Pay Per Click: The Problem with Optimizing Based on ROI
New Pay Per Click advertisers tend to optimize their paid search ads solely around Click-Thru-Rate (CTR). Then they read a few blog posts by purported PPC experts that inform them that optimizing for CTR is a “newbie mistake” and that what they should really be optimizing for is ROI. Suddenly the advertiser rushes back into their AdWords account and starts changing everything around – often based on inadequate information.
The problem with optimizing for ROI
The problem with optimizing for ROI is that most new pay per click advertisers aren’t tracking it (correctly).
At best they’ve set up conversions in Google AdWords (Yahoo, Bing, etc.) and maybe they’ve established some goals in a web stats program like Google Analytics. The problem is that many PPC advertisers are not pure e-commerce shops. Many get 6-12x as many phone inquiries from their website as they do on-line form submits. If they are not set up to track these, optimizing a paid search campaign around ROI (instead of CTR) would most likely be a disaster!
Paid search drives branded searches and direct visits
Another problem with optimizing around ROI instead of CTR is failing to attribute conversions to the most deserving traffic source. Take the following as an example –
A searcher types in “custom wood interior shutters”, they click on a paid ad from Shutter Company XYZ, they visit Shutter Company XYZ’s website and after 4 pages, they leave to continue looking around. Two days later, they decide to pull the trigger and call a shutter company, they think back to all the sites they visited and they type “www.shuttercompanyxyz.com” into their browser, pick up the phone and call the number on Shutter Company XYZ’s website.
Who should get credit for this conversion? Some people would give it to Direct Traffic. Others would attribute it to the Paid Search campaign. Most analytics systems can be configured either way, but don’t assume that they are set-up by default to track things your way.
Failing to attribute that conversion to the original paid click would be a mistake – particularly if you are optimizing your paid search account based on ROI instead of CTR.
The Takeaway for paid search advertisers
Make sure you are tracking things the right way before you shift your thinking from CTR to ROI. Don’t misunderstand us – ROI is a highly important component of managing and optimizing and paid search campaign, but so is CTR. Whether CTR should get more weight than ROI depends on how you’re set up with respect to tracking and your company’s goals.
For many new paid search advertisers – especially small businesses – we find it helpful to think about your website like a sales funnel.
Of course you want every prospect you throw into the funnel to become a lead and eventually a sale. But recognize that this may not happen on their first visit to your website! If you do not have tracking set up to attribute a lead/sale to the first click, you could be dramatically under estimating the efficacy of your paid search advertising. Reducing your advertising expenditure based on incomplete data can significantly reduce your long-term success.
Instead, focus on getting as many new qualified visitors into the funnel as possible! How do you define a “qualified visitor”? That’s up to you. You could use metrics like Pages/Visit, Time on Site, Bounce Rate, etc. OR you could base it off of the content they consume – i.e. visitors that download a free case study or white paper.
Here’s another article that talks about optimizing for CTR instead of ROI.
About The Author: Ben Landers is the President and CEO of Blue Corona, a data-driven, inbound internet marketing company. Submit an inquiry to book Ben to speak at your next conference or event.
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