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Jamie Hallitt

Altering Your AdWords Account Structure To Increase Your Long Term Profitability

8th Jan 2014 Paid Search | 20 Comments


Pay Per Click ComputerFor many business owners, making a steady profit is the main focus when it comes to paid search campaigns, but it can always be improved upon. Be it with more profitable investments or cutting the costs of current ones to increase the margin.

There are lots of different ways to structure an AdWords account, but if your main goal is to make a return on investment, it is important to ensure that you are investing the right amount of your budget into the most profitable keywords, whilst also improving the performance of the less profitable ones. Getting this structure right is a key factor when trying to improve your ROI.

Achieving Short Term Profit

I’m a strong believer that paid search can work very well for time-constrained marketing campaigns and promotions, as it enables advertisers to present their target audience with exactly what they’re looking for very quickly. It can often take less than a day to get a small campaign up and running, with an advert at the top of the search engine results pages (SERPs) within 24 hours of creation.

Using eCommerce campaigns as an example, we can look at how short term profit through Google PPC is achieved using a very simple formula, just with the data columns available in AdWords:

Value per conversion – Cost per conversion = Profit per conversion.

If you’re looking at the above stats at campaign level, you will see how much profit each campaign has generated over your selected time period. However, because this is all based on averages across potentially thousands of keywords and ads, it becomes difficult to further optimise a campaign without drilling into every single keyword to assess its true profitability, and near enough impossible to identify the profitability of advertising for each product that’s being sold via keywords.

Using Effective KPIs

It’s important to recognise short term success, particularly as it usually means some sort of progress is being made. Increasing CTRs, lowering bounce rates and increasing Conversion Rates are all signs of an improving PPC campaign, but they won’t tell you if the campaign is actually becoming more lucrative in the long run.

If I’m looking at fairly generic KPIs such as CTRs and campaign conversion rates, I often find my ego being fed by attractive statistics, but they don’t always generate ideas on how to improve the results. It is vital that the correct KPIs are being focussed on if your campaigns’ profitability is to be improved. This means looking at finer details, breaking down campaigns and working at keyword level instead to identify the strong & weak areas of the campaigns.

Ensuring Long Term Profit

I’ve always believed that a really effective and successful paid search campaign can never truly be “finished” or “achieved”. Markets & economies change all the time and consumer behaviour often changes in correlation. Therefore it is vital to monitor profits from very specific parts of a campaign as thoroughly as possible.

Here are three ways to ensure that long-term profit is the main focus for your campaign

1. Make decisions based on long-term profit, not short term performance increases

High CTRs, low Bounce Rates and high Conversion Rates (etc) are signs of a well-thought-out PPC campaign, but they don’t tell you if you’re making a profit long-term. Make sure these are in a healthy state, but make decisions using these statistics only in combination with data on all-time profitability.

2. Use Lost Impression Share data to make forecasts to increase overall revenue

Impression Share will tell you how many of the available impressions for your keywords your ads actually received and whether you lost out on any impressions due to your budget or rank. If you have a low impression share on highly profitable keywords, it makes sense to increase the budget or work on raising your Ad Rank to pick up 100% of the traffic.

3. Segment data by profitability and prioritise budget spend accordingly

Daily budgets are set at campaign level, but even if you use conversion optimiser you can’t ensure that your budget is being allocated more towards the most profitable keywords within each campaign. Here’s how to make sure you spend more money on more lucrative keywords, and less on keywords that convert, but at a higher cost.

Ensure you have the following columns in your keyword-level view:

  • Cost Per Click
  • Value Per Conversion
  • Cost Per Conversion
  • Search Impression Share
  • Conversion Rate
  • Total Conversion Value
  • Cost
  • Average Position

Using a date range based on how recently keywords have been altered on a large scale, export the data for every keyword into an excel spreadsheet. Create a new column called “Total Profit” and use the data from the Total Conversion Value & Cost cells to get the stats for each keyword. Set up rules in Excel so that the cells containing the above stats are colour-coded depending on their performance.

Once you have all the key metrics highlighted appropriately, filter the data by Total Profit and separate the positive and negative values into different tabs in Excel. Now you have a list of profitable keywords and a list of unprofitable keywords.

Profitable Keywords

With your list of profitable keywords, filter by impression share and use the Cost column to work out how much you would have needed as a daily budget in order to get 100% impression share. The formula to use is (Cost x 100) / Impression Share.

For example:

Keyword

Cost

Impression Share

Formula

Cost with 100% IS

Keyword 1

£50

50%

(£50 x 100) / 50

£100

Keyword 2

£20

80%

(£20 x 100) / 80

£25

Keyword 3

£10

20%

(£10 x 100) / 20

£50

TOTAL

-

-

-

£175

NB. The Total column when exported from AdWords will be based on a mean average, so the Cost with 100% IS result will be slightly different than the actual total of all the costs. Therefore it’s safer to use the formula for each keyword individually and then get the total from the column rather than using the row of average metrics exported from AdWords.

You will now have the data you need to build a new campaign containing profitable keywords, with a more effective budget. Provided that there is enough data to take as a good representation of how your keywords generally perform, your revenue will increase and the campaign will have a much better profit margin, as the unprofitable keywords are not included.

Unprofitable Converting Keywords

With your list of unprofitable keywords, filter by Average Position if there are any keywords with a position of 2 or better, separate these into another tab. Use the conversion rate for these keywords to identify the Average Cost Per Click (Avg. CPC) that would make the keywords profitable.

For example:

Keyword

Value
per Conversion

Conversion Rate

Formula

Target CPC

Keyword 1

£100

2%

(£100/100) / 2

£0.50

Keyword 2

£200

1%

(£200/100) / 1

£2.00

Keyword 3

£500

2%

(£500/100) / 2

£2.50

Once you’ve identified the break-even cost per click for each keyword, you can use this as the max. CPC when you create the new campaign in AdWords.

Non-Converting Keywords With Low Traffic

Between the two lists, take out any keywords with zero conversions and if any of them have less than 100 clicks, put these into another separate keyword list and create a new campaign for them called “Low Traffic Keywords”. Monitor the keywords weekly and pause any that accrue more than 100 clicks without producing a conversion. If any of the keywords do produce a conversion, work out if they’ve made a profit on that conversion and assign them to one of the other campaigns.

The Result

You will now have three campaigns to build, each with their own goals depending on how they have performed in the past:

  1. Profitable Keywords
  2. Unprofitable Converting Keywords
  3. Non-Converting Keywords With Low traffic

You will also now have a list of keywords with no conversions, but high traffic. It is best to either pause or delete these keywords, as they are unlikely to bring in revenue at the profit margin you are looking for.

The amount of traffic your keywords generate will determine how often you should carry out this keyword analysis, but it should ideally be looked at quarterly, at least. Ensuring that your keywords are segmented by profitability and potential profitability will make it much easier to reduce the amount you spend on under-performing keywords, whilst giving you an accurate idea of how much more money you can make from your profitable keywords.

Image Source

Pay per click concept with laptop and cursor via BigStock

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Jamie Hallitt About the author

Jamie Hallitt

Jamie specialises in building, managing & optimising SEO and PPC campaigns and has three years of experience in Digital Marketing. He has a particular interest in the professional services sector and multi-channelled eCommerce campaigns, focusing on ROI and conversion optimisation.

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