AdWords – the fastest way to generate leads and business for most companies nowadays.

All of my clients ask the question “which are the metrics we should review regularly for our campaigns?”.

There are some people who ask for a very high level report, which includes just a few key metrics, not to bother themselves with tons of (useless) information, and some want to see as much information as possible (as if that would help them stay in control of everything).

In case of AdWords, the number of metrics you can measure for your Search Network Campaign is more than 50, starting with CTR (Click through Rate, percentage of clicks out of impressions) and ending with Impressions Share.

Each of those metrics measures a specific aspect of the campaign, and can give very valuable information to the marketer/AdWords manager (not you) for making data-driven decisions and improving the overall campaign performance (it’s all about regular monitoring, testing and understanding the data).

But which metric is the most important one?

To answer this question let’s go all the way back and ask why we even started CPC in the first place – to generate profit, right?. So your AdWords efforts should have a positive return on investment (ROI).

The AdWords metric that will allow you to calculate ROI is the CPA (Cost per Acquisition).

The amount you spend to generate one lead – measured in dollars – is the most important metric you should monitor as a business owner, marketing manager or the CEO of a company.

When you have your cost per lead, the percentage of leads you close into customers (Closing Ratio), the average lifetime value (LTV) of a customer, and how much you pay to the agency (or specialist) you hired, you can calculate the AdWords ROI:

ROI = # of leads*Closing Ratio*Client LTV/CPA*# of leads + Agency Fee

For example, let’s say you’ve spend $2000 on AdWords and generated 80 leads. The cost per leads equals to 2000/80 = $25. Say, your closing ratio is 20%, which means you will close 16 out of those 80, the customer LTV is $500 and the Agency fee $700, your AdWords ROI will be:

ROI = 80 x 20% x $500 / ($25 * 80 + 700) = 296%

This basically means that for every $10.000 you invest in AdWords, you receive $29.600 back.

As a business owner, the most important thing is to monitor your CPA and calculate ROI (remember to pay attention to customer LTV and closing ratio), and don’t bother with the rest of the small stuff – that’s all meant for marketers.

If your investments turn out to be positive, keep going and growing your business. Best of Luck.