Google Analytics 101 (Part 1)

In the past, we've often mentioned Google Analytics as a great tool that helps you learn more about how visitors reach your website and what they do once they get there. But now's a good time to take a step back and talk about how to get started with Google Analytics from the very first step. This will be the first post in a series of "Analytics 101" articles that will walk you through sign up, installation, and using reports.

The WAY Beginning: What is Google Analytics?

Google Analytics is a free, hosted web analytics service that provides useful data for website and marketing optimization. Site owners and marketers can make better informed decisions about their sites and campaigns by using metrics from Google Analytics reports. Google Analytics works by collecting information about your site traffic and advertising campaigns, combining this with e-commerce and conversion information to provide insight into the performance of your marketing efforts and site content.

Anyone can sign up using a Google account by visiting http://www.google.com/analytics/. You don't even need to have an AdWords account beforehand.

How do I sign up and install Google Analytics?

After signing up for a Google Analytics account comes the most important part of installation -- the tracking code snippet. Every Analytics user is given a unique piece of JavaScript code to insert in all site pages immediately before the </body> tag. The code snippet may look like something like this example below:

<script type="text/javascript">
var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www.");
document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js ' type='text/javascript'%3E%3C/script%3E"));
</script>
<script type="text/javascript">
var pageTracker = _gat._getTracker("UA-#####-#");
pageTracker._initData();
pageTracker._trackPageview();
</script>

(For illustrative purposes only.)

Your "UA-#####-#" number will be unique to you. It's important to insert the code on all of your site's pages; otherwise Analytics won't be giving you the whole picture of what's going on.

If you're not ready to insert the code now, you can always retrieve this code later. Depending on the size of your site and the number of pages you need tagged, you may want to discuss installation with your webmaster, if you have one.

How do I view my reports?

After you've finished signup, you'll be taken to the Analytics Settings page. The Status box on the right side of this page will let you know whether the code has been properly inserted. It's important to note, however, that it takes anywhere from a few hours to a full day after code installation for your reports to start gathering and showing information.

Once the Status box in the Analytics Settings page says that you're receiving data, you can click the View Reports link to receive reports about your website traffic. Like this:

(Click on the image for a full-sized version)

That's it for this first installment of Google Analytics 101. Try playing around with a few reports -- the Analytics interface is specifically designed to be intuitive and "discoverable," so to speak. If you can't wait to learn more, the Analytics Help Center is a great resource for information. Look for the next installment soon, when we'll explain more about administering your account and using your reports.

Posted by Christian, Inside AdWords crew

Google Content Network Tips: Part 3 – Optimizing your keywords for the content network

In this third post of our content network series, we would like to share some content optimization tips for your keywords and ad text. In a future post, we will write more about other tips.

Contextual targeting on the content network happens at the ad group level, not at the keyword level. That means all the keywords in an ad group, along with the ad text, are evaluated when Google is deciding whether to show your ad on a specific content page. In other words, it's important for all the keywords in an ad group to belong to a common theme.

We recommend keeping separate campaigns for advertising on content and search. Please keep in mind that these tips below are specific to contexual targeting and advertising on the content network and may be different from your search network strategies.

• Create a manageable, targeted keyword list.
  Advertisers have found most success on the content network with ad groups of around 15 to 30 keywords.
  
  
• Use tightly themed ad groups.
  For contextual targeting, we look for pages that match most of the keywords in your ad group. For example, if your ad group has a number of keywords about lilies and tulips, we try to find pages about these two topics together. If you have an ad group with diverse keywords on different themes, it may decrease the number of pages on which your ad is likely to appear. When picking keywords, imagine what keywords would likely appear on the pages that you are trying to target, and create tightly themed ad groups around those keywords.
  
  
• Use duplicate keywords for appropriate ad groups.
  To continue the previous example, let's say you were creating a campaign for flowers and had ad groups for lilies, roses and tulips. Unlike search, we would recommend that the general keyword flowers be included in all three ad groups to help establish a floral theme.
  
  
• Use ad group level URLs instead of keyword level URLs.
  Because no one particular keyword is used to trigger your ads on the content network, keyword level URLs are not relevant. We recommend using ad group level URLs instead.
  
  
• Measure content performance at the ad group level.
  We've found that measuring your performance on the content network at the ad group level offers a better gauge of what strategies work best.
  
  
• Build a comprehensive negative keyword list.
  The more negative keywords you include on a particular topic, the less likely your ad is to appear on pages that match that topic. If a page is predominately about your negative keywords, while partially about your positive keywords, our system is not likely to show you on that page. If a page is principally about your positive keywords, but mentions a few negative keywords, then your ad may still appear on this page. We recommend that you include multiple negative keywords on topics you would like to avoid. If you sold camera film and wanted to reduce the likelihood of your ad showing on movie-related pages, you should include multiple negative keywords like -movie, -movies, as well as synonyms like -cinema, -cinemas.
  

We hope you found these tips useful. As always, we recommend that you track performance of your content network ads using Placement Performance reports and set up conversion tracking or use Google Analytics. And please let us know what content network topics you would like to read about in this blog.

Posted by Feng, Inside AdWords crew

Google Content Network Tips: Part 2 - Targeting options, environments, and ad formats

In our first post in this series, we highlighted some of the most notable improvements we've made to the Google content network over this past year. Today, we wanted to focus on the range of options that the content network provides to make campaign management simple.

To ensure that our advertisers have increased flexibility and control across all aspects of their campaign, we offer multiple targeting options, a variety of ad formats, and hundreds of thousands of sites on which your ads can show.

Targeting Options
Ever wonder how we match ads to relevant pages? By scanning the millions of pages on the web, Google's contextual targeting technology analyzes the content of different web pages to determine the theme of a page. Then, by looking at all the keywords and ad text in your ad groups, our system matches the most relevant ads to the theme of that page. For example, if you have an ad for a digital camera, our system may place your ad next to a news article that reviews the latest digital photographic technology.

To ensure that you are targeting your ads to the right users, you can create tightly-themed ad groups. You can also try using negative keywords but remember that they work by exact match on the content network. The more theme-specific negative keywords you include, the less likely your ad is to appear on sites that match that theme. Following the example above, to decrease the chances of your digital camera ad showing up on pages related to video equipment, be sure to enter keywords like video, video camera, and video cameras as negative keywords. But keep in mind that doing so will increase your chances of excluding pages that review both video and digital cameras.

For further control, you can use the site exclusion tool to prevent your ads from appearing on specific pages, subpages, or types of pages that you don't think are a good match for your message.

If you want even greater control, you can use placement targeting to hand-pick specific sites or sections of sites you want your ads to appear on. If your goal is conversion-oriented metrics likes sales or leads, you can select CPC pricing and pay when users click on your ads. To increase brand awareness and maximize impressions among your target users, you may choose CPM pricing.

Environments
The Google content network has partnered with a variety of different websites, from news sites like Reuters and CNN, to social networking sites like MySpace and Friendster, to smaller niche sites like Ask the Builder and WhateverLife. This wide selection helps you match your message with the right audience. To find out more about how one advertiser found success through advertising on niche sites, you can read this case study.

Ad Formats
Text ads are a great way to reach your audience with a brief, pointed message. When you want to communicate a simple, visual message, try image ads, which are accepted on over 95% of content network sites. And if you're looking to engage your audience with sight, sound, and motion, or if your product requires a demonstration, Google click-to-play video ads offer an effective way to connect your message to the right users. You can read this case study on how one advertiser engaged with customers and increased revenue by using click-to-play video ads to demonstrate his robotic guitar tuners.

You can also check out demos of video ads and learn more about the Ad Creation Marketplace, where you can find a professional to help create your video ad.

Altogether, Google's targeting options give you full control over the parts of the content network where your ads appear, and AdWords reporting gives you insight into how your ads perform in different environments. By matching the right ad formats with the right environments, you can reach the audience that matters to you most when they're engaged with content that's relevant to your business.

As always, you can read more about the content network here. And if you have specific questions that you would like answered in upcoming blog posts, we invite you to email us. In the meantime, stay tuned more information on optimizing your content network campaign in the coming weeks.

Posted by Feng, Inside AdWords crew

Google Content Network Tips: Part 1 - Recent improvements

Many of our readers have emailed us asking for more information about the Google content network. As you ramp up your advertising efforts for the holiday season, we wanted to provide you with an overview of the content network, including recent improvements, tips, and examples of how others have used the content network to grow their business. Today's post is the first of a three-part series on the content network that we'll be sharing with you over the next few weeks.

The Google content network is a wide network of AdSense partners, ranging from household names such as the New York Times, to sites that cater to niche audiences, such as blogs, forums, and social networks. Together, these sites reach more worldwide Internet users than any other online property or network.

As an advertiser, you can use the content network to achieve goals across the buying cycle, from raising awareness to driving conversions. However, the impact of your content network campaigns can extend beyond the content network -- these content network campaigns can raise awareness for your business and create demand among your potential customers that can be captured later by your search campaigns. Here is what we heard recently from an AdWords advertiser:

There is no doubt that if we were to take our clients' campaigns off of the content network today, we would see a decrease in their conversions on search tomorrow."

- Edward Llach, founder, SearchRev SEM agency.

You can read more about Search Rev’s experience with the content network in this case study.

Over the past year, we've made numerous changes to the ways you can manage, monitor, and optimize campaigns on the Google content network. Here are the most notable features we've added recently, based on your feedback.

Transparent reporting
The Placement Performance report provides site-by-site performance metrics for your contextually-targeted campaigns -- tracking clicks, impressions, cost, and conversion data at the URL level. When coupled with Google’s conversion tracking, the Placement Performance report becomes a powerful tool that can show you the placements where you’re meeting your objectives, and those where you aren't. You can read tips on how to use these reports effectively to boost campaign performance here.

Targeting and pricing improvements
We're constantly making changes to our contextual targeting system to ensure that we place your ads next to the content most relevant to your message, and as a result, measured more than a 25% increase in well-targeted ads over the last year. We've also made improvements to our smart pricing technology, which discounts the price of clicks on specific sites based on their likelihood to result in strong advertiser ROI. All together, these changes have led to more relevant ads for users and better results for advertisers.

More bidding choices
As we mentioned last week, we also released cost-per-click bidding for placement targeting. You can now hand-pick the parts of the content network where you’d like your ads to appear and choose the bidding option (CPM or CPC) that fits your needs.

Let us know if there are specific topics on the content network that you would like to hear about. In the meantime, keep your eye out for posts in this series in the coming weeks.

Posted by Feng, Inside AdWords crew

AdWords Optimization Tips: More on Negative Keywords

If you follow our series on Optimization Tips, you know that we frequently encourage using negative keywords to improve your ROI. Specifically, adding negative keywords to your account can help better target your ads, increase clickthrough rates, and lower your minimum cost-per-click. You can read more on how to brainstorm negative keywords as well as how you can use them to improve your account performance in an earlier post. Today, we wanted to bring attention to an important feature of negative keywords that many advertisers frequently overlook when composing their negative keyword list: keyword match types.

You may know about the different keyword match types (broad, phrase, and exact) for the keywords you want to show your ads on. But did you know that negative keywords also run on these different keyword match types? Many advertisers use broad match for their negative keywords, and accidentally filter out too many search queries, including ones that they would have wanted their ad to show on. Let's check out an example below.

Say you own a men's clothing store and you would like to increase traffic to your site by running a special winter holiday campaign for your men's accessories line. In the Search Query Report you recently ran, you noticed that the ads in your holiday campaign for men's accessories are also showing up when users are searching for women's silk scarves. You have the broad match keywords silk ties, wool scarves, and men's gifts in your keyword list, and now you want to add the negative keyword of silk scarves. But which negative keyword match type should you choose? Below is a graph illustrating what would happen if you chose negative broad (-silk scarves), negative phrase (-"silk scarves"), and negative exact (-[silk scarves]) match types.

(Click on image for full-size version.)

As illustrated above, different match types for negative keywords can seriously impact when your ads show. In the first column for negative broad match, you would be losing out on relevant search queries such as silk ties wool scarves, simply because the broad match type filters out queries that contain words both silk and scarves. In the last column for negative exact match, search queries containing items that you do not sell like silk scarves gifts and women's silk scarves still cause your ad to show because you are only filtering out the exact match silk scarves.

Using negative keywords effectively requires carefully thinking about how negative keywords will impact your campaign. In addition, you should always monitor your traffic, clickthrough rate, cost per conversion, and search queries to make sure that you are seeing the desired result.

We hope that you've found this tip on negative keywords to be helpful. As always, please let us know which optimization tips you would like to read about in this series.

Posted by Feng, Inside AdWords crew

AdWords Optimization Tips: Brainstorming new keyword ideas

Welcome back to our series on AdWords Optimization Tips. We recently received an email from an Inside AdWords reader, asking how to keep up with the latest trends in her ever-evolving industry of cosmetic dentistry. She wanted to make sure that her keywords were capturing all of the new, different ways potential customers are searching for her business. Previously, we covered how to first develop your core keywords and then create a list of modifier keywords. Today, we will discuss some other ways you can continually brainstorm new keyword ideas.

Google Trends
Have you tried Google Trends yet? As an advertiser, you can use Google Trends to look at the search volume for different keyword ideas. Perhaps a new medical procedure was introduced to your field -- you can use Google Trends to figure out how users are searching for it. On the same page, you can also read the latest articles related to your industry so you can keep up to date on all the important, well, trends. Simply enter any search query or compare two or more queries and Google Trends will return a graph of search volume and related articles. Google Trends statistics are updated daily and you can look at specific periods dating back to 2004. You can read more about how Google Trends works here.

Search Query Reports
The Search Query Report shows performance data for the search queries that triggered your ads that received clicks. Since this report includes search queries and their corresponding performance data, you can use this report to fine-tune existing keyword lists. Specifically, you can use this report to identify both new keywords and negative keywords that you'd like to add to your account to better control when you would like your ad to appear. You might also want to enter these terms in the Keyword Tool and see if users are searching for other similar terms. You can find a step-by-step guide on how to run a Search Query Performance report here.

Forums and Wikipedia
Discussion forums related to your industry and online information sources like Wikipedia are other ways to learn how the general public perceives your product or service. Browsing different discussion forums is a great way to keep track of all the buzz related to your industry. If there are misconceptions about your industry, you can use this information to your advantage. Say you work in healthcare, and you realize that many are concerned about a new treatment option -- you can then try to address these concerns in your campaigns.

Google Search
Last but not least, use Google search to your advantage. Perform Google searches to see what the most relevant results are for both natural and sponsored search results. You can check out the sponsored results to see what other people are advertising and use natural search results to find sites you can browse for new ideas. Looking at these results can also help you brainstorm new negative keyword ideas so that you can better target your audience.

We hope you've found these tips to be helpful. And as always, please let us know which optimization tips you would like to read about.

Posted by Feng, Inside AdWords crew

ROI: why it matters and how to track it -- part 3 of 3

In part two of this series, Fred Vallaeys, Product Evangelist for AdWords, discussed how to set up the conversion tracking feature available in every Standard Edition AdWords account -- and how to use conversion tracking information to track your ROI. Today, in the final installment of the series, Fred is back with tips on how to start using that ROI data to your advantage.

Once you have a week's worth or more of conversion tracking data, you should have enough information in your reports to start adjusting your bids to improve your ROI. Here are two strategies to improve bids using your new data.

When ROI is less than 100%

Using the type of report I described last week, sort the data on the “Value / Cost” column (which is your ROI expressed as a percentage) and look for keywords that have a negative ROI (i.e. less than 100%), but enough clicks that you'd reasonably expect some conversions to have happened. These are keywords for which your advertising costs exceed your profits, so your bids for these keywords may be set too high. (Please see the Notes section near the bottom of the post for further discussion on why I say 'may' here.)

In most cases, you should lower the bids for keywords with ROI less than 100% to the amount in the “Value / Click” column from the report. The “Value / Click” amount reflects how much profit you gain per click, so if you set your maximum CPC to this amount and the performance remains consistent, you will at least break even on these keywords.

When ROI is more than 100%

For keywords that have a positive ROI (i.e. greater than 100%), consider increasing your maximum bid -- but not higher than the amount in the “Value / Click” column. By increasing your bid, your ROI will decrease but you may end up making a greater total profit because you’re getting more clicks when your ad moves to a higher average position.

Consider the hypothetical situation shown in the table below. To begin with, your max CPC of $1.00 puts you in position 6.0 on average and your ROI is 200%. Then, suppose there are two possible scenarios when you raise your max CPC by $0.20 to $1.20 to improve your average position to 5.0; in scenario A, the higher position gets you 10 extra clicks and in scenario B, you get 15 additional clicks.

Because you’re paying more for every click, your ROI decreases and you need more clicks to make the same profit as before. As you can see, in scenario A, your net profit has declined from $50 to $48 so you should keep the old bid. In scenario B, your net profit has increased from $50 to $52 so you should keep the increased bid and experiment with raising it even further.

	Avg. CPC	Value / Cost (ROI)	Value / Click	Avg. Position	Clicks	Cost	Total Value	Net Profit
Current	$1.00	200%	$2.00	6.0	50	$50	$100	$50
Scenario A	$1.20	166%	$2.00	5.0	60	$72	$120	$48
Scenario B	$1.20	166%	$2.00	5.0	65	$78	$130	$52

About this table:
Cost = Avg. CPC multiplied by Total Clicks
Total Value = “Value / Click” multiplied by Total Clicks
Net Profit = Total Value minus Total Cost
Note that only the “Net Profit” column is something you have to calculate. All other columns are available in AdWords reports.

If your competitors aren’t looking at ROI data when setting bids, they won’t know which keywords are costing too much, nor which keywords could have delivered greater profits in a higher position. Now that you’ve got the data to see the complete picture and make smarter bidding decisions, you’ll have an edge over competitors who are bidding without being fully informed.

In addition, enabling conversion tracking is also the first step toward using two products which let you bid directly using Cost Per Action (CPA) bidding: the Conversion Optimizer beta and Pay-Per-Action (PPA) beta. These products may make it easier to reach your ROI targets, as well as help you to spend both your time and your advertising dollars more effectively.

Notes: for when you have ROI-negative keywords.

I don't say that you should definitely decrease bids for ROI-negative keywords, because it is also important to factor in the lifetime value of a customer. Also, a keyword may have been used in combination with other keywords before leading to a conversion.

The lifetime value of a customer is probably greater than the one-time conversion event. For example, if you’re selling flowers, it’s quite likely the customer may buy flowers annually for every birthday or anniversary. If you factor this in, the customer may be worth far more than the profit you make on their first purchase.

There is also the possibility that some of your keywords are used while customers are comparison shopping, and once they've made up their mind, they find your site again using another keyword. For example, if someone searches for “flowers”, they may just be researching their options. Once they know what type of flowers they want, they may do another more specific query such as “buy red roses”. If this happens, the conversion will only be assigned to the last keyword they used and you may want to keep the more general keyword to ensure potential buyers are aware of your site early in the purchase cycle.

This concludes Fred's ROI series, which we hope will help you improve your advertising results. Should you have any unanswered questions, or if there are particular areas you'd like to see covered in more detail, please let us know. We'd be pleased to invite Fred back for more posts in the near future.

Posted by Blake, Inside AdWords crew

AdWords Optimization Tips: Managing and Optimizing Bids

Welcome back to our series on AdWords Optimization Tips. A number of our readers have written in to ask about managing and optimizing their bids for best performance, so that is the topic we'll address today. Please note that some of today's tips are directed towards readers who also use Google Analytics, while others are general tips for all AdWords users.

When you are optimizing your bids, you should test how adjusting your bids and changes in your ad ranking affect your return-on-investment (ROI). Below, we cover a few tools and tips that can help you measure these results so you can make the best decisions for your campaigns.

AdWords Keyword Positions report from Google Analytics

If your AdWords account is linked to a Google Analytics account, the easiest and most effective way to optimize your bids is to use Google Analytics. (You can find out how to link the two accounts here.) You can use the Google Analytics Keyword Positions report in the Traffic Sources section to see where your AdWords ads appear on Google search results pages as well as in which position your ad performs best at in terms of total number of visits, conversion rates, etc. To access this report, sign in to your Analytics account, then go to Traffic Sources > AdWords > Keyword Positions. Positions T1 through T3 mean your ad was promoted to the top of the search results page. Positions 1 through 8 indicate placement or location in the right-hand column of ads on the first page, with 1 being the top position, and so on.

You might learn from this report that your ad actually converts better when it is at a lower position than a higher position and you may want to consider adjusting your bid to achieve the best performing position. However, if you do decide to increase or decrease your bids, you should still check back in a week or two to make sure that your keyword is performing similarly since changing its average position.

If you wish to automate the process of testing and adjusting bids, you can use the AdWords Keyword Positions report in conjunction with the Position Preference feature within AdWords to actually optimize your ad's position. With the Position Preference feature, you can select a specific position as a target. If you have determined that you achieve highest ROI with positions 3 through 4, for example, you can set your position preference to these positions. The system will then try to show your ad in positions 3 through 4 by increasing or lowering its bid. You should keep in mind though your changes may improve the ROI of your campaign because your ads are converting well at a lower cost, it could decrease the total amount of traffic to your site if you've specified that you'd like your ad to be in a lower position on the page. Be sure to check out tips in our Help Center on choosing settings and pricing for Position Preference.

If you use Analytics, you can check out more ROI tips from the Google Analytics Conversion University.

Traffic Estimator Tool

If you don't use Google Analytics, you can still adjust and optimize your bids using the Traffic Estimator Tool. For each keyword you select, you will be able to see the minimum bid, maximum CPC, the search volume bar, Estimated Ad Positions, and other information. The most relevant column for the purposes of testing ad ranking against ROI is the Estimated Ad Positions information. The Estimated Ad Positions column shows your ad's estimated position on each of your keywords with your current maximum CPC. If you're unhappy with the estimated ad position, enter a new maximum CPC in the Maximum CPC field and click 'Get New Estimates.' You can follow a step-by-step guide on how to use Traffic Estimator here.

Testing again and again

Lastly, you can always measure results without any special tools by simply looking at your conversions and your position, and then manually adjusting your bids until you achieve your optimal ROI. We want to emphasize that bidding higher CPCs for the keywords that you want isn't always what's best for your ROI. Instead, we recommend that you find out where the keyword is converting the best for the optimal cost. In this experimentation process, you may lower your bid too much and see conversions go down significantly or you may raise it too much and see no changes in conversions. Through testing and measuring, you should be able find the sweet spot where you are most effectively reaching your advertising goals.

For a more comprehensive range of topics related to managing bids, we recommend that you visit the Managing Cost-Per-Click and 'How do I strategically maximize my ROI?' topics in the Help Center. And you may also want to read more about the Conversion Optimizer beta.

As always, we want to know about the optimization tips you're interested in. Please email us to let us know and you may see your question answered in a future post.

Posted by Feng, Inside AdWords crew

ROI: why it matters and how to track it -- part 2 of 3

Last week we introduced Fred Vallaeys, Product Evangelist for AdWords, and turned him loose on a topic that is likely to be of particular interest to just about every advertiser: Return on Investment (ROI). Today, Fred is back with part two of this three part series:

In part one of the series, I explained that it's important to measure ROI because this metric gives you the complete picture about the profitability of the keywords in your AdWords account. This week, I'll cover how to start collecting ROI data in your own AdWords account. Since ROI depends on how often you convert clicks into customers and how much profit you make on every transaction, you'll need to enable conversion tracking with conversion values in your account. Let's take a look at how to do this.

Conversion tracking is a free tool available in every AdWords Standard Edition account, and can be found by clicking on the 'Tools' link under the 'Account Management' tab. Once there, to start tracking ROI, click 'Start Tracking Conversions' on the Conversion Tracking page. In the two screens that follow, select the type of conversion you wish to track and the colors for the text block on your conversion page. The third page in the setup process is where you set the monetary value of the conversion by clicking the link 'Advanced option: conversion value' and entering your profit for the conversion.

You may remember from last week that we defined ROI as your profit divided by the cost of AdWords. AdWords will automatically track the amount spent on ads but you, as the business owner, must define the profit every time a conversion takes place. If every transaction has the same profit (e.g. when you sell a subscription for a fixed price), you can always set the same numeric value that represents your profit for the conversion. When you're selling items with different profits, you can set a different value for every transaction. Calculate the value to set by subtracting the cost of the item from the price for which you sold it. Note that your numeric value should not include a currency symbol and needs to use the decimal separator appropriate for your interface language. More details on entering your conversion values may be found here.

Your webmaster, or the person in charge of your website, can also use dynamically generated values to set the right profit value every time a conversion happens. We've documented the details of this process in the conversion tracking setup guide (.pdf).

Once conversion tracking is active, you'll see a few new columns in your account labeled 'Conv. Rate,' 'Cost/Conv.' (where Conv. is the abbreviation for Conversions) and 'Conversions'. Notice that ROI is not one of the new columns. To see your ROI based on your conversion tracking information you'll need to run a Keyword Performance report from the 'Reports' tab. Be sure to include the 'Value/cost' column (which is your ROI expressed as a percent) from the 'Add/Remove columns' menu. You'll probably want to save this report as a template and schedule it to run periodically. Note that you also have the opportunity to give your report/template a descriptive name, such as 'ROI Report by Keyword.'

For your reference, here is an example of such a report, with the Value/cost column highlighted:

(Click screenshot for a full-size image)

With your report in hand, you can see the ROI for every campaign, ad group and keyword. Any time the Value/cost is greater than 100%, you're making money, and the higher the value, the more profit you're making. This is powerful data that can help you optimize your account -- and next week I'll give some specific examples of how to use this data to give yourself an edge over your competitors.

Posted by Blake, Inside AdWords crew

ROI: why it matters and how to track it -- part 1 of 3

Over the past couple of years you've met a number of AdWords experts on our blog -- and, in that spirit, we'd like to introduce Fred Vallaeys, the Product Evangelist for AdWords. You may have met Fred in person, or heard him speak at recent industry events. If you're someone who attends these types of events keep your eye out for him: he loves to hear feedback from our advertisers firsthand.

Today, we begin a new series on a subject that is key to advertiser success: Return on Investment (ROI). In this series, Fred will cover why ROI matters, how to track it using tools available from AdWords or other sources, and how to optimize AdWords advertising for ROI.

Now that the stage is set, let's get started. Here's Fred:

I've heard it said at conferences that online advertising is the most cost-effective way for businesses to attract new customers -- but how exactly is such a claim measured? Well, one of the beauties of AdWords is that results are easily measured. Not only do advertisers get reports about clicks and impressions within their account, they can also track conversions of visitors to their site. One possible downside of having all that data, however, is that advertisers may become distracted by tracking lots of metrics at the expense of losing focus on the ones that matter the most.

On the other hand, many advertisers don't spend much time at all monitoring their campaigns. They might check only one metric, such as impressions, clicks, CTR, or their overall spend -- and so long as they don't see anything obviously amiss, they don't make any changes to their ads, maximum CPCs, etc.

Regardless of how much or how little an advertiser measures results, it's possible to miss out on potential profit if close attention isn't paid to the one metric that almost certainly matters the most: ROI. And while impressions, clicks, CTR and costs are all important components that contribute to the ROI, these metrics only show part of the picture.

The ROI metric can be defined in two ways: the revenue generated for every dollar spent on ads, or the amount of profit generated from every dollar spent on ads. I'm going to focus on profit here, since that's what most advertisers inquire about.

The formula for ROI is as follows (keeping in mind that the "revenue minus cost" in the top line equals profit):





For any campaign where the advertiser's goal is to get a conversion, whether it be a sign-up, a sale, or something else, the ROI should be greater than 100% -- which simply means that for every dollar spent on AdWords, they've made a profit. The greater the ROI number, the greater their profit.

Here's an example -- let's say an advertiser has two keywords ('flower delivery' and 'fresh flowers') and spends $50 on each. For the same $50, the advertiser receives 50 clicks for 'flower delivery' and 100 clicks for 'fresh flowers':

Keyword	Impressions	Clicks	Cost	Average CPC	Conversions	Profit	ROI
flower delivery	1,000	50	$50	$1.00	5	?	?
fresh flowers	1,000	100	$50	$0.50	10	?	?

Based on the data in the table, the keyword 'fresh flowers' seems like the better of the two because it has a lower average CPC and it leads to more conversions (sales). But without tracking the ROI on both keywords, an advertiser would have to guess whether it makes sense to change the bids for these keywords. If they were only looking at the average CPC or the conversions per keyword, they may be making assumptions that could end up costing them money.

Now, here's that table again -- but with figures added for ROI:

Keyword	Impressions	Clicks	Cost	Average CPC	Conversions	Profit	ROI
flower delivery	1,000	50	$50	$1.00	5	$100	200%
fresh flowers	1,000	100	$50	$0.50	10	$50	100%

Notice that the keyword 'flower delivery' has a much better ROI, even though it generated fewer conversions and fewer clicks for the same advertising cost. This could be the case for a variety of reasons -- for example, users who clicked on the 'flower delivery' ad may tend to buy products with a higher profit margin. The average profit per sale on the keyword 'flower delivery' is much higher ($20) than 'fresh flowers' ($5), which justifies the higher CPC for the keyword 'flower delivery', even in light of fact that it receives fewer conversions.

When an advertiser tracks and monitors their ROI, they are seeing the complete picture. This allows them to make smarter decisions about their online ads and, ultimately, make their business more profitable.

Now that you've seen why ROI matters and how it can help you to make more informed decisions, Fred will tell you how to track and monitor your ROI in part two of the series. Then, in part three, he'll take a close look at some tools and strategies for optimizing ROI. We hope you'll stay with us for the entire series -- and as always, please feel free to comment along the way.

Update: Republished to correct formatting of tables

Posted by Blake, Inside AdWords crew