If you want to make the most of your pay-per-click campaigns, then traffic isn’t the best metric to focus on.
Below we’ll explain why, before discussing which metrics you should be looking at.
What Affects Traffic From Paid Advertising?
Every day you’ll see changes in the amount of paid traffic you receive from a PPC campaign.
The most obvious change concerns the different days of the week. You might get more traffic on a Sunday than you do on a Friday due to people’s different circumstances and reasons for visiting the website:
There’s also seasonal trends in traffic levels depending on what the website has to offer in terms of content, services or products:
Finally, different times of the day greatly affect the amount of paid traffic sessions:
What Can We Control Within Paid Advertising Campaigns?
For most advertisers there’s no way to control the amount of traffic levels over each day. Your ads will appear when there are people around to see them – the actual available audience.
So if we cannot control traffic, what can we control? Below is a list of the main options:
- Where the ads are shown – which website the user is looking at – usually a search engine or social network – and what they must do to trigger the ad
- When the ads are shown – what days and times of day the ad is shown
- Which demographics the ads are shown to – which locations or types of people can see the ad
- Which devices the ads appear on – if the ads are shown on desktop, tablet or mobile devices
- The maximum amount we are willing to pay if somebody clicks an ad – usually a maximum cost per click value
Measuring Paid Advertising Performance with Conversion Rates
What’s important isn’t the amount of traffic overall, it’s how much value you can get from paid advertising within your budget.
You can easily get 10,000 people to your website, but that means nothing unless a percentage of those 10,000 people actually perform a positive action. Huge levels of traffic are only beneficial if at least some of your visitors convert into customers.
The conversion rate percentage is far more important than the overall traffic for paid advertising because often we are paying for every click of an advert:
Conversion Rate Percentage = Number of Leads or Sales / Total Number of Paid Clicks
The less clicks we can pay for to make a conversion, the more cost effective the advertising will be overall. This is directly related to the conversion rate percentage.
By looking at the conversion rate on different campaigns, ad groups, or specific targeting areas, you can raise or lower the maximum cost per click amounts so that the areas with higher conversion rates get a higher Max. CPC bid and vice-versa:
If you haven’t got conversion tracking set up then it’s highly recommended to do so either for lead generation goal tracking, event tracking or eCommerce tracking. Without a full understanding of how well paid advertising is performing, all you can measure is the amount of traffic you send to a website. This isn’t a useful metric.
Optimising Paid Advertising with Cost-Per-Acquisition or Return-On-Investment Metrics
If you want to optimise your PPC account, a good strategy is to look beyond how well the traffic performs for different areas of an account, and instead consider the ratio of costs versus returns.
Conversions can be measured in two ways: Lead based cost-per-acquisition (CPA) levels or revenue based return-on-investment (ROI) levels for eCommerce:
Average Cost-per-Acquisition (CPA) Value = Total Costs / Total Goal Completions
Average Return-on-Investment (ROI) Value = Total Revenue / Total Costs
Rather than blindly changing bids up or down, you can instead work towards a specific CPA or ROI target, considering you have statistically significant historic results. To do this we can re-arrange these formulas to figure out an ideal cost-per-click bid:
Total Costs = Average Cost-per-Click * Total Number of Clicks
Total Goal Completions = Total Number of Clicks * Goal Conversion Rate
Total Revenue = Total Number of Clicks * eCommerce Conversion Rate * Average Revenue Per Transaction
Ideal Cost-per-Click Bid (CPA bids) = Target Cost-per-Acquisiton Value * Goal Conversion Rate
Ideal Cost-per-Click Bid (ROI bids) = eCommerce Conversion Rate * Average Revenue Per Transaction / Target Return-on-Investment (ROI) Value
With these types of bids we can clearly say “Each paid advertising lead will cost me X amount” or “For every X amount I spend on paid eCommerce advertising I will get X back in terms of revenue”.
When Traffic Levels Do Matter for PPC Campaigns
There’s one exception where traffic levels are important for PPC campaigns, and this is when there is only a limited budget available.
With an unlimited budget you can set an entire AdWords account towards a specific CPA or ROI target. Then, with some careful optimisation, you can get as as much traffic as possible at this level. This will give you a good idea of how much each lead will cost you on average, and how much revenue each lead can generate.
Unfortunately, with a limited budget a fine balance is needed between getting enough traffic and making the budget stretch as far as possible. So a good first step is to optimise bids to the target CPA or target ROI and then see if the entire budget has been used up or not.
If the budget is maxed out each day, then all bids could be lowered to achieve additional traffic at a better than expected CPA or ROI amount. All bids can continue to be lowered in sync each week until the daily budget doesn’t hit maximum. Then they need to be ever so slightly raised to hit the perfect level.
Are there seasonal changes to the traffic? If so, then it’s worth lowering bids if the trend is going upwards in the incoming week, and vice versa. In this way, the highest possible number of clicks can be drawn out from the paid advertising.
If you have a limited daily budget and rely on phone calls, then why not turn the ads off while there are no staff to answer calls? This will free up budget for the more lucrative times of day so within these times you can get as many leads or sales as possible within your targets.
For most PPC campaigns, traffic level differences shouldn’t be your main focus. You should look at the performance of your account and continue to optimise bids in order get as much traffic as possible within your target CPA or ROI level.
But if you have a limited daily budget then it might be worth considering when best to show your ads, or to lower bids in order to get slightly more clicks and conversions each day.
— Jonathan Ellins (@Jonathan_Ellins) March 31, 2016