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Posted on May 1, 2008

Improve Return on Ad Spending

Improve Return on Ad Spending
Posted on May 1, 2008

Looking for a Quick Fix?

Evaluating a PPC account on the basis of its Return on Ad Spending (ROAS) is akin to evaluating the Bronco’s season performance on the basis of its win/loss record. While it’s the only thing the fans care about, it doesn’t provide the team with what precisely what needs to be done to shut down Manning’s air attack, wrestle Tomlinson for a loss, and convert more third downs. A deeper analysis is required.

Three Factors Driving PPC Returns

Similarly, for PPC, it’s helpful to understand the factors driving ROAS. Not everything is under the control of the search marketing team, but there are three primary Endogenous Factors which drive PPC ROAS:

  1. Click Purchases
  2. Post-Click Experience
  3. Web Offers

Smarter Click Purchases

Pay per Click (PPC) Ad Management represents the art of selecting and purchasing clicks. Through the myriad of choices we make as PPC managers in creating and maintaining a PPC account, we determine the price and destination of Clicks, as well as important intrinsic qualities of visitors. If we improve the rate at which we consistently choose and land the best prospects, on the best webpage, at the optimal time, for the lowest relative ad cost, then ROAS for an ad account is likely to improve.

Ad Space Competition represents a semi-exogenous factor which drives purchasing decisions. While it’s somewhat outside the control of a PPC Manager, we mention it here because it can significantly impact the ad manager’s click purchasing decisions, and also because it independently impacts ROAS. We refer to Ad Space Competition as a semi-exogenous factor, because prices within our own Ad Space are based on an auction, so our behavior within the auction can impact the cost per click.

Better Post-Click Experience

It’s tough to win games with a three & out offense. Similarly, it’s tough for a PPC Manager to overcome an uncompetitive Post-Click Experience. The point is, even small improvements to a website can have a significant impact on PPC ROAS. This is the reason our PPC reports often include specific recommendations targeted at webmasters to:

  • a) make conversion levers more accessible
  • b) improve calls to action
  • c) improve searchability of a website
  • d) streamline the conversion process

Competitive Web Offers

For PPC Managers and Webmasters to influence ROAS, it’s necessary for the Web Offers to be competitive in price and value proposition.

Geo Market Competition represents an Exogenous driver of ROAS. While it’s largely outside the control of the Site Owner, Webmaster, and PPC Manager, the effectiveness of a business in dealing with its competition significantly impacts ROAS. If the Web Offers don’t stack up with the competition, then it’s not possible for a Webmaster to significantly increase ROAS by improving a website, or for PPC Manager to significantly improve performance through changes to an ad account.