This year, pay-per-click (PPC) advertising platform Google Adwords celebrated its 15th birthday. While PPC ads can sometimes feel like the elder statesman of digital advertising, it’s still in its prime and its birthday serves as a good reminder of how much potential there is for all the digital channels that marketers want to master.
Since the arrival of Google Adwords, the digital advertising landscape has evolved in almost every way: more channels, more technologies, and more data. The PPC corner of that landscape has changed with it and marketers today have a much greater set of capabilities when running PPC compared to the early 2000s. Yet through all this change, the keyword auction remains at the heart of PPC, billions of which take place every month.
Like email marketing, search marketing remains a critical channel for many marketers and, if Google’s advertising revenue growth is anything indicator, it will remain so for quite a while. As a B2B marketer who wears the web/digital/online hat, PPC is a channel that I have been heavily involved in throughout my career. Across all my experiences with PPC activity, I’ve found that answering these two key questions has served as a foundation for delivering real growth and return:
Do you have an easy-to-measure indicator of the health of your PPC investment?
Like most digital advertising channels, PPC is metric-rich. There are so many ways to assess performance, from conversions to click-through-rate to quality score. In the B2B world where PPC is more often than not a lead generation channel, bridging the gap between PPC specific metrics (such as conversions or quality score) and the revenue performance of your PPC activity is critical. It is very possible to have a situation where you are seeing significant improvements in your PPC metrics, but the revenue performance remains flat. This makes it even more important to have a way to measure the revenue impact.
One possible metric is a simple yet powerful equation we use here at Marketo. We look at the ratio between the opportunity pipeline created by the PPC channel (first-touch or multi-touch) and the investment in PPC; we call this ratio ‘pipeline to spend’. There are a number of factors that determine what a healthy ratio is depending on your business. For example, based on your opportunity close rate, you may aim for a pipeline to spend ratio of 13:1, which means that for every $1 you invest in PPC, you aim to generate $13 in pipeline.
Pipeline to spend can be used to track the revenue impact of any marketing program and is a fantastic way of determining marketing efficiency. By focusing on pipeline as opposed to closed revenue, you can understand how well marketing is serving your sales organization with the right marketing qualified leads. If you were to look at closed revenue instead, then it would factor in the efficiency of your sales organization at closing opportunities.
Are you allocating your PPC spend based on the right data?
The pipeline to spend ratio is a great measurement of your overall PPC investment, but getting more granular and understanding what campaigns or ad groups are driving the pipeline enables more effective budget allocation. Take the following example, in which Ad Group 1 has a higher cost per conversion but generates 3x the amount of pipeline as Ad Group 2. In this scenario, the marketer might look to increase investment in Ad Group 1, if there is volume available.
By tracking revenue performance down to the ad group and even keyword, you can prioritize where budget should flow. Below is an example of how you could categorize and then prioritize your ad groups in terms of budget. This simple categorization is a very easy way to ensure that budget gets to the most revenue-impactful areas first.
- Priority 1: Ad groups that have historically generated significant pipeline.
- Priority 2: Ad groups that have not necessarily generated significant pipeline, but are important from a brand, product, or industry perspective.
- Priority 3: Ad groups that have not generated significant pipeline and are not critical from a brand, product, or industry perspective.
PPC is a channel that has plenty of measurement options and requires continuous optimization and analysis. Put another way, PPC requires a lot of hard work on an ongoing basis; it is a journey that never ends. By knowing that the return on your PPC investment is healthy and having a mechanism for allocating budget to the right places; you can empower yourself with the knowledge you need to drive on with optimization and find ways to improve your return.
Do you agree that these questions are important? Are there other key questions you ask yourself about your own PPC? I would love to hear them –please feel free to comment below!