Advertisers frequently ask us which metrics we look at when conducting PPC ad copy testing and analyzing PPC ad copy performance.  Do we use CTR or conversion rates?  Even if we are focused on conversions, should we use conversion rates or CPA?

Like many answers in PPC, this one depends on your account goals.  Your account goal probably isn’t to have the lowest possible CPA or else you would only advertise on a select number of very strong keywords.  Conversely, it’s unlikely you are trying to just maximize clicks since you don’t want to pay for clicks that are ultimately unprofitable.

Most advertisers aim to strike a balance.  With that in mind, you shouldn’t be optimizing toward one extreme or the other between conversion rate vs. CTR.  To illustrate, consider the three scenarios below for ads that are shown for 10,000 impressions each:

Ad CTR Clicks Conv Rate Conv CPC CPA
A 1% 100 10% 10 $1.50 $15.00
B 5% 500 4% 20 $1.00 $25.00
C 3% 300 8% 24 $1.25 $15.65

In the scenario above, it’s very likely that ad C is our best option.  Notice however that ad C does not have the highest conversion rate, does not have the highest CTR, and does not have the lowest CPA.

So why did we end up with ad C?  Most advertisers will establish a threshold CPA (or ROAS for retail clients).  This means, that their goal will be to maximize conversions as long as CPA is below a certain threshold.  For instance, they might say, I want to maximize conversions under a CPA of $20.

If we apply that goal to our ads above:

–       Ad B is out because the CPA is above $20.
–       Ad A loses to Ad C because it delivers fewer conversions that are still profitable (under $20).

So how do we establish that balance when acting on our ad copy tests?  How do you blend conversion rate and CTR into one metric?

I would recommend creating a custom metric that measures the number of impressions per conversion.  In other words, divide impressions by conversions to give you a new metric for PPC ad copy testing. The lower that number, the more likely the ad is to convert.

Ad Impressions Conversions Imp/Conv
A 10,000 10 1,000
B 10,000 20 500
C 10,000 24 417

For the ads above, we’d expect to convert most frequently (every 417 impressions) with Ad C.  If you are using a third-party software like Kenshoo, this should be very easy to set up on an ad group level.  If you’re optimizing without a third-party software, you can also use Excel for this purpose.  This simple equation helps you decide what is usually the most important question: which ad is most likely to convert.

The appropriate follow up question: Is there a scenario in which you wouldn’t use the above impressions/conversions metric?

Glad you asked!  Yes, there is.

In general, you would use this metric for ad groups where you are already at or below your CPA threshold.  In other words, for the client we described, you would optimize toward lowest impressions/conversions in all ad groups that have a sub-$20 CPA.

However, for ad groups that have a CPA above $20, you would instead want to choose the ad with the lowest CPA since the ad group as a whole is still producing conversions that are above your threshold.  The idea here is that you are ok giving up a few conversions in order to get closer to your goal threshold.

Overall, the impressions/conversions metric is useful for analyzing your PPC ad copy tests, and especially for accounts with a CPA goal.  For accounts focused instead on ROI or ROAS goals, there are some additional metrics worth looking at.  We will cover those in a future post.