Performance, profitability, and growth

Question 1

Scaling budget by performance

Best Practice: Even for campaigns that are scalable by performance, we recommend setting your AdWords daily budget at a

Answer 1

a level low enough to limit your spending if something unexpected happens, like a sudden shift in traffic quality of one of your keywords due to a news event.

Question 2

Example: If you’re running a profitable campaign with an average cost of $750/day, you don’t need a daily budget limit of

Answer 2

$10,000/day. A daily budget limit between $1,000-1,500/day allows for flexible traffic growth while helping protect you from dramatic increases in spend.

Question 3

A campaign that scales by performance can work for many advertising goals, including:

Answer 3

Selling goods or services directly via an e-commerce site
Generating leads for a sales team
Driving signups for a monthly subscription service

Question 4

Campaigns that scale with performance usually meet the following conditions:

Answer 4

You can estimate your conversion value (e.g., you make an average of $50 profit per sale)
You understand how much time is needed before profits will be available to reinvest (e.g., you know that sales leads convert to deals in 3-5 weeks)
Your costs of servicing new customers remain stable or decrease as you grow (e.g., the more customers you gain, the lower the costs of supporting each new customer)

Question 5

Here are some conditions that can make it more difficult for a campaign to scale with performance:

Answer 5

You have high fixed costs that make it difficult to estimate the profit value of a conversion (e.g. significant manufacturing costs)
You have supply or customer service limitations (e.g., you can’t serve additional customers if you grow)
You have cash flow limitations (e.g., you have a $100 CPA for new signups worth $500 over 5 years)
You have sales tracking limitations (e.g., most of your sales are difficult to track because they’re offline)

Question 6

Growing a profitable campaign

What are the three stages

Answer 6

Testing
Growth
Maturity

Question 7

Growing a profitable campaign

Stage 2: Growth
In the growth stage, your goal is to reach more customers while remaining profitable. You may be able to achieve this by increasing your AdWords campaign budget while leaving your CPC

Answer 7

bids, keywords, and ad text the same. If parts of your campaign are no longer profitable after you increase your budget, try adjusting your CPC bids, keywords, or ads to regain profitability before you continue to grow.

Question 8

Growing a profitable campaign

Stage 2: Growth

By gradually increasing your AdWords campaign budget over time, you’ll reach a point where it

Answer 8

where it no longer limits your exposure.

Question 9

Growing a profitable campaign

Stage 3: Maturity
If your costs don’t reach your AdWords daily budget and you’re profitable, you’ve

Answer 9

you’ve successfully scaled up to the traffic available. Congratulations!

Question 10

Learn the basics of performance-based bidding

Bidding to balance sales volume and profitability

Increasing bids generally results in more

Answer 10

more conversions at a higher average cost-per-acquisition (CPA).

Question 11

Learn the basics of performance-based bidding

Bidding to balance sales volume and profitability

Decreasing bids generally results in fewer

Answer 11

fewer conversions at a lower average CPA.

Question 12

Increasing bids while limited by daily budget generally results in fewer conversions at

Answer 12

at a higher average CPA.

Question 13

Learn the basics of performance-based bidding

Prioritizing business objectives

In order to achieve your goals most effectively, it’s helpful to prioritize your business objectives. What are four example objectives

Answer 13

Aim for ad positions 1-3
Maximize profit
Maximize conversions
Maximize clicks

Question 14

Selecting metrics to maximize profit

Value-per-conversion is the amount of expected

Answer 14

profit or value you gain from each conversion.

Question 15

Notes : Common ROI targets that are unlikely to maximize profit

Targets decided in advance of a campaign (e.g., “With $50 profit per conversion, $10 is a good target.”)

Answer 15

No answer just review

Question 16

Notes : Common ROI targets that are unlikely to maximize profit

Targets based on traditional rules of thumb (e.g., “Ad spend should be 9% of revenue.”)

Answer 16

No answer just review

Question 17

Notes : Common ROI targets that are unlikely to maximize profit

Targets based on other marketing channels (e.g., “E-mail and Search should have the same CPA.”)

Answer 17

No answer just review

Question 18

Achieving profitability

In your AdWords campaign, you can use this $50 benchmark to assess the profitability of various parts of your account.

Example 1: Ad group level profitability

Say you have three ad groups, each with its own CPA:

Ad group 1: ‘Music mixing software’ CPA: $35
Ad group 2: ‘Music production’ CPA: $85
Ad group 3: ‘Music editors’ CPA: $53

$35 for a profit of $15 ($50 - 35).

Answer 18

No answer just review

Question 19

Achieving profitability

Example 2: Keyword level profitability

Which of these is unprofitable?

Keyword 1: music production CPA: $42
Keyword 2: music production software CPA: $28
Keyword 3: learn music production CPA: $65
Keyword 4: music production companies CPA: $230
Keyword 5: music production packages CPA: $39

Answer 19

Keyword 3: learn music production CPA: $65 - You can no profits to this

Keyword 4: music production companies CPA: $230 - clearly unprofitable: $50 profit - $230 cost = $180 lost per sale. Removing this keyword may bring the ad group to a point of profitability.