Are You Wasting Your AdWords Budget? Lessons from 2,000+ AdWords Audits

As paid search marketers, we have something of a love affair with data. Paid search marketing is expensive, so we want to know where every cent is going and whether or not our ad spend is producing sales.

Or at least, that’s what we tell ourselves.

Over the last three years, we’ve audited more than 2,000 AdWords accounts at Disruptive Advertising. We’ve analyzed hundreds of millions of dollars of ad spend, nearly 100 billion impressions and well over 500 million clicks.

After documenting, reviewing, and assessing all of those AdWords accounts in detail, we were forced to face a sad truth: paid search marketers aren’t as data-obsessed as we say we are.

However, for those paid search marketers that are data-obsessed, our audits uncovered an exciting way to use your data to dramatically and predictably improve your account performance.

Here’s what we discovered.

Conversion Tracking

Perhaps the most obvious finding of our 2,000+ audits was the fact that very few AdWords accounts have effective conversion tracking in place.

Now, that’s not to say that most accounts aren’t tracking conversions. In fact, 58% of the accounts in our study had tracked at least one conversion.

Only 29% of AdWords accounts are effectively tracking conversions.

However, only half of accounts are actually tracking most-or-all of their actual conversions. That means only 29% of AdWords accounts are effectively tracking conversions.

The other 71% of AdWords accounts either had no conversion tracking in place or such poor conversion tracking that they had no idea whether or not their campaigns were working.



The problem is, if you aren’t tracking all your conversions, you don’t know which campaigns are actually producing results.

Take the plumbing/HVAC industry for example. Generally speaking, most plumbing leads come in the form of phone calls, not form submissions.

Your typical plumbing/HVAC company, however, is only tracking form submissions. As a result, they don’t know which paid search campaigns are driving the majority of their conversions.

Technically, they have conversion tracking in place, but it’s not doing them any good.

We run into this problem all of the time during our account audit process. Often, companies say they have conversion tracking in place, but when we start asking about what actually constitutes a conversion for their company, it quickly becomes clear that they aren’t tracking what really matters.

What is a “Good” Conversion Rate?

Not surprisingly, since only half of the AdWords accounts that are tracking conversions are doing so effectively, most conversion rate estimates are skewed towards 0%.

The problem is, when most people estimate the “typical” conversion rate, they assume that if an AdWords account is tracking any conversions, it must be tracking most or all conversions.

For example, here are the results of an analysis Wordstream ran on hundreds of AdWords accounts to create conversion rate benchmarks for AdWords campaigns.

• The median conversion rate was 2.35%.


• The bottom 25% of accounts had a conversion rate of 0-1%.


• The top 25% of accounts had conversion rates of 5.31% or better.

It was an interesting study, but a flawed one.

To their credit, Wordstream tried to account for poor conversion tracking by excluding accounts with less than 10 conversions, but without directly auditing the accounts they were pulling data on, they didn’t know if the accounts in their sample were tracking actually conversions effectively.

Here’s what we found when we duplicated Wordstream’s analysis using our data. Not surprisingly, the results were very similar to Wordstream’s findings.

• The median conversion rate was 2.18%.


• 27.5% of accounts had a conversion rate of 0-1%.


• The top 25% of accounts had a conversion rate of 5.34% or better.

Here’s how the data looks when you break it down into conversion rate ranges:



It’s not immediately obvious from this chart, but a conversion rate of over 11.03% means your AdWords account is outperforming 90% of AdWords accounts (in Wordstream’s study, the top 10% of accounts converted 11.45% or more of their traffic).

The only problem is, this analysis included a huge number of accounts that we knew from our audit process were not tracking their conversions effectively.

These accounts meet Wordstream’s criteria, but their data was skewing our results.

The top 10% of well-tracked AdWords accounts have a conversion rate of over 20%.

Here’s how the data changed when we only included the few hundred accounts with good conversion tracking in place:

• The median conversion rate for a well-tracked AdWords account is 3.16%.


• Only 15.2% of AdWords accounts have a conversion rate of 0-1%.


• The top 25% of accounts have a conversion rate of 7.82% or better.

Again, here’s the data looks if you break it down into conversion ranges:



Clearly, if you don’t have solid tracking in place, you’re probably missing out on a huge percentage of your conversions!

And here’s the thing, if you don’t know if your campaigns are converting effectively, you’re probably wasting most of your AdWords budget.

Ad Spend Efficiency

It’s clear that most AdWords accounts aren’t doing a good job of tracking conversions. The question is, how does that affect campaign performance?

To get at that data, we need to look at where your AdWords budget is really going.

Since AdWords is pay-per-click marketing, it doesn’t make a ton of sense to bid on keywords or search terms that don’t produce conversions. After all, if you are paying for traffic that doesn’t convert, you are probably paying for the wrong traffic.

Ideally, you should be spending the majority of your budget on search terms with a track record of producing conversions. These search terms are how your target audience is actually finding you.

The problem is, most companies spend the majority of their AdWords budgets on search terms that have never produced a single conversion. These search terms are typed in by the wrong sort of traffic and—as a result—they never convert.

Paying for these search terms is a waste of money. The question is, what percentage of ad spend is being wasted on the wrong search terms?

Wasted Ad Spend

Now, you can only accurately assess ad spend efficiency from accounts that have quality tracking in place, so these results come from the 29% of our audited accounts that were tracking conversions effectively.

61% of ad spend is wasted.

In total, these accounts spent 61% of their budgets on search terms that never converted.

In other words, 61% of ad spend is wasted.

However, as you can see below, the more you spend on AdWords, the less you usually waste on the wrong search terms.

Note, a chart with our entire database of accounts is almost impossible to read on this blog, so this image shows only a few dozen accounts. However, the depicted trend is consistent across hundreds of accounts.

The average AdWords account wastes 76% of its budget on the wrong search terms.

On a per account basis, wasted ad spend accounts for 6.6-99.7% of total ad spend. The median AdWords account wastes 76% of its budget on the wrong search terms.

And, without good conversion tracking in place, there’s not much you can do about it.

However, if you are tracking your conversions effectively, you can use this data to profoundly impact the performance of your AdWords campaigns.

How Does Wasted Ad Spend Affect Your Account?

At first glance, you might think that wasted ad spend and cost-per-conversion would have a linear relationship—every 10% increase in wasted ad spend would increase your cost-per-conversion by 10%.

Annoying, but not too bad, right?

Unfortunately, that’s not the case. As it turns out, wasted ad spend and cost-per-conversion have an exponential relationship.

Since cost-per-click has a significant effect on cost-per-conversion, let’s look at how wasted ad spend varies with cost-per-conversion for AdWords accounts with a cost-per-click of around $1.00.

Basically, for every 10% increase in wasted ad spend, your cost-per-conversion increases by 44-72%.

Every time.

For example, say you’re currently wasting 30% of your budget on non-converting search terms and your cost-per-conversion is $10.00. If you start bidding on a bunch of new keywords and your wasted ad spend increases to 40%, your new cost-per-conversion will be approximately $14.40 to $17.20.

Every 10% increase in wasted ad spend increases your cost-per-conversion by 44-72%.

If your wasted ad spend increases from 30% to say, 76%, your cost-per-conversion be around $53.79-120.20.

That’s a 540-1,200% increase!

And, this trend holds true for every industry, conversion rate, and average cost-per-click.

The fact of the matter is, the more money you waste on non-converting search terms, the less money you can put towards the search terms that matter.

Now, as exciting as this observation is, it’s important to note that this model only explains about 60% of the variation in the data (for the statisticians out there, R² = 0.597 after log-level regression). However, it is an accurate model of the data (ρ < 0.001).

As a result, the exact rate at which increases in wasted ad spend affect your cost-per-conversion will vary from account to account while still following the trends outlined in this article.

That being said, controlling your wasted ad spend is one of the best, most predictable ways to control your cost-per-conversion.

For comparison, let’s take a look at quality score, which has been frequently described as the most effective way to manage cost-per-conversion.

Using the AdWords accounts with a $1.00 cost-per-click from our previous example, here’s how cost-per-conversion varies with impression-weighted quality score.

Looking at this chart, it seems like a pretty direct correlation—as quality score increases, cost-per-conversion decreases.

In fact, our results are strikingly similar to those reported by Larry Kim. If your quality score increases by 1 point, your cost-per-conversion decreases by 13% (Larry puts it at 16%). If your quality score decreases by 1 point, your cost-per-conversion increases by 13%.

Or does it?

Although a quality score-based model looks nice on paper, it only explains 1.2% of the variability in the data (R² = 0.012).

In other words, there’s only a 1.2% chance that improving your quality score will improve your cost-per-conversion by 13%. The rest of the time, you have no idea how changing your quality score will affect your cost-per-conversion.

If you think about it, this makes complete sense. If 76% of your ad spend is being wasted on the wrong search terms, tweaking your ad copy or landing pages to bump up your quality score a few points isn’t going to make much of a difference to your cost-per-conversion.

Other the other hand, if most of your ad spend is going towards the right search terms, a higher quality score will reduce your cost-per-click and, therefore, your cost-per-conversion.

Using This Data

Fortunately, understanding how wasted ad spend affects the performance of your AdWords account gives you a huge leg up on the competition.

Once we discovered how wasted ad spend affects AdWords campaign performance, we made reducing wasted ad spend a key part of how we manage our clients’ AdWords accounts.

The results are remarkable. Here’s what happens:



On the left, you can see how much is being spent on each term compared with the number of conversions that search term is producing. The bar graph to the right shows how those changes affect total ad spend and conversions.

As you can see, shifting your ad spend away from your non-converting search terms reduces your overall spend and increases your total conversions.

In other words, that exponential relationship between wasted ad spend and cost-per-conversion works in reverse, too!

For example, as we reduced one client’s wasted ad spend from 91% to 68%, their cost-per-conversion dropped from $160.38 to $38.58…in a matter of weeks.



Since this approach focuses your budget on what’s working, the benefits of reducing wasted ad spend pass all the way through to your cost-per-sale. For example, with this technique, we regularly see results like 300-500% more sales or 25-65% lower costs-per-sale.

So, if you’re looking for a reliable, effective way to reduce cost-per-conversion and cost-per-sale, pull your Search Terms report and start eliminating your wasted ad spend!

Summary

After auditing more than 2,000 AdWords accounts, it’s become clear that many search engine marketers aren’t using AdWords to its full potential.

Even if your account doesn’t fall into the 71% of poorly tracked AdWords accounts, you’re probably still wasting 76% of your budget on the wrong search terms. It’s time to stop!

To succeed in today’s competitive paid search market, we have to do more than just talk about data. We need to track everything and then use that data to focus our efforts on minimizing marketing waste and maximizing conversions and profits.

Fortunately, even a few simple changes can dramatically improve the performance of your AdWords account. It takes some extra effort, but the results are worth it.

You’ve heard my two cents, now it’s your turn.

Do these findings make sense to you? Did any of these findings surprise you? How do you use your data to improve your account performance?

 

Image Credits

Featured Image: Tatiana Popova/Shutterstock.com

How Ad Impression Share Affects Your PPC Account Performance

As the CEO of a PPC marketing agency, I’ve had the opportunity to audit a lot of PPC accounts. Most of these accounts have elements that are working… and elements that aren’t.

Unfortunately, those dysfunctional elements do a lot more than just waste your PPC budget. They actually reduce the effectiveness of the elements that are working.

How? Lost search impression share (IS).

Okay, so parasitic account problems kill account performance in a lot of ways, but one of the biggest problems is lost impression share.

Are you paying for the wrong ad impressions?

Every click comes with an opportunity cost — if you’re paying for one click, you’re not paying for another click.

And, once your budget is spent, you can’t pay to play in the PPC auction.

Now, if most of your ad impressions and clicks are producing conversions, that’s not a big deal. The problem is, most companies spend their PPC budget on search terms that never produce conversions.

In fact, the average AdWords account wastes 76% of its budget on search terms that never convert.

As a result, advertisers don’t have enough budget left over to truly capitalize on the search volume for their converting search terms.

Essentially, they are wasting most of their impressions on the wrong keywords.

Diagnosing the problem

So, how can you tell if you’re getting impressions on the right keywords? To begin with, we need to take a look at where your budget is actually going.

Tracking conversions

First off, you need to have good conversion tracking in place. If you aren’t tracking conversions, you can’t tell if you’re getting impressions on keywords, search terms, or ads that produce conversions or sales.

And, it’s not enough just to track “some” or “most” of your conversions. You need to track calls, chats, purchases… everything!

If you’re thinking, Oh, well, that doesn’t really apply to me, I’m already tracking everything, you may want to double-check yourself — only 29% of paid search advertisers are actually tracking all of their conversion actions.

Sit down, make a list of everything you want people to do after they click on your ad and then check and see if you have a good system in place for tracking all of those actions.

Hopefully, you’re already in that 29% bracket, but if not, get your act together because it’s worth it!

Checking your data

After you’ve got the right conversion tracking in place, you’ll need to wait a few months to accumulate a good amount of quality conversion data.

Once you have that data, it’s time to dive into the details.

Set your date range for the past 3-6 months and click on the “Keywords” tab.

Now, click the Filter drop-down menu and “Create filter” for “Conv. rate < 2%” as follows:



This should produce a list that looks something like this:



 

As you can see, this particular account had wasted over 11% of their ad spend on just five poorly-converting keywords. Clearly that’s a problem, but let’s take a look at how that wasted ad spend affects your converting keywords.

Go back to your filter and change it to “Conv. rate > 2%”. Next, click on Columns > Modify columns and make sure that “Search Impr. share”, “Search Exact match IS” and “Search Lost IS” are selected:



 

Now your list should look something like this:



 

Can you see the problem here?

In this particular client’s case, they have a keyword that is converting 8.28% of the traffic it generates and yet, it’s only getting one-third of the available impressions—even when someone types in that exact keyword.

The question is, why? There are actually a couple of problems here.

1. Search Lost IS (rank)

If you look at the far right column, you can see that all of these keywords are losing a lot of impression share because their bids are too low. They aren’t getting seen!

For keywords that are converting well, this is a big potential problem. Why would you spend money on keywords that don’t convert very well, but not bother to spend enough to get your best keywords seen?

That being said, you do have to balance the increase in CPC with the increase in impression share. Most of the time, it’s worth it to bid higher on your good keywords, but you’ll need to determine what cost-per-click works for your business.

2. Search Lost IS (budget)

This number is a bit harder to track down. If you note which campaigns your high-performing keywords are in and go back to the Campaigns tag, you can view the Search Lost IS (budget) for that campaign (just add it as a column).

In this client’s case, that keyword with an 8.28% conversion rate was part of a campaign that was losing 77% of its impression share to budget limitations.

And where was that budget going? Paying for clicks on all of those poorly performing keywords.

Talk about a missed opportunity!

Fixing the problem

Whenever possible, you should aim to have a 90% or better impression share for your high-converting keywords. After all, if a keyword is profitable for your business, why wouldn’t you want every possible click and conversion from that keyword?

Now, you may be wondering, what actually happens when you stop spending money on the wrong impressions and instead push that money towards the keywords that matter?

Let me show you!

In the case of our client above, we stopped bidding on their useless keywords and focused their budget on what was working.

Here’s what happened... the blue dot right before the lines intersect is where we stopped bidding on useless keywords:



Almost overnight, the client’s ads were showing up for the right searches twice as often and sales increased more than 50% within a month.

After nine months, sales had more than tripled.

Best of all, we accomplished this without increasing their ad budget. The client didn’t pay a penny more for AdWords and got 3x the sales volume.

All we had to do was give their high-performing keywords the impression share they deserved.

How many conversions are you missing out on?

Clearly, optimizing your impression share can yield fantastic results. The only question is, how big of a difference will it make for your campaigns?

Fortunately, calculating the effects of optimizing your impression share is fairly simple.

For example, let’s say you have the following high-performing campaign:

• 5% click through rate


• 10% conversion rate


• $5 cost-per-click


• 25% impression share


• 25,000 impressions per month

That means your campaign has the potential to be seen 100,000 times (25,000/0.25 = 100,000) each month. In other words, you’re missing out on 75,000 potential impressions.

Now, let’s say you have a Lost IS (budget) of 66%, which means that 66,000 of those 75,000 missed impressions are being lost to budget limitations.

In this situation, if you keep your bids the same but decide to spend whatever it takes to get all of those 66,000 missing impressions, here’s what you can expect:

• You will get an extra 3,300 clicks


• Those extra clicks will translate into 330 extra conversions


• Your total cost for this campaign will increase from $6,250 to $22,750


• You will pay $50 per conversion

Now, at first glance, that might seem like an expensive way to get an extra 330 conversions. But here’s the thing, you’re probably already spending that $16,500 on keywords that aren’t converting effectively.

If on average, that $16,500 is paying for clicks with a 1% conversion rate (assuming that all of your other campaign factors are the same), that $16,500 is currently producing 33 conversions.

That means your total $22,750 of ad spend is only generating 158 conversions (125 from your good keywords, 33 conversions from your poor keywords) at a cost of $144 per conversion.

You know what that means? You could nearly triple your conversions without increasing your ad spend!

Are you getting the most out of your AdWords impressions?

Impression share is often easy to ignore, but maximizing your impression share for high-performing keywords can be an incredibly effective way to improve the performance of your PPC advertising.

It can take a little extra sleuthing to identify your keyword winners and losers, but the results are definitely worth the effort.

How do you feel about your PPC impression share? Did you even know that metric existed? Is it an important metric to your campaign success? Do you agree with the approach in this article?

6 Online Reputation Mistakes To Avoid

A company’s online reputation, like most things worthwhile, can be difficult to build but fiendishly easy to shatter. The internet has given consumers a voice that is widespread and immediate. One negative customer review, blog post, comment, or social media mention—if ignored or handled poorly—can be enough to damage your online business reputation.

If you’re serious about managing your company’s online reputation, then you need to avoid the following mistakes:

Ignoring Comments and Reviews

One of the benefits of having an online presence for your business is that it gives you a chance to build and nurture relationships with your customers. When customers take the time to leave feedback about your business, whether positive or negative, you need to respond.

If you make no effort to engage your customers, their approval and trust is going to deteriorate and your reputation is going to suffer.

Responding Poorly to Negative Feedback

There are all kinds of reasons why people leave negative comments and reviews. Some may be trolls. Some may be your competitors. But some of them may be actual customers with legitimate complaints. It may be tempting to go head-to-head with an irate customer, but bear in mind that the complaint and your response will be seen by a lot of people. No matter how justified you feel you are, coming off as angry or defensive is only going to damage your reputation.

The best approach is to wait until you’ve calmed down before you respond. Apologize to the customer, and explain what steps you’re taking to correct the problem. Even if the issue is something that is beyond your control, simply acknowledging the complaint can go a long way towards rebuilding trust and mending your reputation.

Paying Customers to Review Your Business

Paying someone to write online reviews for your business isn’t just skeevy; if they don’t disclose that they are paid, it’s also illegal. According to the FTC Endorsement Guidelines, if a reviewer has been compensated by your business, then he or she must disclose it in the review. This includes offering folks cash, coupons, discounts, or free products in exchange for favorable reviews.

Because this has become such a widespread problem, a number of review sites are taking steps to put a stop this. Since 2012, Yelp has been calling out businesses that they catch red-handed buying reviews. Talk about a devastating blow to your online reputation!

Posting Fake Reviews of Competitors

If you’re having trouble raising your own reputation, it may be tempting to knock your competitors down a peg or two by posting negative reviews about them. However, most review sites give businesses the option of flagging reviews that they deem inappropriate, which means your fake review would probably vanish in a fraction of the time it took to write it.

Even worse, this underhanded tactic could come back to bite to bite your reputation. Back in 2013, Samsung came under fire for hiring students to post positive reviews for their products while writing negative comments about their competitor, HTC.

Not Monitoring All of Your Accounts

If there was one centralized location where you could see what folks are saying about your business online, then reputation management would be a snap. And if a frog had wings… well, you know. Anyway, the point is that your customers are likely scattered all across the web, posting reviews on some sites, writing blog articles on others, and mentioning you on any number of social media platforms.

Monitoring your own sites is pretty simple. Make sure you check your Facebook, Google+, and Twitter feeds at least once a day. You should also check regularly on Google+ Local, Yelp, or any other review site where you have claimed your local listing. Finally, you can set up Google Alerts to notify you when your business name shows up on any websites you didn’t know about.

Getting Too Personal on Your Business Pages

It’s always a good idea to let some of your personality shine through on your business pages, if only to assure your customers that they’re dealing with a real person rather than a faceless, corporate entity. However, if you bring religion, politics, or any other controversial topics into the mix, you’re going to alienate some otherwise loyal customers. Before you post, tweet, or otherwise share your personal views on your business pages, ask yourself if it’s really relevant to your business and are you willing to risk the negative impact to your online reputation.

 

Building a positive online reputation for your business is a gradual and ongoing process. Be wary of any shortcuts or quick fixes, as these could very easily backfire and seriously damage your reputation and relationship with your customers.