What is the “Ads Success Index”
The Ads Success Index is the answer
The answer was to create an “Ads Success Index”.
A simple calculation that can be applied to any PPC performance “entity” for any time period. Of course, that begs the question: how do we want to calculate an ASI? We developed one such overall measure that we highly recommend:
ASI = [Conversions x ProfitPerConv – ClickCosts] / [Impressions]
Take the profit margin you make off a conversion. Multiply it times the number of conversions. Subtract the cost of those conversions (clicks). And divide that by the impressions.
A formula. Now why is this calculation relevant?
Pretty simple. Sort of a net profit per impression calculation. You can see that this requires you to have a good understanding of all your conversion types and how to quantify them into marginal profit. Weaknesses or bias in those calculations will render this calculation useless very quickly.
- This makes sense because the real goal of your search marketing is to maximize profit. Isn’t it? The impressions show you how well you’re “farming”. Getting people to see your ads. The ASI tells you how well you’re turning that into profit.
- The great thing about the ASI (defined in this particular way) is we can apply it to anything; not just to compare two ads in the same adgroup. And we can use that comparison to decide which ads, keywords, markets, time of day, audiences, etc. that work best.
- So how big a set of impressions is required for meaning in this ASI dimension? You have to have enough impressions to represent some conversions. If you are averaging one conversion per 200 impressions, would you think 1000 impressions without one conversion was significant? Probably. Would you think 400 impressions without a conversion was reason to change something? Probably not.
Let’s take a look at an example of how to apply the ASI
Let’s say that in your marketplace, a reasonable objective would be one conversion for every 200 impressions. And let’s say that the profit on that conversion was $200 (before Ads costs).
- One way to get that conversion is by achieving a 10% click thru rate
coupled with a 5% conversion rate. That conversion would require 20 clicks. If your cost per click was $5, that conversion would cost $100 and net out $100 profit.
- A better way to get that conversion is by targeting a 5% click thru rate
coupled with a 10% conversion rate. That conversion would then only require 10 clicks and cost you $50 and net out $150 profit. Same 200 impressions. Same one conversion. $50 more profit.
Imagine this performance improvement was the result of a transition to more targeted keywords and ads – so the CPC stayed about the same overall.
Your ASI would initially be +0.50, and then it would improve to +0.75
(in the above example) because of your improved conversion rate. Same one conversion per 200 impressions, but it’s 50% more profitable in real terms to your business because it took 10 fewer clicks to generate it. You were able to keep $150 profit instead of $100.
The goal is to have one consistent measure of performance – in real profit terms. We are not suggesting that there is ONLY one universal formula for this, but we are recommending that you develop one measure of success that you can apply across all of your Google Ads activity.
Without the ASI, it is quite difficult to “find” where your profit opportunities come from. Profitable conversions come (primarily) from higher conversion rates coupled with fewer “wasted” clicks. This can seem counter to the goal of improving click through rate and lower cost per click.