketing platforms like Google AdWords and Microsoft Bing. To calculate this metric you simply take the total spend for your cohort (Campaign, Ad Group, Keyword, Ad) and divide it by the total clicks of that same cohort. This is an important metric to consider when analyzing paid search performance because it is the best indication of paid search competition and a good starting point for figuring out which keywords you need to closely monitor for optimal performance. If you see rising CPC’s and stagnant or declining conversion rates you have a high likelihood of hurting your return on investment (ROI) and will increase your acquisition cost.
However, CPC should not be considered by itself when analyzing performance. While in most cases this factor identifies weaknesses in your SEM strategy, it is also possible that the keywords with high CPC’s and acquisition costs are also the keywords that drive higher ticket transactions or better quality leads. As a result, Average Order Value or Lead Quality should be analyzed in parallel with CPC to determine if paying the higher price for a click is worth the investment. In other words, will the ROI be better by paying the higher price for a combination of low transactions/high avg. order value than a keyword with a low CPC that drives more transactions/low avg. order value.
The results of this analysis will provide you with a good understanding of where you should shift budget and adjust bids, but more detailed reports and data points should be analyzed to see where granular optimizations can be made to shave off spend and increase performance. One of the first areas to examine for this analysis is at the keyword level with the Search Query report. This report provides you with the user searches that triggered your ads. Remember that the broader your keyword match type, the larger the search variability and volume that can trigger your ads. In theory, you want to have the most brand exposure you can have, but this can be a double edged sword as this exposure can potentially waste your money by driving unqualified and unrelated traffic to your website. This will commonly happen when the keyword you are bidding for has multiple meanings or can be used in phrases that veer away from your business’ core. In order to prevent this from happening, this list should be closely monitored and negative keywords should be added to prevent your ads from appearing for unrelated searches.
In addition to analyzing the search queries that trigger your ads, you should also take a look at the Ad Performance for those keywords. It is possible that the click through rate (CTR) for your ad or your quality score, based on your ad text and landing page content, is having a major impact on your CPC’s and keyword performance. Ad text needs to be continually tested to keep the ads copy fresh for users searching for your keywords, as well as improve the likelihood that they click on your ad over competing ads.
Finally, you should figure out how you stack up against your competition. The best way to do this is by looking at the Auction Insights report, which provides you with competing domain metrics like impression share, average position and outrank share. This data is great to analyze to determine if it is worth the additional investment to compete with businesses based on competitor recognition and how commanding their impression share is for the selected group of keywords. For example, if you are up against a company like Amazon, where they have an uncapped budget and will spend everything it takes to stay in the top position for a specific term, then it will typically not be worth the effort to try and outbid them. Take this into consideration when you combine it with the other insights to determine what battles are worth your time and effort.
In the end, there is no single report or metric that will clearly reveal the reason for specific paid search performance. All of these reports flow together to reveal the reasons behind the trends that you are seeing. If there is anything that you should take away from this article it is that last sentence. This is why I scattered the keywords among the article as opposed to bulleting them. You need to train your mind to mix and match data points to determine what action or actions should be made and always remember that paid search is a dynamic process. Your performance will change overnight, so always monitor and make adjustments to your search engine marketing tactics.