Complete Guide to Analytics behind Google Adwords

If you do multi-channel marketing for your company than you simply can’t afford to ignore Google Adwords.

In order to get optimum results from your Adwords campaigns you need good practical knowledge of how Adwords really works, how different Adwords metrics are calculated and how different campaigns, ad groups, keywords and landing pages are analysed  and optimised for traffic and conversions.

You need to understand the key concepts behind Adwords system as outlined below.

Index

1. CPC, CPM and CPA Bidding options
2. Max. CPC, Actual CPC & Avg. CPC
3. Ad position
4. Quality Score
5. Google Ad Rank Algorithm
6. Secret to getting highest possible return on your Adwords Investment

If you are an experienced Adwords user, you can skip the upcoming sections and jump straight to the section titled: ‘Secret to getting highest possible return on your Adwords Investment’.

But there is no harm in reading few more lines. Who knows, you may learn something new.

CPC, CPM and CPA Bidding options

Whenever a user performs a search on Google (or its search partners), Google run an auction for clicks known as the Adwords Auction.

To participate in any auction you need to bid. Similarly to participate in Adwords Auction you need to bid on keywords.

Your bid is known as the CPC (Cost Per Click), CPM (Cost Per Thousand Impressions) or CPA (Cost per acquisition)

In case of CPC bidding you pay for each click on your ad. CPC bidding is suitable if you are mostly interested in getting traffic to your website.

In case of CPM bidding you pay every thousand times your ad is displayed. CPM bidding is suitable if your main focus is on branding, getting site visibility

In case of CPA bidding you still pay for each click on your ad but you don’t need to manage your bids manually to get conversions. The bids are automatically managed by Google Adwords Conversion Optimizer. This type of bidding is suitable if you are mainly interested in getting conversions.

Note: In order to use CPA bidding, you must have conversion tracking enabled and your campaign must have received at least 15 conversions in the last 30 days.

Max. CPC, Actual CPC & Avg. CPC

The maximum amount you are willing to pay for each click on an ad is known Max CPC.

The actual amount you pay for each click on an ad is known as Actual CPC.

The actual CPC is usually less than the Max. CPC because you need to pay only that much to Google which is good enough to rank your Adwords ad higher than the advertiser immediately below you.

Actual CPC = Ad Rank of the competitor below / Quality Score of the advertiser

To get a sense of your actual CPC look at the Avg. CPC column in your Adwords reports.

Avg. CPC is the average amount you pay for each click on your ad.

Ad position

It is the position of your ad on Google Search Result Page. Your ad can appear on the top of the search result page, on the side of the page or at the bottom of the page.

Ad position of 1 means, your ad is the first ad on a search result page. Similarly, ad position of 8 means, your ad is the 8th ad on a search result page

Higher is your ad position, higher is the probability that searchers will see your ad and click on it. So you should aim for high ad position.

The ad position is calculated by Google Adwords system via ‘ad rank’.

Quality Score

Quality Score is a factor used by Google Adwords system to determine how relevant your keyword (on which you are bidding) is to the user’s search query, your ad copy and the corresponding landing page.

Most of the time when we talk about the quality score, we are talking about the quality score of a keyword. However we can also have quality score of a display ad or mobile ad.

So there are three types of quality scores in total:

1. Quality Score of a keyword – it is used when the ads appear on Google Search Network.
2. Quality Score of display ad – it used when the ads appear on Google Display Network
3. Quality Score of mobile ad – it is used when the ads appear on Mobile devices.

Note: Quality score of a keyword is re-calculated each time it triggers an ad. If the quality score of your keyword is very poor, your ad may not be eligible for ad auction.

Quality score is measured as a number from 1 to 10, where 1 is the lowest quality score and 10 is the highest.

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