Keeping track of PPC metrics can quickly get confusing and overwhelming, as there are so many metrics to consider. Many marketers ask me, "What's the one metric I should optimize for?". What are the top one or two levers I can pull to make a difference?"
Observing thousands of Google AdWords accounts and billions in combined spend, I have found two metrics that correlate most strongly with success:
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1. Account Activity: You get out what you put in. This isn’t too shocking; advertisers who do more work on heir accounts get better results.
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2. Quality Score: Higher Quality Scores generally lead to lower costs, so optimizing for Quality Score is essentially the same as optimizing for ROI.
Why You Should Spend Time Optimizing for Quality Score
Quality Score is a powerful predictor of success because it measures relevance. And it makes total sense -- Google’s main goal is to keep users happy so they keep using Google, and keep clicking results. More relevant ads, campaigns, and landing pages get more clicks; that raises your Quality Scores and -- since Quality Score determines both your ad ranking and what you pay per click -- everybody wins.
After you've committed to spending more time in your account, what should you focus on? In order to achieve higher rankings, more clicks and leads, and lower costs for those actions, I recommend focusing on optimizing your Quality Scores.
How much lower? Let’s take a look.
New Data Shows AdWords Quality Score Can Save You Up to 50% on PPC
Craig Danuloff calculated in 2009 that a Quality Score of 10 could save you 30% on cost per click (CPC). (Unfortunately, the Click Equations blog now redirects to Acquisio, so I cannot link to the post.) But that was over four years ago, and I wondered if the data had changed.
As part of my investigation, I manually analyzed several hundred new clients signed up by WordStream in the first two months of 2013. The average impression-weighted Quality Score has declined over the past four years. In 2009, a Quality Score of 7 (out of 10) was average. But today’s impression-weighted average Quality Score is just slightly over 5. The distribution looks like this:
As a result, accounts (or campaigns or ad groups) with average volume-weighted keywords Quality Scores better than 5 are considered better than average, and are therefore benefiting relative to most advertisers. You should avoid accounts with average Quality Scores below 5, as those scores are detrimental to your account.
With this data, I was able to rerun the calculations and see how much a Quality Score higher than 5 saves you on CPC. Here’s what I found:
In the chart, you can see that the savings have increased. Highlights include:
- - A Quality Score of 6 is 200% more valuable than it was four years ago! A Quality Score of 6 was previously below average, and increased your CPC by 16.7%. Now, a Quality Score of 6 decreases your CPC by 16.7%.
- - A Quality Score of 9 is twice as valuable as it was in 2009, saving you 44.4% compared to 22.2%.
- - A Quality Score of 10 now saves you a full 50% on CPC. That means if all your keywords had Quality Scores of 10, you’d only be paying half as much as the average advertiser. Pretty crazy, right?
If you're wondering, "So what?" I don’t care about cost per click, all I really care about is cost per acquisition” -- fear not. Quality Score lowers your CPA, too. I did a similar analysis based on CPA and found that high Quality Scores also correlate with lower CPAs:
When you have a Quality Score of 10, you will pay 80% less per conversion than if you had an average Quality Score of 5. The savings are mainly due to lower costs per click. This is why optimizing for Quality Score is such a good use of your time.
Benchmarking AdWords Quality Score: What Should You Shoot For?
As I mentioned above, average Quality Scores these days hover around a 5. Therefore, anything above 5 will benefit you, in comparison to the average AdWords advertiser. In other words, you should aim for a minimum impression-weighted average Quality Score of 6. However, it’s important to note that higher scores save you more. If you want the full 50% savings, you need the gold standard Quality Score of 10.
Use the free AdWords Performance Grader to find your impression-weighted average Quality Score in AdWords. This tool will do an instant audit of your PPC account across 8 different key performance metrics, including impression-weighted Quality Score.
The report calculates your average Quality Score, plots the number of impressions at each visible Quality Score for the last 90 days, and compares it to a "Recommended Curve" for your business. Here’s an example of what the Quality Score section of the report looks like:
Your scores should improve if you don't like what you see (the example account above is well below average). Here are three tactics to try:
- 1. Use ad extensions. AdWords ad extensions, such as sitelinks, make your ads bigger with more places to click, so they increase CTR at no extra cost.
- 2. Write better ad text. Test different messaging to find the ad text that speaks to your audience. And use your one allotted exclamation point!
- 3. Bid on brand terms. Branded keywords tend to have really high clickthrough and conversion rates, so they bring up the average for your whole account.
This is a guest post written by Larry Kim. Larry is the founder and CTO of WordStream, provider of the 20 Minute PPC Work Week and the AdWords Grader. You can follow him on Twitter and Google+.
Image credit: Philip Taylor PT.