The Most Important Google Ads Metric?

This is one of the most common questions small business owners ask us when we discuss advertising on Google. Here are some other variations you may have even asked yourself:

“How do I know it’ll be worth it?

“What assurance can you give me that my investment won’t be wasted?”

“How soon can I expect a return on my investment, and what kind of return can I expect?”

The problem with these questions when it comes to advertising is that there are several contributing factors that determine your success as an advertiser, and not all of them we have information about or the ability to control.

Here are some contributing factors that will impact your Google Ads results:

Is it a short or long sales process?
Is it an inexpensive impulse buy? Or a long, complicated, expensive product or service?
What is the level of competition in your industry? Are competitors bidding aggressively for your target keywords?
What is the price point of your target keywords, and do you have the budget to compete there effectively?
Will users be directed to your homepage, a product/service page, or an optimized landing page?
What is the conversion rate of that page?
If you’re an ecommerce brand, what is your revenue per visitor?
And more…

Now that you understand the complex nature of the question, let’s break it down to get a better understanding of the things we are able to answer.

Definition of Success

Most businesses that run Google Ads would define a successful campaign by its ability to capture either direct sales or qualified leads, but this isn’t true in every case.

Some businesses, especially B2B businesses, sell products that require more explanation and consideration before the prospect is going to convert. In those cases, they may want to run awareness campaigns to generate demand, and possibly a branded Search campaign to capture that demand.

The problem with reviewing performance for awareness-based campaigns is that they don’t typically drive conversions directly. They simply plant the seed for a conversion later on.

In that case, some metric other than direct sales or leads should be used to determine their success.

Regardless, we need to first understand how success is defined for your business in order to effectively interpret your Google Ads results.

Now for the Numbers…

To get an idea for what kind of performance you can expect from your Google Ads, we need to ask some questions and crunch some numbers. Two major questions we need to ask are…

How much do you need to spend to run Google Ads?
How many leads or sales can you expect based on that budget?

To answer the first question, we need to get an idea for how much each click is going to cost.

To do that, we’ll need to use Google’s Keyword Planner to do a little keyword research. This will give us an estimated cost per click for the keywords we’re interested in targeting.

Google’s Keyword Planner provides a “low range” and a “high range” for each keyword. In this example for a fence contractor operating in Los Angeles County, the keyword “fence companies near me” would cost $4.79 per click on the low end and $17.22 per click on the high end.

In this example, the estimated average cost per click (CPC) for this keyword would be $11 ( [$4.79 + $17.22] / 2). This isn’t the actual cost you’ll pay per click; this is just an estimate we’ll use to do some quick math.

Let’s also assume that other keywords being targeted in the same campaign will have a similar average CPC.

Every Google Ads Search campaign should really be getting at least 10 clicks per day, or 300 clicks per month, in order to get enough data from which to optimize.

Based on this assumption, this business would need to spend at least $110 per day ($11 x 10 clicks) in order to get those 10 clicks every day.

The equation is,

Avg CPC x Clicks per Month = Minimum Monthly Ad Budget

In this example, if each click is $11 on average and this campaign is capturing 10 clicks every day for 30 days, then that would require a monthly ad budget of $3,300.

$11 CPC x 300 Clicks = $3,300 Minimum Monthly Ad Budget

But how many leads or sales could you expect per month based on this monthly ad budget?

Let’s also assume that this business is using a landing page that is fairly well-optimized, and the conversion rate for that page is 8%.

The equation is,

Clicks per Month x Conversion Rate = Estimated Number of Leads/Sales per Month

In this example,

300 Clicks x 8% Conversion Rate = 24 Leads/Sales per Month

Note: If you aren’t currently using a landing page that could be applied to your Google Ads, then a good place to start when forecasting your Google Ads performance is to find out what your website’s conversion rate is, and use that number for this calculation. If your Google Analytics 4 (GA4) account is set up correctly, then that information should be available in your account.

Revenue per Visitor (Ecommerce)

Is your ecommerce business ready to run Google Ads?

Aside from the questions of “how much” and “what results can I get,” it may not actually be the right time to start advertising.

This is easier to determine for ecommerce businesses because of an additional metric called “Average Order Value,” or AOV.

In order for Google Ads to be profitable for your business, you can’t spend more to get a sale than the sale is worth.

The following equation helps us get an idea for where you stand by calculating your Revenue per Visitor (RPV). If your AOV multiplied by your conversion rate is at least $2, then Google Ads may be a good fit. However, if it’s less than $2, then running Google Ads will likely mean spending more than you make back in revenue.

This is based on the assumption that your average cost per click in Google Ads will be about $2. If your RPV is not at least $2 and you’re spending at least $2 per click, then you are unlikely to have a profitable Google Ads account because you’re spending more to acquire each visitor than each visitor is worth to your business.

The equation is,

Average Order Value x Conversion Rate = Revenue per Visitor (should be > $2)

Your AOV can be improved by increasing your prices or incorporating upsell opportunities on your site.

Your conversion rate can be improved by clarifying your message, making calls to action more clear, improving loading times, and more. Check out this article on 3 Steps to Improve Your Website Conversion Rates.

Source: This concept of determining Google Ads eligibility based on RPVs of at least $2 comes from Jyll Saskin Gales.

Summary

The bottom line is no marketing professional can guarantee you Google Ads results, no matter how qualified they claim to be.

However, it is possible to make some reasonable predictions beforehand, set the right expectations, and determine a plan of action most likely to result in your success.

Assuming you’d like to start with a Search campaign in Google Ads, then doing some light keyword research should indicate what you can expect to pay per click. Based on that, it’s possible to calculate a recommended monthly ad budget.

If you have access to your website’s conversion rate, then that metric can be used to further calculate how many leads or sales a Google Ads campaign is projected to generate.

If you’re ready to start running Google Ads and you’d like to see what that plan looks like, then request a Google Ads quote today.