When paid media optimization starts working against you

Who doesn’t want to pay less for groceries? But what if the cheap groceries include spoiled food you wouldn’t want to eat? Cheapest isn’t always best.

The same tradeoff can happen in paid media. Paid media managers may be tempted to focus on the lowest CPCs and CPAs when evaluating cost efficiency. However, these low-cost clicks and leads may be less likely to result in revenue.

High CTR doesn’t tell the whole story

CTR can easily become an unnecessary obsession. On the surface, it appears to indicate how relevant people find your ads.

But a higher CTR isn’t necessarily a good thing:

• Higher CTRs aren’t necessarily translating into better conversion efficiency. While a number of factors could be in play, one indication could be that you’re driving less qualified users.
• Bot traffic can drive abnormally high CTRs.
• Some mobile display placements can encourage accidental clicks.
• Niche search ads may intend to speak to a precise audience and gate out others. For instance, you may specify “enterprise” businesses in copy and not want smaller business owners to click.

If you’re seeing a CTR that looks exceptionally high, be sure to look into the data further to see if you might be sending unqualified traffic. Review conversion rates, lead quality in your CRM, and on-site metrics like time on site in Google Analytics.

High CPCs aren’t necessarily bad

In some pricey industries, high CPCs can be a major concern because the click is ultimately what a business is billed for. If you’re a business owner spending $50 for a click, you’re going to want to know that you’re getting a return from that traffic.

However, the solution can become an obsession with bidding down on CPCs and focusing on keywords that are likely to be cheaper. For instance, “workout plans” might be a more efficiently priced keyword than “personal trainer near me,” but the latter more directly implies buying intent.

Ultimately, by pursuing the lowest CPCs, you may be sacrificing visibility for the most relevant search terms that indicate a high likelihood of becoming a customer. While bid caps can still be helpful to avoid obsessively high CPCs, restricting bids too aggressively can mean missing out on qualified conversions.

Dig deeper: Paid media efficiency: How to cut waste and improve ROAS

Chasing low CPAs can mean low-quality leads

Make sure you’re considering metrics beyond the initial form fill when tracking conversion metrics such as conversion rate and CPA. For lead gen-focused businesses, this likely looks like:

• Some form of tracking initial lead > marketing qualified lead > sales qualified lead > sale

Consider the conversion rate and CPA for each of these stages. You may find that keywords and audiences with a higher initial CPA generate more qualified individuals, a higher conversion rate to sale, and better ROI in the long run.

There’s a balance between getting enough conversion data into your ad platforms and optimizing for more qualified conversions. If you have a relatively low volume of final sales or a longer sales cycle, it’s worth identifying conversion points between the initial form fill and the sale to help fill in the gaps.

Value-based bidding, combined with multiple conversion stages assigned to levels of value based on proximity to the final sale, can help focus your campaigns on more qualified individuals as well. Just be sure to base your estimated values on real, recent data whenever possible. 

For instance, if you make an average of $1,000 on a final sale, and 10% of sales qualified leads close to a sale, you would want to assign a value of $100 (10% x $1,000) to a sales qualified lead.

Dig deeper: The high cost of PPC efficiency

Include revenue and profit metrics when possible

If you’re just looking at conversions, CPA, and conversion rate, you’re not factoring in the full value of a prospect. Ideally, tracking the return you’re getting from campaigns should factor in the anticipated lifetime value (LTV) of a sale.

Correlating stats like initial revenue, recurring revenue, average retention time, and upsells into additional products gives you a fuller picture of how profitable a particular campaign might be.

Getting this data into your backend lead-tracking platform is crucial. Having proper tagging set up, using consistent UTMs, and any unique parameters associated with CRMs or automation platforms is a vital step here.

Incorporating Enhanced Conversions for Leads in Google Ads and Conversion APIs for supported platforms can help you report on data further down the lead pipeline.

Make sure to include conversions for leads that become marketing- or sales-qualified and those that close, helping tie reporting and optimization to true success metrics.

Dig deeper: How to diagnose and fix the biggest blocker to PPC growth

Focus your reports

Even when you understand which metrics matter, reporting to higher-ups can lead to unnecessary focus on less-than-ideal measures.

For instance, you might be reporting on growth in overall sales, but CPCs may have risen in the same timeframe. If CPCs are highlighted more prominently in your report, they could become a discussion topic.

Make sure your reports focus on the metrics that matter. While including metrics like CTR and CPC can still be helpful, you should highlight metrics like cost per qualified lead and conversion rate to final sale that relate most directly to your stakeholders’ ROI.

Additionally, if you see performance shifts that might raise red flags with your client or boss, get ahead of questions by calling out these changes in the report. For instance, you might say that CPCs rose due to aggressive competitor activity in the last month, but at the same time, ROAS remained efficient due to an increase in conversion rate to sale.

Make sure your reports are more than simply tables of numbers and graphs. Tell a story about performance, add context, and show metrics in order of priority.

What are your priority metrics?

As you consider the metrics you’re optimizing toward and highlighting in reports, think about how they relate to the business bottom line and how stakeholders will interpret them. 

Make sure you’ve built a foundation of reliable conversion data so you can connect ad platforms and reporting to the results most valuable to your client or company. Remember that focusing on the wrong metrics can lead to sunk costs and lower results in the end.

Dig deeper: Why too many micro-conversions hurt PPC performance