Understanding PPC
CPC, PPC, CDC… ok, that last one is about diseases. The sheer quantity of acronyms in the paid search ads universe is daunting. But, never fear! Consider this your crash course or cheat sheet. First, get your head around the terms and then (more importantly) let’s talk about real-world results.
Whether you farm out monthly paid search ad campaigns or have an internal team, there are some key metrics in play that you need to understand. Pinning down real numbers is the only way to know if the uptick in phone rings is followed by your “cha-ching.” At the end of the day, your bottom line is the most important number.
Ad Terms and Strategies
The way an ad is set up directly impacts what you can measure. This is the main reason the terms are important. Here are the main ones:
PPC: pay-per-click – This is an advertising format where you only pay for an ad if someone clicks on it. Examples include ads that appear at the top of a search engine results page or a banner ad on Facebook – or a website.
CPC: cost-per-click – this is the amount of money each click costs your business.
CPI: cost-per-install – this is an important KPI for mobile marketers and it measures the number of times digital collateral or an app is downloaded.
Note: CPI can also stand for cost-per-impression which is a different metric you’ll see in Google Ads and other platforms.
CPL: cost-per-lead (sometimes called CPA or cost-per-acquisition) – this is the amount of money you pay for each lead generated from an ad.
CPV: cost-per-view – if you’re running video ads, this is a bidding option.
PLA: product-listing-ads – if you sell something, Google Shopping can suggest your product to buyers through an ad like this.
ROAS: return on ad spend is the paid ad term for ROI.
Dynamic Ad Targeting – this kind of ad structure automatically matches searches to your website.
Keyword types – these are a little techie but important when you are configuring or interpreting data from Google or Bing Ads.
Ad Structures and Platforms
There is a whole system for social media ads, some of which can function similarly to pay-per-click ads. More commonly, “PPC ads” refer to search advertising on Google or Bing. These search platforms can provide a ripe and ready group of future customers, if you play the cards right.
Cutting through the clutter, the primary tool your business probably uses is a paid search ad. To get how these work, you need to understand keywords and ad bids or ad auctions.
Paid Search Keywords
First, understand how ads are set up. The heart of PPC ads on search engines is in language: namely, keywords. Keywords are very specifically used to deliver your ad to people who type or tap in certain search queries.
Now, if everyone thought and spoke the same way, searching, “I want to buy a red, four-door sports car,” this would be a cakewalk. The problem is, no one thinks or speaks the same way, so there are infinite possibilities. Keyword strategies are designed to create a system in which your sales funnel catches more likely prospects.
There are five basic categories of keywords for PPC ads:
- Broad match, which is the default type. This keyword type includes synonyms, related searches and misspellings. The great thing is, this type catches everyone. The bad thing is, this type catches everyone. You may be serving a costly ad to an irrelevant audience.
- Negative keywords exclude your ad for certain search terms. This may be useful if, for instance, you specifically do not sell something and do not want to waste ad spend on tire kickers for that kind of product.
- Broad match modified is similar to broad match but lets you choose which related words to show the ad for.
- Phrase match shows ads for phrases and variations of phrases.
- Exact match is laser focused for super specific terms.
Even asking a question about this will help you understand how your ads are being set up and how dialed in your marketing team is to your real, paying customer.
Search Ad Auction
Whoever is setting up your search ads will probably set up a maximum bid, or a max CPC. Bids may be set on the level of keywords or entire ad groups. So, you (or your marketing exec) set up how much they want to spend. Almighty Google decides how much it wants to show.
Google prioritizes your ad delivery based on:
- Estimated click-through-rate (CTR) or how likely it is someone will click on your ad.
- How relevant your ad copy is to a search query.
- User experience, or how good your landing page is.
These three measures are known as your Quality Score. You can go here to see directions from Google Ads on how to check your Quality Score.
So, once your keywords are selected, your bid is set and your quality is ensured, is it a wing and a prayer? Ongoing monitoring should be a daily activity for any active ads your business is running.
There are really only two measurements that matter at this point:
- How much does a click cost?
- How many clicks convert?
Calculate the Click
Click conversion isn’t too difficult. The hard numbers are these:
Total cost of clicks divided by total number of clicks.
Reported CPC numbers on your Google Ads or Bing Ads dashboard will be an average, based on the actual price of each click.
Calculate the Conversion
Here’s the muddier step. Even if you are regularly knocking it out of the park with super low CPC numbers or high click rates, you may not have a healthy conversion rate. And, at the end of the day, customers who convert are the only ones providing return on your ad spend. There are several points along a conversion path where customers can get lost. Highly skilled marketers will have a crystal clear path, with plenty of touchpoints, to monitor this data.
Your conversion number for a PPC ad should be:
The cost of the ad (including all agency fees, team member hours + ad spend) divided by the number of customers you got from that ad.
This conversion may be the fulcrum where the digital becomes personal. If you can’t connect the data from PPC ads to real customers, your team needs to re-strategize.
Is Your Digital Marketing Agency On Top of Their Game?
As you read this, do you recognize the terms? Are these things regularly reported to you? Do you know your actual conversion numbers? No executive or business leader should ever be in the dark about their PPC campaigns. This ad work comes at a hefty price tag. As you shell out thousands of dollars a month to pay marketers and pay for ads, you have to know if you’re getting what you pay for. Need eyes and ears in the room? We can help with that. Contact us to learn more about our consulting services.
