1. Advertising
    y u no do it?

    Advertising (learn more)

    Advertise virtually anything here, with CPM banner ads, CPM email ads and CPC contextual links. You can target relevant areas of the site and show ads based on geographical location of the user if you wish.

    Starts at just $1 per CPM or $0.10 per CPC.

Which Do You Choose? CTR or Conversion Rate?

Discussion in 'Google AdWords' started by TheAdmin, Jul 15, 2007.

  1. #1
    I have about 5 ads running right now in the same ad group and some of them have better CTR rates then others, but by the same token some have better CONVERSION rates then others.

    So my question is... Which do I get rid of (pause) the ads with the higher CTR or those with the higher conversion rate?
    Here are a few examples:

    CTR 3.27% Conversion Rate 0.8% Cost per Conversion $17.22
    CTR 2.61% Conversion Rate 1.7% Cost per Conversion $7.12
    CTR 3.04% Conversion Rate 0.8% Cost per Conversion $15.55





    I get a profit of $38.13 per conversion, so am I right in saying that I should be going with the second ad here and trying to improve on it by split testing one similar? I'm new at this and sometimes the obvious does not make sense so any input is appreciated.
     
    TheAdmin, Jul 15, 2007 IP
  2. explorer

    explorer Well-Known Member

    Messages:
    463
    Likes Received:
    40
    Best Answers:
    0
    Trophy Points:
    110
    #2
    Maybe you already know, but since you haven't mentioned it, I will: You need to make sure your results are statistically significant - in other words taken over a reasonable time frame and with enough clicks to be sure your sample set is big enough to be reliable. You can check whether you have enough clicks for your results to be reliable here: http://www.splittester.com/
     
    explorer, Jul 15, 2007 IP
  3. TheAdmin

    TheAdmin Peon

    Messages:
    17
    Likes Received:
    0
    Best Answers:
    0
    Trophy Points:
    0
    #3
    Useful tool, I had my own weird system but this one if pretty cool as well :O

    Thanks for the link.
     
    TheAdmin, Jul 15, 2007 IP
  4. vgsmike

    vgsmike Guest

    Messages:
    8
    Likes Received:
    0
    Best Answers:
    0
    Trophy Points:
    0
    #4
    There is always a lot of focus on CTR, but just remember that your bottom line matters more than any optimization statistic, including CTR.

    You may or may not profit the most by removing the lower CTR ads. Split test correctly, and run ads based on the largest bottom line you achieve. It could very well turn out that you profit most when running all 3.... or not. It's all in the testing. ;)
     
    vgsmike, Jul 15, 2007 IP
  5. thomashoi

    thomashoi Peon

    Messages:
    50
    Likes Received:
    0
    Best Answers:
    0
    Trophy Points:
    0
    #5
    I think the ctr is most important. It determines whether the ad that appears is relevant to the customer. My average ctr is above 10% and this reflects quality traffic and thus I got good flow of sales.
     
    thomashoi, Jul 15, 2007 IP
  6. William

    William Peon

    Messages:
    1,310
    Likes Received:
    31
    Best Answers:
    0
    Trophy Points:
    0
    #6
    If those figures are correct and you earn 38.13$ on every add I would say keep them all as all of them are profitable. I would however increase the marketing budget to be able to increase overall revenue and perhaps try to find more adds with a low cost per conversion.
     
    William, Jul 15, 2007 IP
  7. jimbob

    jimbob Active Member

    Messages:
    165
    Likes Received:
    7
    Best Answers:
    0
    Trophy Points:
    58
    #7
    CTR is all very well but the bottom line has to be the conversion rate. That's what pays the bills.
     
    jimbob, Jul 16, 2007 IP
  8. CustardMite

    CustardMite Peon

    Messages:
    1,145
    Likes Received:
    33
    Best Answers:
    0
    Trophy Points:
    0
    #8
    Here's what I wrote about clickthrough rate vs conversion rate:

    http://www.epiphanysolutions.co.uk/...advert-text/maximising-the-click-through-rate

    Basically, you don't want to maximise either of these figures, you want to maximise profit. Increasing your clickthrough rate, and at the same time lowering your conversion rate can increase or decrease your profit - you need to look at it on a case-by-case basis.

    I find it easiest to look at the profit per 100,000 impressions. In your case above:

    1) 3270 clicks, 26.16 conversions, total cost of $450.
    2) 2610 clicks, 44.37 conversions, total cost of $316.
    3) 3040 clicks, 24.32 conversions, total cost of $378.

    Clearly, since 2 has the most conversions, at the lowest cost, then unless you lose money on each sale, then 2 is always the most profitable.

    To complete the picture, 1 is better than 3 when the profit per conversion (exc. advert cost) is greater than ($450-$378)/(26.16-24.32) = $39.29.
     
    CustardMite, Jul 16, 2007 IP
  9. solution2u

    solution2u Peon

    Messages:
    252
    Likes Received:
    11
    Best Answers:
    0
    Trophy Points:
    0
    #9
    Interesting question and answer! But do we need to consider the ROI as well?
    1) ROI = 122%
    2) ROI = 435%
    3) ROI = 145%
    Hope that someone can help me to clarify this :)
     
    solution2u, Jul 17, 2007 IP
  10. CustardMite

    CustardMite Peon

    Messages:
    1,145
    Likes Received:
    33
    Best Answers:
    0
    Trophy Points:
    0
    #10
    Not really - I'd rather spend £10 to make a £10 profit, than £1 to make a £5 profit. ROI only really matters when you've got a limited budget, and have to decide between keywords when they are all profitable...

    If you look through my invented case study (http://www.epiphanysolutions.co.uk/...google-adwords-case-study-part-2-optimisation), you'll see how I've used the ROI to decide which Adgroups to pause (from Day 8 onwards).

    If your budget is sufficient, then you should bid on ALL profitable keywords (unless you think the money could be spent better via another advertising medium, in which case, yes, you'd need a minimum ROI).
     
    CustardMite, Jul 17, 2007 IP
  11. Cobnut

    Cobnut Peon

    Messages:
    184
    Likes Received:
    6
    Best Answers:
    0
    Trophy Points:
    0
    #11
    Surely this question can't be answered properly without knowing the ROI?

    As has already been mentioned, the CTR and conversion rate are only elements of the whole. Your primary focus should be on ROI and how these values relate to that.

    Jon
     
    Cobnut, Jul 17, 2007 IP
  12. CustardMite

    CustardMite Peon

    Messages:
    1,145
    Likes Received:
    33
    Best Answers:
    0
    Trophy Points:
    0
    #12
    Why? You want to know which advert is the most profitable. I assume that that's the objective. If so, then you want to make as much money per SEARCH as possible (and hence as much money as possible in total).
     
    CustardMite, Jul 17, 2007 IP
    solution2u likes this.
  13. Cobnut

    Cobnut Peon

    Messages:
    184
    Likes Received:
    6
    Best Answers:
    0
    Trophy Points:
    0
    #13
    Sorry, you've lost me there CustardMite, aren't you saying exactly what I just said, that it's the ROI that's important?

    Jon
     
    Cobnut, Jul 17, 2007 IP
  14. CustardMite

    CustardMite Peon

    Messages:
    1,145
    Likes Received:
    33
    Best Answers:
    0
    Trophy Points:
    0
    #14
    No - I'm saying that the advert that makes the most TOTAL profit is the one to go for, not the one with the highest Profit/Cost ratio.

    For example (per month)...

    Advert 1:
    Impressions 100,000
    CTR 5%
    Clicks 5,000
    Conv. Rate 5%
    Conversions 250
    Cost Per Click £0.25
    Profit Per Conversion £10

    Advert 2

    Impressions 100,000
    CTR 3%
    Clicks 3,000
    Conv. Rate 6%
    Conversions 180
    Cost Per Click £0.25
    Profit Per Conversion £10

    Advert 1 makes a total profit of £1500
    Advert 2 makes a total profit of £1200

    Advert 1 has an ROI of 150%
    Advert 2 has an ROI of 200%

    Which would you go for? I'd go for Advert 1, unless I was using my entire budget. If I was, then I MIGHT consider Advert 2, although Advert 1 with a lower CPC may work out better...
     
    CustardMite, Jul 17, 2007 IP
  15. digitalraves

    digitalraves Guest

    Messages:
    43
    Likes Received:
    1
    Best Answers:
    0
    Trophy Points:
    0
    #15
    i'll go for whichever one which gives me more net profit.. :p
     
    digitalraves, Jul 17, 2007 IP
  16. solution2u

    solution2u Peon

    Messages:
    252
    Likes Received:
    11
    Best Answers:
    0
    Trophy Points:
    0
    #16
    Ya. I have read it and I plan to read it for 2nd time :D I recommend everyone to read it as it is good resources for Adwords. rep Added

    Here is my calculation (correct me if I am wrong):
    1) cost = $450; profit = $997.48; revenue = $547.48
    3) cost = $378; profit = $927.32; revenue = $549.32

    Doesn't the 3rd ads performs better than 2nd ads?
     
    solution2u, Jul 17, 2007 IP
  17. Cobnut

    Cobnut Peon

    Messages:
    184
    Likes Received:
    6
    Best Answers:
    0
    Trophy Points:
    0
    #17
    Sorry Custard, maybe it's the time of day (the pub's calling) but my maths doesn't match yours.

    With these figures I make Ad 1 to have a cost of £1250 (5000*0.25) and an incoming revenue of £2500 (250*10), hence an ROI of £1250.

    With these figures I make Ad 2 a total cost of £750 (3000*0.25) and an incoming revenue of £1800 (180x10) hence an ROI of £1050.

    I'm not sure how you're working your ROI % out but using 'real' figures it looks to me like Ad 1 gives a better ROI (£1250), not a worse one, so yes, of course I'd go for that one but that's simply confirming what I'm saying, it's the ROI that's important - the amount in minus the amount out.

    Have I gone mad? :confused: (I'm off to the pub so won't be able to answer till later)

    Jon
     
    Cobnut, Jul 17, 2007 IP
  18. prosumer86

    prosumer86 Peon

    Messages:
    237
    Likes Received:
    6
    Best Answers:
    0
    Trophy Points:
    0
    #18
    I for one wouldn't focus on ROI%.

    CTR% and conversions% are important figure, but it all boils down to this:

    "Am I making money with this Ad?"

    I would see how many sales each ad has gotten me so far, and keep the one that has yielded the highest NET profit. Ignore ROI%/Costs, and what matters at the end of the day is your NET.

    Of course I'm not discounting the importance of ctr/conversions or ever ROI%. I'm just saying you should focus on net profits, and try to improve upon the rest slowly.
     
    prosumer86, Jul 17, 2007 IP
  19. CustardMite

    CustardMite Peon

    Messages:
    1,145
    Likes Received:
    33
    Best Answers:
    0
    Trophy Points:
    0
    #19
    The third advert performs better than the first - the second is far better than either. I stated that the first advert was better than the third only if the profit per conversion was greater than $39.29 - it was only $38.13, so as you say, the third is better than the first in this example.

    I calculate ROI% as [(Profit exc. Ad costs) - Ad Costs]/[Ad Costs]. In the example, I managed to get the sums wrong:

    1. Cost = £1250
    Profit exc. Cost = £2500
    'Real' Profit = £1250
    ROI = (2500-1250)/1250 = 100%


    2. Cost = £750
    Profit exc. Cost = £1800
    'Real' Profit = £1050
    ROI = (1800-750)/750 = 140%

    So Advert 2 has the better ROI%, but the lower total profit.


    Well said!
     
    CustardMite, Jul 18, 2007 IP
  20. suni12

    suni12 Banned

    Messages:
    64
    Likes Received:
    0
    Best Answers:
    0
    Trophy Points:
    0
    #20
    I kome to know more from this diskussion.
     
    suni12, Jul 18, 2007 IP