Measuring Google ROI

By Chris Golec

Advertisers
familiar with Google Adwords already understand the basic metrics:

• Impressions: The number of times an ad was displayed in a
  given time period
• Click-thru-rate
  (CTR): Reported as a %, it is the
  number of times an ad was clicked divided by the number of impressions.
• Conversion
  Rate: Reported as a %, it is the number
  of transactions divided by the number of clicks. In a given time period, Conversion is also
  reported as an average cost per conversion.

For
B2C advertisers, the metrics work wonderfully. CTR can be related to a Cost-per-Lead and Conversion Rate can be related
to a customer acquisition cost assuming the Transaction measurement is an online sale.

The
model, however, breaks down for B2B advertisers. I am by no means suggesting that Google
isn’t a powerful and cost effective lead generation engine, just simply
highlighting how B2B marketers need to measure campaign effectiveness differently than B2C marketers.

Consider
the following waterfall analysis to compare B2C and B2B metrics (percentages are hypothetical):

As you can see in the above chart, the Click-thru’s should not be translated as a measure of Cost-per-Lead for a B2B company.  I
would even avoid using Google’s Conversion Cost as a measure of cost-per-lead.  Instead, I would go one step further and
measure the number of inquiries from Target Prospects in a time period divided by the total spend for that same
period to get a true Cost-per-Lead. For example, if you spent
$1,000 during the month and received 10 inquiries through your Google campaign,
your cost per conversion as reported by Google would be $100. If, however, only 20% of those inquiries
were from companies that match your target customer profile, your Cost-per-Lead would be $500 ($1,000 divided by 2 leads).   

While the above analysis illustrates a dramatic difference in
acquisition cost between B2C and B2B companies (400X using the percentages listed), the ROI may still be very attractive for many B2B companies.  Marketers should also note that other benefits of running Adword campaigns, such as faster sales cycles and fewer resources, are not covered as part of this analysis.   

If you are interested in better managing your results from Google, Demandbase recommends that B2B companies
set up or configure their CRM systems to automatically manage the metrics.  If you’re
a Salesforce.com customer, take a look at Kieden. Their solution is designed to simplify the set up,
management, and ongoing measurement of Google campaigns right from Salesforce.com.