AdWords: Why aggregate data can be misleading

When making decisions based on your Google AdWords account performance, don’t just look at overall account performance. It is very important to get more granular in your analysis.

Consider this scenario

You are willing to spend up to 20% of your product’s price to make a sale. (Maximum % Cost of Sales = 20%). You’ve spent $10,000 in a given period and generated $100,000 in sales. Great! Your advertising’s cost is 10% of sales, well below your 20% maximum. Your account is performing great!

SPEND SALES % COST OF SALES (COS) PERFORMANCE
ACCOUNT $10,000 $100,000 10% Great!

Based on this you decide to increase your spend by an additional $10,000, with the hope that doubling your spend will double your sales. Unfortunately, this doesn’t happen, and you only generate another $25,000 in sales.

SPEND SALES % COS PERFORMANCE
ACCOUNT $20,000 $125,000 16% Good. But not Great.

Why doesn’t it scale?

The problem is that your account performance is not even. Every dollar spent is not generating the same revenue. If we take another look at the initial account, this time with the underlying campaigns visible, it might look something like this:

SPEND SALES % COS PERFORMANCE
BRANDED CAMPAIGN $2,000 $80,000 2.5% Great!
UNBRANDED CAMPAIGN $8,000 $20,000 40% Underperforming
ACCOUNT TOTAL

$10,000

$100,000 10%

The performance of the Branded Campaign is subsidizing and hiding the not-so-good performance of the Unbranded Campaign. Your spend and sales are following a typical 80/20 split: 80% of your sales are coming from only 20% of the spend, and the remaining 80% of your spend is underperforming.

Now that you have this additional information, your budget conclusions are much different:

  1. Decrease spend on your Unbranded campaign (and optimize or segment further)
  2. Increase spend on your Branded campaign.

However, your branded search spend is usually a function of search demand for your brand. Once you are capturing 100% of your search demand, you can’t really scale up any higher. If you want to increase your spend, the only place where you might be able to put the extra spend is the already underperforming unbranded campaign, which will lead to something like this:

SPEND SALES % COS PERFORMANCE
BRANDED CAMPAIGN $2,000 $80,000 2.5% Great!
UNBRANDED CAMPAIGN $18,000 $45,000 40% Underperforming
ACCOUNT TOTAL

$20,000

$125,000 16%

  Summary

  • Avoid making account wide budget decisions on aggregate data. Always try to dig a little deeper.
  • Don’t let underperforming segments ride the coat tails of your top performers. Look for 80/20 campaign and ad group performance and analyze those individually.
  • If you have a single campaign with a single ad group, your Branded and Unbranded searches are likely lumped together. Split them apart into separate ad groups.

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