PPC: How to Understand Your Data

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Published

June 1, 2022

PPC stands for Pay Per Click, which is a form of online advertising.

You are spending a budget on pay per click advertising, but your ads aren’t working as well as you would have hoped. Now you are trying to fix or improve their performance, but you aren’t quite sure what all of the key performance indicators (KPIs) mean.

Understanding PPC can seem scary, but it doesn't have to be!

In this article I will go over the most important metrics to watch and offer some specific solutions to improve them. The good news is that most marketers spending less than six figures per month can ignore most of those numbers because they only matter if you are trying to refine an additional 1% out of your budget, and even then many of them are redundant.

Don't get lost in the details. Make good decisions with a handful of numbers and your ads will be profitable.

Note: The following information will be generally applicable to all platforms, though we will use Google Ads for specific examples.

Where Do I Start With PPC Analytics?

Set up and launch your ads
Let the ads run for at least 14 days
Try to generate at least a few hundred clicks
Now, begin to look at the numbers

Set up and launch your ads.

If you aren’t even sure where to start or how to launch your ads, this article is not for you yet. Take a step back and go over Google’s PPC checklist for getting started.

Let the ads run for at least 14 days.

This is an important next step that many professionals miss. It will be tempting to fiddle with your ads every few days (or every few hours) and try to make some quick judgements on performance after only a day. After all, you don’t want to lose money. But, the ads are like stocks. You have to make some decisions then leave them alone for a minimum of 14 full days. This is because the ad software needs at least that long to put the ads through a learning phase, which is where it pushes a lot of views or clicks through your ads to watch and learn who is clicking and buying. It then shows the ads to more of those people, and more and more. As time goes on, the machine is literally applying machine learning to your ads to find you the best buyers. But, if you keep changing things, the software will never find its target and learn. So, keep your hands off.

Try to generate at least a few hundred clicks.

I am apart of a lot of forums and a regular question I get asked is: I have 14 clicks and they are so much more expensive than I was expecting! Should I do something? The answer is NO. You need to give the machine enough time to find your target, and to do this, the machine needs at least enough budget to generate a minimum of a few hundred clicks or ideally 50 conversions.

If you don’t have a budget to generate ~30 clicks a day for 14 days minimum, then you should wait and not waist your money. Even if you were to get a sale off of one click, it doesn’t mean anything. A profitable ad program is one that starts with enough of a budget to get 300-500 clicks a month, hopefully 50+ conversions, and lets the program run for at lest a few months. If you can do this, you are off to the races.

Now... begin to look at the numbers.

Now that you have launched your PPC program, have let the program run for at least 14 days, have generated a few hundred clicks and hopefully have at least a handful of conversions, you are ready to start to try to understand and improve your data.

Which PPC Numbers Are Important & What Do They Mean?

We will usually click the “columns” button towards the top of your chart and make sure that the following columns are visible. We also usually then line them all up and save them so that you can easily check in on them in a quick glance.

You will also want to take note and make sure that your date range is set properly in the top right corner.

Cost: Cost means how much you actually spent. If your costs are too high, you need to adjust your budget.

Budget: Budget is how much the campaign is set to spend each day. You want to multiply this by 30.4 to get your monthly cost.

Clicks: This is the total number of clicks your ad received. It is possible for one person to click more than once, but it is not likely since the website page will change and they will be taken to your website rather than back to the search page where they saw the add.

CTR: This is short for click through rate. This is one of your most important metrics to watch. If you have 100 people see your ad and ten of them click your ad, then your click through rate (CTR) would be 10%. You will want to do a Google Search for what an average click through rate is for your industry, but we try to shoot for anything above 4%, though this will vary by industry.

An example of a well written and profitable ad

The way you improve your click through rate is improving your ad language and if your ad platform offers ad extensions, like your phone number, address or product information, you should fill all of that out as well since this information will also improve your click through rate.

Testing ad language is arguably the most important thing for you to do in your ad account. You want to have ads that talk about your product or service, mention how you are different than your competition and make some form of offer with a call to action.

As your click through rate goes up, you will also see your cost per click come down. (See next metric)

Avg. CPC: This is the average cost you are paying per click. The click is the action that ad platforms usually charge you for. This is good news because we want targeted clicks, which are targeted customers to our website who will hopefully make a purchase.

There is no way to know what a good cost per click is for you without knowing your industry. Liquor might pay $ .50 while legal services will pay more than $50.

What you want to do is to watch your numbers and start to test different ad language and offers to see how to improve your CTR, which will in turn decrease your cost per click (CPC).

Conversions: A conversion is the general term we use to describe your final target action. This might be a phone call, a purchase, a subscriber, a lead, etc. It is not necessarily easy to have conversion tracking set up on your website but you want to try if you can. You can also use a service like Unbounce which will help you build sales-focused landing pages that come with conversion tracking installed with a little help from their customer support. We focus on conversions as our North Star Metric, though many agencies don’t want to bother, but tell me this: If you can’t measure your sales, how will you know if ads are working and what to improve?

Cost / Conv.: This is your cost per conversion, which means how much you are paying for each conversion. Remember, you are not actually paying for conversions, you are paying for clicks whether those clicks convert or not. However, we can get to this number by dividing your total cost by your conversion number.

For example: If you are spent $1,000 in June on advertising and generated 100 conversions, your cost per conversion (Cost / Conv.) would be $10.

You can then use this number to decide if your ads are profitable.

For example: If you spend $100 per sale and you make $350 per sale, then they are profitable.

Conv. Rate: This is your conversion rate. A decent conversion rate is usually around 5% while a good one is 10% or higher. (Many of our clients are above that!)

You get to this number by taking your total number of clicks and dividing it by your total number of conversions.

For example: If you had 100 clicks and 10 of them turned into a lead (a possible target conversion) then your conversion rate would be 10%.

If you feel that your conversion rate is low, the way to fix this is improve your landing page. CTR is always associated with ad quality and Conv. Rate is always associated with landing page quality.

For example: If your Conv. Rate is 1%, then try to test different language, images and offers on your landing page. Try different prices. Consider shortening the page. There is a lot you can do. Ideally, you will show relevant ads to people who are interested in buying what you have to offer when they need it the most. If you can do this at a competitive price, you should have sales.

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