Clicks, conversions, and Christmas

Online advertisers have noticed that CPCs tend to increase during the holiday season and have asked us why. We turned to Hal Varian, Google’s Chief Economist, for an explanation:

Many advertisers track their average cost-per-click (CPC), but what really matters for the bottom line is the average cost-per-acquisition (CPA): how much you have to spend on advertising to make a sale. The third factor to watch is the conversion rate, which is defined as conversions (sales) per click.

Note that these numbers are neatly tied together by the convenient formula:

CPA = CPC/Conversion rate = (cost/click)/(conversions/click).

Clicks, cost, and conversions all go up during the holidays. As it happens, conversions increase more than clicks, so conversion rates tend to rise. This makes the clicks more valuable, so advertisers raise their bids to reach more consumers. As a result CPCs get pushed up.

(Click image for full-size version)

The plot above shows the median CPC, the median conversion rate, and the median CPA during the 2006 holiday season for those Google AdWords advertisers who use conversion tracking. The series have been normalized so they all start at the same point on November 1.

Last year, Thanksgiving fell on November 23. Note how the conversion rate (green) and the CPC (blue) both dropped on that day which means CPA (red) went up. Perhaps watching football and eating turkey trumped online shopping on Thanksgiving?

Right after Turkey Day, people started on their Christmas shopping so conversion rates started to rise. During this period, advertisers raised their bids in order to get more prominent positions in the ad auctions so they could attract those shoppers. That increased the median CPC (blue). But the conversion rate rose more than the CPC, which pushed CPA (red) down. Even though the clicks cost more, the conversions -- what really matter -- cost less.

The conversion rate peaked on December 11, somewhat before the peak of overall retail sales, since it takes time to process and ship the online orders. By December 23, things were pretty much back to normal. Once Christmas Day arrived, conversion rates dropped to their lowest point of the year -- people were just too busy opening presents to think about buying more things… at least for the next few days.

The bottom line is that is that the cost of clicks does tend to rise during the holidays. But since those clicks are more likely to turn into sales, the CPA goes down, making those seemingly expensive clicks quite a bargain. If you are interested in tracking how your own conversion rates and CPAs change during the holiday season, you can set up AdWords Conversion Tracking on your ads and see how these metrics work for you.

Thanks to Hal for his explanation on how the holiday season can affect the ROI for an AdWords campaign. And remember, you can always visit the AdWords Help Center year-round to read up on tips on how to improve your ad performance.

Posted by Christina, Inside AdWords crew

New edition of the AdWords Retail Newsletter

To help you prepare for the fall season, the Retail team has put together the latest edition of the AdWords Retail Newsletter.

In this issue, you’ll find tips on how to optimize your AdWords campaigns for fall and Halloween. These tips, along with information about how to expand your reach using the Google content network, Audio Ads, and Print Ads, will help you start gearing up for the busy winter holiday season ahead.

To find previous issues of the AdWords Retail Newsletter, you can visit the Retail News section of our newly redesigned Retail Knowledge Center.

Posted by Feng, Inside AdWords crew

Just three more shopping months

As we launch into fall, many retailers are already gearing up for the most important sales season of the year -- the winter holidays. It may seem like we have a long way to go before December, but according to the 2007 Holiday eSpending Report, shoppers are hitting their favorite online stores well ahead of time -- some even report that they've already finished their holiday shopping!

With this in mind, it's never too early to start thinking of ways to attract more customers. We suggest creating a separate, fine-tuned winter holiday campaign with specific, narrowly focused ad groups and relevant keywords to attract potential customers. The Keyword Tool is a great resource to turn to for ideas and tips on creating a number of keyword variations.

You may also want to write ad text that appeals directly to the audience you're targeting. After creating multiple ads per ad group, you can look at the % Served column in your 'Ad Variations' table to see what kind of ad text attracts more clicks. And, remember that AdWords will automatically show the ad with the higher clickthrough rate (CTR) more often, so you can experiment with different ad texts to see what works best.

As always, you can visit the AdWords Help Center year-round to find ways to improve your ad performance. Retailers can also check out our optimization tips.

Posted by Christina, Inside AdWords crew

Happy Labor Day!

Those of us in the US and Canada are looking forward to a long Labor Day weekend. Whether Labor Day means intense retail therapy in the form of back-to-school sales or simply the end of wearing summer whites, we here at Inside AdWords will be taking a day off to rest in the true spirit of the holiday. We hope you'll find some time to do the same as well.



We'll be back next week!

Posted by Vivian, Inside AdWords crew

Auto Industry Knowledge Center - Rev up your skills

In the spirit of back to school, we’ve launched the Auto Industry Knowledge Center to provide automotive advertisers with the most up-do-date information and learning tools. The Auto Industry Knowledge Center has industry-specific resources to help you get the most out of AdWords. Whether you sell parts online, own a dealership, or host an auto website, you'll find customized tips for success, case studies featuring other auto advertisers, and Google product solutions to help your business.

Another great resource is our new quarterly AdWords Auto Industry Newsletter, which features industry trends and best practices for promoting summer sales. We want to hear and learn from you as well, so please send us feedback by dropping us a line at auto-knowledge@google.com.

Posted by Christina, Inside AdWords crew

Are you ready to go back to school?

As students across the country get ready to head back to the classroom, we'd like to invite you to do a little learning, too. Check out the Google AdWords Learning Center for free access to a variety of text-based and multimedia "how-to" lessons to help you with your campaigns.

Whether you're optimizing a campaign to appeal to back-to-school shoppers or looking for easy ways to track your campaign's performance this fall, the Learning Center offers all the information you need to improve your ads and brush up on your AdWords knowledge. And to really get yourself in the back-to-school spirit, take the quiz at the end of each lesson!

Posted by Heather, Inside AdWords crew

Brides, Grads, and Dads

June is a month of weddings, graduations, and, of course, Father's Day (June 17th!). Jennie Cohen from the AdWords team is here to share how you can make the most out of this summer gift-giving:

Here come the brides
According to a 2006 Questus research study, 97% of brides now use the Internet to plan their weddings, and 93% find new ideas and brands online. Google's content network includes wedding planning sites like eWedding.com, which engaged couples visit frequently as their big day approaches. These sites offer a fantastic opportunity for caterers, photographers, DJs, formal wear retailers, and florists to market their products and services. But they're not the only ones who stand to benefit. Many couples are already anticipating post-nuptial purchases such as honeymoon travel, a new home, and household items like furniture and cooking supplies – especially if they find that their wedding gifts include more cash than kitchen appliances.

• Make sure your keywords are targeting wedding guests rather than brides- and grooms-to-be. Use keywords like 'wedding day gift ideas' and 'unique wedding gifts' to reach undecided shoppers. Include these terms in your ad text and experiment with calls to action like 'Find the Perfect Wedding Gift' and 'Save on Gifts for Newlyweds.'
  
  
• Try creating a separate landing page on your website that features all your wedding-appropriate products. That way, wedding attendees will have an easier time finding the perfect gifts and adding them to their shopping carts.
  
  
• Don't forget that wedding party members are often looking for finery of their own!

School's out
Young adults are notoriously hard to shop for. According to the National Retail Federation's Graduation Survey, 31% of proud parents and other shoppers plan to give gift cards for graduation. The survey also found that the average graduation gift shopper plans to give gifts to two graduates this year, spending about $50 on each. In light of these two findings, consider the following tips:

• If you offer gift cards on your website, try mentioning them in your ad text.
  
  
• If you offer any special discounts like 'buy one, get one half off' or 'free shipping on orders over $50,' you can use your ad text to let potential customers know. These will attract shoppers looking for gifts for more than one graduate.
  

World's Greatest Dad
Designated as a holiday a full 51 years after Mother's Day, Father's Day has always lagged behind its more prominent counterpart. In recent years, however, it seems to be catching up. According to a survey done by the National Retail Federation in 2007, U.S. consumers will spend nearly $10 billion on dads this year, with the average person spending $98.34 (up from $88.80 in 2006) on dear old dad. Roughly 19% of respondents plan to buy Father's Day gifts online., and with a little work, you can use AdWords to connect with these gift-givers.

• Set up a separate AdWords campaign for all Father's Day-related keywords and ads to gain better control over your daily budget and maximum cost-per-click. You can then delete this campaign after June 17 or pause it and use it again next year.
  
  
• Within your Father's Day campaign, create distinct ad groups for each product category, and direct visitors who click on your ads to the most relevant pages on your website.
  
  
• The fewer clicks it takes to find the perfect gift and complete the transaction, the more likely it is that consumers will complete a purchase. You may want to consider using Google Checkout, a convenient checkout process that can save your customers time, while saving you money.

We hope you'll use Google AdWords to reach out to gift-givers this month, helping them share the joy with the brides, dads, and grads in their lives.

Posted by Trevor, Inside AdWords crew

Make the most of Mother's Day

Do you know how much the average American will spend on mom this May 13th? Well, we must love our moms a lot, because according to a recent survey, gift givers will spend an average of about $140!

With only 11 days until Mother's Day, many consumers are shopping online to assure the perfect gift for mom arrives in time. As an advertiser, you can make sure you're targeting those last-minute shoppers by creating a Mother's Day campaign, with specific keywords, that showcases all the wonderful things you have for moms.

You can always get more retail-specific tips by visiting our Retail Knowledge Center. There you'll find optimization tips and suggestions that will help you create successful ad campaigns for Mother's Day, and all year long!

Posted by Heather, Inside AdWords crew

Latest AdWords Retail newsletter

Now that the winter holidays and Valentine's Day are behind us, many retailers are gearing up for their next important sales season. Jennie Cohen from the AdWords Retail team is here to let you know about a useful resource:

We'd like to invite advertisers to check out the most recent issue of the AdWords Retail Newsletter. In this issue, you'll find a number of tips to get your AdWords campaigns ready for Mother's Day and Father's Day and a helpful recap of the winter holidays. According to the National Retail Federation, Mother's Day ties with Valentine's Day as the second-largest spending holiday in the U.S. We hope our newsletter will help you make the most of it!

To read previous issues of the AdWords Retail Newsletter, you can visit the News & Groups page of the Retail Knowledge Center.

Posted by Feng, Inside AdWords crew

Daylight Saving Time - a friendly reminder

The Inside AdWords crew would like to remind you that Daylight Saving Time begins a few weeks early this year. The time change will take effect this Sunday, on March 11 at 2 a.m., so don’t forget to set your clocks one hour ahead.

If you have set up your AdWords account to one of the time zones that will be affected by the change, the time in your account will adjust automatically. All of your ad scheduling settings that help time your campaigns or adjust your bids will run on the new time.

We're hoping that "springing ahead" early also means that spring is arriving early this year!

Posted by Feng, Inside AdWords crew