The Conversion Chain In Paid Search: Beyond Traditional Key Performance Indicators

A typical way of thinking of a SEM program is to look at multiple metrics individually, such as the average rank, cost per click, click through rate, conversion rate, cost per action, return on ad spend. Analyzing these metrics separately is a good start but does not allow search marketers to get the full picture.

I like thinking of a SEM program as a whole, or more specifically as a chain. Just like a computer is as fast as its weakest component, a SEM program is as strong as its weakest link. This holistic approach is actually pretty straight-forward and originates from the user experience itself – from the search query to the landing page, see graph #1 below.

As opposed to analyzing multiple indicators independently, the purpose of this article is to emphasize the relationships between those indicators.

While a process is typically a chronological series of steps, a chain is rather a set of links which simultaneously interact with each other and where every link matters. The point here is that search marketers should manage their SEM programs as a chain, and not as a process.

Also, one can measure those interactions within the chain – as defined above – using different performance indicators, see graph #2 below.

Query vs. Keyword Indicators

While the total number of keywords in your SEM account is a fairly good indicator of the development of your account, a more granular way to evaluate your keyword list is to look at the percentage of impressions in exact match type. Basically ,you want your keyword list to effectively match relevant search queries which are related to your offering.

In the long run, most impressions should occur in exact match type for maximum control and relevance. Other match types such as phrase, modified broad, and broad should be active only to explore new queries and feed your list of exact and negative keywords.

Also, impression share (IS) data at the campaign/ad group levels can be compared with the exact match impression share (Exact IS). While it is practically impossible to reach an IS of 100% due to poor ranks in phrase/broad match types, it is definitely possible to reach an Exact IS of 100%.

This means that search marketers should look at this indicator to ensure maximum visibility for their exact keyword list, as opposed to less qualitative queries associated with phrase/broad match types.

Keyword vs. Ad Copy Indicators

Most advertisers think of the Quality Score (QS) as a keyword level only metric, while the QS (in both AdWords and adCenter) actually reflects the whole user experience from the user query to the landing page – with a strong focus on the click through rate (CTR).

Interestingly enough, the Yahoo Quality Index was an ad copy level metric, which makes a good case for analyze keyword/ad copy performance as a pair. The bottom line is that it is quite irrelevant to analyze keyword performance without looking at the associated ad copies.

Ad Copy vs. Landing Page Indicators

The one metric search marketers usually look at is the conversion rate, i.e. the number of conversions divided by the number of clicks. While this metric makes sense in most cases, it is even more relevant to analyze the impact of the CTR on the conversion rate, and vice versa.

To clarify, you might have ad copies with a high CTR/QS and a low conversion rate, or ad copies with a low CTR/QS and a high conversion rate. Again, it really is a question of balance – either you optimize the CTR/QS without looking at the conversion rate, or you optimize the conversion rate by sacrificing the CTR/QS.

Whatever your strategy is, you might want to look at other ratios which take into account both metrics: either the number of conversions by impression, or the revenue by impression.

In a nuthsell, a successful SEM program is not necessarily a program with a strong Quality Score. What matters most is the overall profitability and revenue volume levels, which is a combination of all indicators mentioned above.

Beyond that, search marketers should have a good understanding of the whole conversion chain so that paid results are even more relevant than organic results – which is obviously advantageous for everyone: publishers, advertisers, and most especially web users.