SEM Metrics 101: Know Your Clicks

Raise your hand if the following anecdote hits a little too close to home:

The end of the month has arrived, and you find yourself wondering how your SEM Campaign has performed over the past 30 days.  You frantically scroll through the mess of emails that have taken residence within your prime inbox Real Estate; towards the bottom, you find a message boasting the subject line: “SEM Report – March.”  Lucky you!  You quickly glance at the email’s text – blah, blah, blah…”things haven’t gone as well as we expected this month, but we’ll turn it around next time,” blah, blah, blah – nothing stands between you and the attached PDF file that contains your beloved Campaign data.  Rapt with apprehension, you open the file as a thin line of sweat begins to form along your brow.  You “ooh” and “aah” at all of the fancy tables and colorful graphs; not to mention the myriad of figures and percentages sprawled across the page.  As you scan the report, you begin to feel eerily perplexed by a few specific terms: Impressions, Clicks, Click Thru Rate, Cost Per Click, Conversions and Conversion Rate.  Then the horror strikes – you realize that you have no idea what those expressions mean, why you should care about them and more importantly, why your agency rep has failed to properly explain them for you!  What blasphemy! If you raised your hand after reading the tragic narrative above, fear not, for I have taken the liberty of providing you with a quick guide to some common metrics used in SEM, particularly for reporting purposes.  You could call it an “Idiot’s Guide to SEM,” but I think I will stick with “SEM Metrics 101.”  After all, I’m in the business of Paid Search Marketing, not paid search and destroy your self-esteem.  Either way, take a moment to digest the list below – I hope that it allows you to better evaluate the success of your SEM initiative.

1. Impressions:  Impressions denote the number of times your Ads have appeared within Search Results Pages.  Your Campaign’s monthly Impressions will rise and fall depending on your Paid Search Marketing goals.  If brand awareness is your primary objective, then an increase in Impressions should make you smile (think, the more eyes on your Ads, the better).  In contrast, if you’re seeking relevant web traffic and qualified sales/leads, slight dips in your reported Impressions may occur due to attempts to weed out any irrelevant Ad Clicks.  When it comes to SEM, Impressions are absolutely free (notwithstanding some forms of Display Advertising).
2. Clicks:  A Click is counted each time someone decides to exercise their finger via their mouse when he/she physically clicks on one of your Ads.  When this occurs, your Campaign accrues a small fee depending on the quality of your Ad and its corresponding landing page, as well as the Keyword bid associated with that Ad (not to mention a few other factors).  All things created equal, an uptick in Clicks indicates that more and more searchers find your Ads appealing; consumers feel compelled to visit your website in search of a specific product/offer.  However, a barrage of Clicks may not always generate a proportionate and/or profitable improvement in site engagement and leads/sales.  In that case, you may be wise to ask your agency rep about his/her team’s effort to attain more qualified traffic via your SEM Campaign.
3. Click Thru Rate:  Click Thru Rate is the percentage of clicks your Ads have received out of your Campaign’s total Impressions (or Clicks/Impressions).  Click Thru Rate measures the relevancy of your Ads to searchers within your targeted geographic area; whether your Ads resonate with your audience, and are captivating enough to drive traffic to your site.  A monthly rise in your Campaign’s Click Thru Rate showcases the effectiveness of your Ads, especially when that growth stems from a disproportionately larger increase in Clicks than Impressions.  If you notice month-over-month drops in Click Thru Rate, get your agency on the horn right away.
4. Cost Per Click:  Cost Per Click represents the small fee you pay for each click on one of your Ads.  In general, your Campaign’s Cost Per Click is determined by two primary factors: (1) The quality of your Keywords/Ads and their corresponding Landing Pages; (2) The maximum price you are willing to pay for each Ad Click, as established by a specific Keyword bid.  At the aggregate, the Cost Per Click metric provides you with a means to gauge the financial success of your SEM effort and if the web traffic and ensuing leads/sales generated through Paid Search are worth their cost.  Ideally, your Campaign’s Cost Per Click should gradually fall each month.
5. Conversions:  A Conversion occurs when a person clicks on one of your Ads and then completes some sort of desired action.  For an e-commerce business, that action will most likely take the form of an online purchase; for most other websites, a Conversion is tracked via a lead form completion and/or a phone call.  Assuming that your monthly SEM expenditure does not consume an increasingly overwhelming chunk of your marketing budget, the more Conversions generated by your Paid Search Campaign, the better.
6. Conversion Rate:  Conversion Rate is the percentage of Ad clicks that have resulted in Conversions (leads, sales, and/or phone calls).  To calculate this value, simply divide your Campaign’s total Conversions by its total Clicks (Conversions/Clicks).  Conversion Rate not only measures the effectiveness of your SEM initiative, but it also allows you to analyze the ability of your website to stimulate consumer action.  If your Campaign’s Conversion Rate rises each month without an accompanying dip in Clicks and web traffic, then the person responsible for your Ad Spend is doing something right.  If not, start dialing that phone – he or she has some explaining to do.

If you haven’t noticed, each of the above metrics, while certainly valuable in their own right, carry much more meaning when analyzed together.  To illustrate this concept, let me quickly hash out a scenario that characterizes what I would consider a “great month” for an SEM Campaign.  When looking at your report, you see that your Campaign has received more Impressions than before, but you also notice that the Clicks generated via those Impressions have increased by an even larger factor, which means your Paid Search Click Thru Rate has enjoyed an uptick as well.  As you dive deeper into the data, you also take note that the aforementioned proliferation of Ad Clicks has spawned a disproportionate jump in Conversions, thus resulting in a Conversion Rate spike.  Finally, as your gravitate to the Cost portion of your report, you find that such performance came at a lower Cost Per Click than in months prior, thereby signaling a greater return on your SEM investment!  If your current Paid Search agency consistently provides you with this type of success each month, then read no more; if not, give us a call ASAP – we’ll show you how you too can attain such killer SEM results.