In a move that’s been a long time coming, Google announced today that advertisers will now be able to optimise ads based on conversion rates instead of just click through rates. This is a welcome feature on Google’s part and it’s great to see them recognize the fact that many advertisers could care less about clicks if they’re not resulting in sales.
Many advertisers will undoubtedly look to roll this feature out immediately, but it is important to do some analysis to avoid unintentionally shooting yourself in the foot. Surprising as it sounds, it is possible that an ad with a great conversion rate may actually drive less conversions than an ad with a lower conversion rate.
Let me explain. A little while back I posted the results of a test we did on the effects of keyword insertion on ad performance. For that particular client, we found that when running two ads that differed only in whether or not they had keyword insertion in the headline, the ads with keyword insertion had higher click through rates and the ones without it had higher conversion rates:
It’s pretty clear who the winners are there, right? If clicks are the goal, keyword insertion is the way to go, but for efficiency, the regular ads do the trick. Now, we’ll take those ratios and apply them to an identical number of impressions:
In this scenario, because the ads with keyword insertion had a much higher CTR, they got a lot more clicks, and that extra traffic resulted in about 11% more orders, despite the lower conversion rate. With that in mind, we had a decision to make. Did we want to keep the keyword insertion ads and go for volume, knowing that we’d have a higher cost per order, or did we want to go with the non keyword insertion ads and focus on efficiency, even if it would result in fewer sales? This particular client was more interested in efficiency, so we went with the non insertion ads, but should they decide they want to invest more money in acquiring new customers, we’ll know where to turn.
The point here is that there will always be tradeoffs between revenue growth and efficiency in any paid search campaign. If you find that your ad variations have similar click through rates, then optimising based on conversions is an easy choice. However, if you find that your ad variations show significant differences in CTR, walking through an exercise like the one above will help you visualize the impact that optimising for conversion rate may have on your campaigns and ensure that the decision you make is beneficial to your goals.
Written by Kevin Hill, Paid Search Account Associate