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Have you ever felt frustrated because you were running several Google Ads campaigns and you didn’t know which ones were profitable and which were not?
By profitable, I mean the revenue earned from the campaign, less the cost of the ads give you a positive number. (This will give you a gross profit, but you would need to subtract the cost of goods sold to get your net profit.)
Sometimes metrics can lie – for example if you choose a date range that happens to include a significant transaction, you may see a big Return on Ad Spend (ROAS) in Google Ads for that month and think that you’re making a good profit from that campaign.
In actuality, if the campaign is spending, spending, spending and then only occasionally results in a transaction, you might find that your actual profits are break even or negative when taken over a long term.
Another way that Return on Ad Spend can lie is that you may have ads running for some very infrequent search terms. When someone buys from you using that search term it can appear to be a very high ROAS, but in actuality you made a one-off sale that only happens once in a blue moon.
Campaigns with a good healthy ongoing profit are generally the ones with steady, high volume searches and good conversion rates. They might not be the highest returning campaigns in any specific month, but they’ll be consistently bringing in revenue. Depending on how your campaigns are set up, these may either be ongoing campaigns or seasonal.
To work out if your campaigns are profitable or not, it is valuable to look at them over a longer term, three months to twelve months and then subtract your ad costs from your revenues. Since I love analytics visualisations, I have a report template that works this all out automatically. (See image below). This one is part of our standard Google Ads report that all our Google Ads clients get when they work with us for their Google advertising.
We believe in measuring your actual profits as closely as we can, so we attempt to record all sources of revenue on your website. This is easiest if you have Google Analytics Ecommerce Tracking turned on and working. We pass the revenue from your website directly to Google Ads and pull this data with regards to profit as a custom Google Data Studio report linked to your Google Ads account.
If you earn revenue from sources other than Ecommerce, such as bookings (eg accommodation or healthcare), sales funnels, events, third-party carts, transactional forms or custom paypal or stripe integrations, we try to collect this revenue for you using our Google Tag Manager programming skills. Essentially what we do is apply some code that reads the page to work out what the revenue is going to be, and then when the user makes the payment we can record it in Google Ads. Some third-party integrations do this part for you and all we need to do is configure it properly.
Another scenario we see is that you may have a phone sales team, a lead generation form for offline sales, or a live chat widget where the conversion can take place. Some of these scenarios can still be tracked. So for example, if you have a phone sales team you can add Delacon or another phone tracking service to track conversions via phone. Some live chat widgets allow you to report back a conversion. In other cases, what we can do is ask you how much you typically sell from these offline channels and what your typical conversion rate is, and then assign an approximate revenue per lead. So for example if you sell a high-ticket item offline for $18,000 and close one in ten, we can average each offline lead to $1,800.
The last thing we need to do after we’ve added in all these revenue sources, is to set up your attribution settings. We believe that every interaction with a paid channel counts towards the final sale, and it is better to attribute more rather than less towards the paid campaigns in order to better understand profitability.
Unfortunately users tend to thwart attempts to make the analytics easy! When people are shopping they will come back several times before making the final decision. To help resolve this, we will attempt to find an attribution setting in Google Ads that best reflects the full value of the Paid campaign. We also like to adjust your Google Analytics settings to increase session length as this improves the accuracy of your revenue data collected in Google Analytics.
The image above is an example of what you might expect to see if you had one of our Google Ads reports. It shows profitability over time, and in aggregate.
Its not necessarily a problem to have a mixture of high and low profit campaigns. This can be expected when you have campaigns that target cold audiences as well as warm audiences. The cold audience campaigns are intended to increase reach, while the warm audience campaigns are intended to convert.
Are you wanting to improve your records around profitability of your campaigns? If so, I’d love to hear from you. We really enjoy making your business life easier by providing you with real financial numbers. You can contact me here if you want to tell me about your own scenario.