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[Discussion] How do you know how much a click is worth to you?

Community Manager
# 1
Community Manager

Hi Community,

 

I hope most of you are aware of the free AdWords courses that we offer within our Help Center. They're great resources, especially if you're new to AdWords and online marketing.

 

We're going to start a weekly quiz series where we ask a question that can be answered through one of our courses. This week's question is from Online Marketing 201.

 

Question of the week:

How do you know how much a click is worth to you?

 

Anyone can answer (you don't have to have taken the course) - so let's see who can get the most stars for their response!

 

Kathleen

2 Expert replyverified_user
Marked as Best Answer.
Solution
Accepted by topic author KathleenG
September 2015

Re: [Discussion] How do you know how much a click is worth to you?

[ Edited ]
Collaborator ✭ ☆ ☆
# 2
Collaborator ✭ ☆ ☆

ROI is one of the most important metrics to measure the ratio of your profits to your advertising costs. Return on investment (ROI) measures how much profit you've made from your ads compared to how much you've spent on those ads.

To identify your ROI, you first need to measure conversions, which are customer actions that you believe are valuable, such as purchases, sign-ups, web page visits, or leads. You can use Conversion Tracking to determine the profitability of a keyword or ad, and track conversion rates and cost-per-conversions.

ROI = (Revenue - Total Costs) / Total Costs * 100

Revenue (measured by conversions).......Total costs= Adwords costs + Product costs

let's say you got 10 conversions and the conversion value is 100$, then the total revenue (number of conversion x conversion value)= 10 x 100 = $1000

You sell the product for $100 (conversion value) but this product costs you $40 to produce. you sold 10 (number of conversions) then the products costs = 10 x 40= $400

All the Adwords costs is 150$, then the Total costs ( Adwords costs+Products costs)= 150 + 400= $550

ROI= (Revenue - Total Costs) / Total Costs *100
(1000- 550) / 550 * 100 = 81%

By calculating your ROI, you'll learn how much money you've made by advertising with AdWords. You can use ROI to help you decide how to spend your budget. For example, if you find that a certain campaign is generating a higher ROI than others, you can apply more of your budget to the successful campaign, and less to the ones that aren't performing as well. You can also use the information to try improve the performance of the less successful campaigns.

Re: [Discussion] How do you know how much a click is worth to you?

[ Edited ]
Participant ✭ ☆ ☆
# 3
Participant ✭ ☆ ☆

Understanding How Much A Click Is Worth
 
A clicks value, or worth, may be expressed and credited in many different ways via a combination of direct ROI metrics and also attribution modelling. It is vital to consider all factors that may be relevant when applying any value calculations since these often provide vital pieces of the jigsaw that are often overlooked. Going into detail may reveal several interdependencies elsewhere in the campaign strategy that drives success and ROI (namely assisted clicks and conversions).
 
First and foremost, since ROI is closely linked to conversions, conversion needs to be set up and implemented, whilst a series of goals in GA would also be very insightful.
 
The easiest starting place is by a direct ROI and last click attribution perspective, and applying a simple ROI = (Revenue - Total Costs) / Total Costs * 100
 
i.e.
 
campaign =  1
ad groups = 1
keywords = 5
clicks = 100
cost per click = £1
campaign costs = £100
sales = £200
Product Cost = £50
 
Gross Profit £50
ROI = 33%
 
 
However, a few other factors need to be considered that include:
 
When is the value ROI analysis reviewed? If using 7 days for example, is 7 days enough for a typical conversion? Are there any likely conversions in the pipeline close to conversion? (perhaps recorded in micro goals)

Have any visitors recommended the website products to friends / colleagues that has stimulated brand or organic search?

Within the campaign, did any KW help assist clicks and indeed conversions (especially if a longer customer decision making process) so we apply the correct attribution weighting


How many of the 100 clicks were new vs return visitors? (this may be needed for upper funnel kw investing, bid strategies and also understanding visitor decision making behavior via search funnels)

Blocking out competitors (how many of your clicks prevented the interest / sale of a product to a competitor, and how do they feel about your product now they have been exposed to your product page?

Has the click attributed any value in driving opinion? For example, I may not be near my purchase point yet, but when I need such a product my company is top of the consumers evoked set (list of providers).

Has this 1 sale likely to deliver future sales of the same product or similar linked add on products? For example, if we tracked the lifetime value of the future sales, the value of this click would look very different and greatly enhanced.
 
 
By analysing the ‘value’ in some of the above mentioned methods, we may be able to justifiably adjust AdWords strategies with more confidence and increase competitiveness.
 
Hope that helps
 
Happy to share my views
 
James Edward Goode

Re: [Discussion] How do you know how much a click is worth to you?

Rising Star
# 4
Rising Star

Hi All,

 

From what I understand you can understand a clicks worth to you depending on your account/campaign objective. There are two types of account objectives I would consider here:

 

1. Revenue Generating Campaign

2. Branding Campaign

 

Revenue (ROI):

 

Let’s take an example here to understand things better.

Consider the following case for an AdWords account that has ROI as its KPI:

 

Spends till date: $1000

CPC                   : $ 10

 

Clicks                : 100

Conversions      : 5

 

Overall CPA      : $ 200

Revenue/Conversion: $ 50

 

Therefore, Total Revenue = Revenue/Conversion * Conversions

i.e.

 

Total Revenue = $ 50 * 5

                           = $ 250               

 

Profit earned = Total Revenue – Total Spends

                         = $ 250 - $ 1000

                         = - $ 750

 

Considering this scenario, we can see that total profit earned from running the campaign was not successful in terms of driving ROI for the client. Since we were not able to make profit here, the total number of clicks that were recorded in the account can be deemed as not profitable. On the other hand, if we had recorded conversions of higher value say $ 500/ conversion, our total revenue would have been $ 2500 which would lead to us recording a profit of $ 1500 which will make each of the clicks worth much more for us as advertisers.

 

Basically, the more profit we make out of an ROI based campaign the more the worth for each click that we record during the campaign lifecycle.

 

Branding:

 

From a branding perspective to derive worth for each click we record, we would have to make use of Google Analytics. Since we are running a Branding campaign, we would need a good mix of unique and new users to land up on our website and not just repeat visitors. This can be measured using the New Vs. Returning Visitors report in GA. By understanding the ratio of New visitors against the returning ones we can understand if the clicks we are recording are getting us additional visibility i.e. not just more unique & new visitors but that they are also driving visitors to revisit us. A good balance between your New & Returning Visitor will be worth much more to us from a Branding perspective thereby increasing the value of each click we record.

 

Another way to measure the effectiveness of the Branding campaign would be to set up conversion tracking on your landing page to trigger a conversion every time a user lands on your landing page. Converted Clicks (conversion one per click) will help you understand the number of unique users visiting your page. More the number of converted clicks more successful your branding campaign is and more worth can be assigned to each click. You can also look at the View Through Conversion numbers here as it will help you understand the number of users that may have been exposed to your ad and since the initial interaction with the user was made because of your ad, you can measure the effectiveness of your Branding campaign by adding these conversions to your total number of conversions thus adding more value to your recorded clicks.

 

In addition to this, looking at the conversion funnel for the campaign can help you measure the performance of Brand vs Generic keywords. The funnel will help you understand the total number of clicks that your Brand keywords are driving in comparison to the clicks driven by your generic keywords.

 

We could also look at Search Funnels to check the performance of the ‘Upper Funnel’ keywords and how many clicks they have been recording for your campaign. The search funnel will also allow you to identify the assisted conversions that your keywords have recorded for you during the campaign lifecycle thus adding more value to each click recorded.

 

Finally, let’s consider a case where for your Branding campaign a SQR triggers your ad for one of your generic keywords. User clicks on your ad, lands on your LP but does not convert at that instant but later using your Brand name (E.g. – XYZ) searches for you again and upon clicking on you ad converts. Since your is a branding campaign, you would call it a win if a user who was previously unaware of your brand uses your brand term the next time look for you & converts on your website. Since the user was able to recall your brand after his/her initial interaction, you can attribute more value to the initial click here as it has helped meet your campaigns objective.

 

Below is an example of a conversion path with respect to keyword themes:

 

Generic > Brand                                                           Good

Generic > Generic > Brand > Generic > Brand            Good

 

Brand > Generic                                                            Bad

Brand > Generic > Brand Generic                                 Bad

 

 

Cheers!

 

Shashank

Cheers,
Shashank Singh, AdWords Rising Star |
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Re: [Discussion] How do you know how much a click is worth to you?

Community Manager
# 5
Community Manager

Hi Everyone,


Thanks everyone for your fantastic responses! So detailed, so insightful! 

This week's winner with three stars is @Ahmed Ali   - Awesome job Ahmed!

 

This week's question is up - check it out here and give us your best responses!

 

Kathleen

Re: [Discussion] How do you know how much a click is worth to you?

Visitor ✭ ✭ ✭
# 6
Visitor ✭ ✭ ✭
Hi Ahmed,

I have a question.

"You sell the product for $100 (conversion value) but this product costs you $40 to produce. you sold 10 (number of conversions) then the products costs = 6 x 50= $300"
If the product cost is $40 & 10 products are sold, how come product cost is = 6 x 50?
It should be 40 x 10 = 400 ?

Regards,
anoop

Re: [Discussion] How do you know how much a click is worth to you?

[ Edited ]
Collaborator ✭ ☆ ☆
# 7
Collaborator ✭ ☆ ☆

Thanks Anoop. I edited it, you are totally right. I don't know how I missed this.

Re: [Discussion] How do you know how much a click is worth to you?

Visitor ✭ ✭ ✭
# 8
Visitor ✭ ✭ ✭
Hi Shashank,

Regarding ROI,How can I get Revenue/Conversions? Where can I find that column in Ad words Account? or You got some 'X' Revenue from 5 conversions??

Please,reply me.

Re: [Discussion] How do you know how much a click is worth to you?

Rising Star
# 9
Rising Star
Hi Neeraj,

Apologies for the delayed response here.

You do not have a column for this particular metric i.e. Revenue/Conversion. To derive this value, you need to tag your URL's with the theme or keyword data which should be associated with a conversion or multiple conversions in your CRM/back end.

Once you have this data in your back end and you know that a X product is worth say $500 for you and you recorded 5 conversions in your back end then you know that you earned $500 dollars against each conversion here.

Total revenue generated here will then be $2500. Hope this made sense to you.

Cheers!

Shashank
Cheers,
Shashank Singh, AdWords Rising Star |
Did you find any helpful responses or answers to your query? If yes, please hit "Like" or "Accept as Solution"