Accounts If you’ve ever managed a Google Ads account, at some point you’ve sat back, stared at the computer screen and wondered, “Why? Why is this happening?” Even the most experienced account manager has this sort of moment on a regular basis. Google Ads is just plain hard to figure out.
You can follow every best practice and come up short…and then make some minor tweak that produces phenomenal results. A while back, we realized that a lot of the apparent “randomness” of Google Ads management came from the fact that we were relying on personal experience to figure out our best practices. That didn’t work.
After trying to figure out why one person’s “best practices” backfired for someone else, it occurred to me what our problem was—we couldn’t see the forest for the trees.
To solve this problem, we started accumulating data. We collected data on our own accounts. We audited over 2,000 Google Ads accounts for potential clients. And, amongst all that data, we made some remarkable discoveries.
Over the years since we first published these findings (March 1, 2016), we’ve audited thousands of new accounts. To be honest, very little has changed. Most accounts still struggle with these same problems and the findings in this article remain as useful today as they were when they were first published.
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A Quick Note About Currency
Before we dive into the details, it’s important to note that all currency has been standardized to the US dollar. This is important.
Google Ads reports monetary figures in the currency of the account, which is why many agencies report that they manage 100-500 million in annual revenue.
What Did We Learn from 2,000+ Google Ads Accounts?
As of writing this post (March 1, 2016), we’ve audited 2,167 Google Ads accounts—representing over $320 million in ad spend in hundreds of industries across the world.
All told, that ad spend paid for more than 90 billion impressions and well over 500 million clicks.
The question is, was it worth it?
One of the first things you notice when you audit 2,000 Google Ads accounts is just how few accounts have effective conversion tracking in place.
To the credit of everyone who’s encouraged conversion tracking over the years, 57.7% of Google Ads accounts have set up some level of conversion tracking.
However, that means that 42.3% of Google Ads account managers have absolutely no idea whether or not their campaigns are working.
And, it gets worse. Of that 58% of accounts with conversion tracking, only half—well, technically 50.1%—are actually tracking anything meaningful. The other half is technically tracking conversions, but their setup is so poor that they might as well not be tracking anything at all.
However, most plumbing/HVAC companies only track form submissions, which are few and far between—making them a terrible indicator of campaign effectiveness!
Plumbers aren’t the only ones with this problem, either. Many companies with millions of clicks have only a handful of conversions to their name. Yes, they technically have conversion tracking in place, but it’s not doing them any good.
This poor tracking implementation heavily weighs conversion rate estimates towards 0%. Even accounts with millions of clicks are not immune to this problem.
For example, take a look at this chart, which compares total clicks per Google Ads account to the conversion rate of the account.
Clearly, there’s a reason why a conversion rate of 2-3% is generally considered “typical” for a Google Ads account. Based on our data, the median conversion rate for a Google Ads account is 2.18%.
The bottom 27.5% of accounts lie in the 0-1% conversion rate range and the top 25% of accounts have a conversion rate better than 5.34% What does that mean for you? Well, if more than 5.34% of your clicks are converting, that means your conversion rate is better than 75% of Google Ads advertisers.
If your conversion rate is above 11.03%, your account is in the top 10% of all Google Ads accounts. Great news, right? Well, maybe. Remember, only half of the conversion tracking is actually set up correctly. Here’s how the conversion rate distribution breaks down for the half with good conversion rate tracking in place:
Ad Spend Efficiency
Hopefully, it’s clear by now that most Google Ads accounts are not tracking their conversions properly. The question is, how does that affect campaign performance?
To get at that data, we need to look at overall budget efficiency.
Pay-per-click advertising is intent-based marketing. In other words, you want your ads to show up for internet searches that indicate a strong purchasing intent—you want to be seen by people who want your product or service. Fortunately, Google Ads provides insight into the search intent of your audience through the Search Terms report.
The Search Term report allows you to see exactly what searches triggered your ad and how many impressions, clicks and conversions each search term produced.
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The Exponential Cost of Wasted Ad Spend
Not unsurprisingly, your cost-per-conversion is directly related to your wasted ad spend.
Unraveling this relationship is fairly complex, but I’ve already done the legwork for you, so you can just benefit from the results.
Now, you’d think the connection between wasted ad spend would be linear. In other words, for every 10% increase in wasted ad spend, your cost-per-conversion would increase by around 10%.
Let’s take a look.
Since cost-per-click has a significant effect on cost-per-conversion, let’s just evaluate Google Ads accounts with an effective cost-per-click of around $1.00: