When optimizing your site for traffic, you will need some means to see where you are, track your progress (or your lack there of), and help identify mistakes.

Here are the core elements I recommend:

1. Sign-up for a Google Analytics (GA) account, it’s free and it some if the best information you can get about visitor activity and how they got to your pages. If you do PPC marketing on AdWords and don’t have Google Analytics installed you can add it under the Analytics tab in AdWords. If you already have Google Analytics and your GA and AdWords accounts aren’t linked, be sure to select “link to existing” in your AdWords account so your Google CPC traffic will be properly tracked. If you made a mistake here and wound up with two GA accounts you can get Google to unwind the mistake, but it can take several carefully worded emails to get it fixed. (more…)

I am always surprised when I find businesses measuring Ad effectiveness based on click-thru rate. CTR is a simple measurement of clicks given as a percentage of impressions. That is, for a given volume of ad impressions, some number of readers have clicked-thru to your site. Unfortunately CTR can be very misleading. If you create a gee-wiz ad (such as click here to WIN), you can make your CTR soar, but if 100% of those clicks bounce, or otherwise don’t go past your landing page, you have wasted your money. What is needed is some kind of conversion or success metric to indicate that a positive step has been taken beyond just clicking the ad.

Conversion tracking is offered within Google’s, Microsoft’s and Yahoo’s the Ad interface. To track conversions, a code snip-it is placed on a confirmation page and information, like total purchase amount, can be captured. For a eCommerce site this provides straightforward business case as it is easy to understand that paying $1.00 for a click that result in a sale that nets $2.00 is a good investment.

If you don’t sell on-line, you can measure demo requests, requests for information, or file downloads as conversions. For service businesses, if the prospect selects your Contact page, where your street address, phone number, or email link are displayed you have established a clear ‘buying signal’.

I highly recommend turning on conversion tracking and installing the conversion code for every search engine you work with. Once this is enabled, you will have an additional column in your ad account showing ‘conversions’. Use conversions to help you tune the wording in your ads and to see which keyword phrases are producing the best results. One note, if you rely on a Contact page as a success metric, be sure to remove address, phone number, email contact, etc. from other pages on your site or your conversion rates will be skewed low.

There is also a conversion measure is also available in Google Analytics called Goals. Google Analytics Goals lets you identify a single page visit as a goal or visits to a series of pages can trigger a Goal. Setting ‘Goals’ helps you identify your most fertile source of leads and tune your advertising budget accordingly.

Previously I has said that you shouldn’t use broad match in AdSense campaigns. While I still lean in that direction, it would be more correct to encourage you to test both phrase and broad match and then base your decision on hard conversions data.

An excellent article on this topic: Google AdWords Marketing: Exact Match Bidding

How these differ:

Broad Match:

Broad Match actually matches the words from the phrase any order. What is a little harder to follow is broad also matches synonyms for your phrase. If you have the phrase “tennis shoes” in your campaign, you ad may be triggered by a search for “tennis sneakers”. So the complete phrase has to be there, but Google may accept a synonym for part or all of your phrase. So if your phrase is “tennis shoes” won’t get matched for “tennis elbows” or “running shoes”.

Here is the link to Google’s help on this topic: What are keyword matching options and What is broad match?

Phrase Match:

Exact Match:

Exact matches only when all the words are used in the exact order, but with no other words in the query.

Yahoo Marketing

Yahoo adds some confusion in that it uses the terms “standard and “advanced”. “Standard” is similar to Google’s “exact”, but introduces some minor variations to your phrase, including plurals and misspellings. “Advanced” is analogous to Google’s “broad”.

See: Overview: Match Types

So what should you use, broad or phrase??

I think the best answer is “it depends” and some testing will be needed to ferret out the differences. I have tried both with a number of clients and usually find that “phrase” performs better than “broad”. I say usually because there are other factors that affect the results.

You might come to the conclusion that “broad” was better because your ad will be triggered on a wider range of phrases. After all, your ad should accurately identify what you are selling and keep your clicks relevant. However, Google and Yahoo both use click-thru rate as part of there formula to determine what to charge. So, if “broad match” causes your ad to be presented for searches that are irrelevant to your ads, your click-thru rate will be lower and you CPC rate will go up. More relevant matches will drive more clicks, improve your click-thru rate and drive down the CPC.

See: Quality Score

So again I come back to the importance of using “cost per conversion” (also known at cost per acquisition, CPA), as your metric instead of “cost per click” (CPC). As long as you have a way to measure cost per conversion you have a reasonable handle on the value of the phrase and can make an educated choice about what match perform best at the least cost.

Added 3/10/2008 >> Another good article on this topic: Focus On Exact Match

I have blogged about this breaking Adwords campaigns up before, but recent events merit revisiting this approach to PPC management. While employed as a in-house marketing manager, I was faced running campaigns that included some very high-cost phrases (in excess of $10). This select group of phrases appeared to be the only words that were converting. We measured demos, and trips to the contact page as conversions. We received conversions only once out of eight or nine clicks (at $10/click a conversion cost $80 to $90). Moreover at $10/click, I was quickly exhausting my daily budget for few paltry conversions. This was clearly a chicken and egg scenario, I needed leads to get sales, but I needed sales to pay for generating leads.

A typical sale was between $2,500 and $5,000. When you divided new sales revenue by leads over the span of a year, we had an average revenue of $1000/lead. So I felt paying up to $100/lead was reasonable.  However, we had a sales cycle of 3 to 6 months and since every lead doesn’t close, I needed to temper my enthusiasm for getting new leads with the realities of cash flow.   

My first thought was to separate my AdWords campaigns by keyword cost, dividing words into producing and non-producing campaigns. This way I thought I could focus my ad dollars on these high-dollar phrases where they were producing the highest number of leads.

Then something unexpected happened. Prior to dividing my campaigns up, my high-dollar, high-conversion words had been consuming each days ad spend. After placing high-dollar phrases in a standalone campaign with its own budget, lower cost words were able to run for longer periods. Statistics emerged showing that while the lower-cost ($3.50/click) phrases converted at a lower rate, the cost per conversion was half the cost of the high-dollar phrases.

As a result of this exercise, we abandoned the high-cost phrases, reduced our ad spend by half, while increasing our exposure and maintaining constant flow of leads.

I now believe you need to take this a step further and separate campaigns into high, medium, and low (or exposure) campaigns.

High and Medium campaigns are those which convert to leads at a solid rate. Here, you have to look closely at your cost per lead (annual new sales revenue/leads) and your cash flow to determine what you can afford to pay. Phrases whose cost start moving into stratosphere can be abandoned or throttled in separate campaigns so they don’t exhaust ad budgets prematurely.  

The low-cost campaigns provide exposure and build name recognition in exchange for an occasional lead. If phrases in this group become performers be sure to move them in to higher performing campaigns to be sure they have adequate budgets for them perform. These low-cost/ exposure campaigns may also include words that have become too expensive to keep within the top 5 positions on the first page, but might continue to provide exposure and even an occasional click from lower positions or even second page results.

So what position should you shoot for? While I like to stay above the fold in position 3-5, there is certainly and argument to settle for an occasional click with a lower cost from a lower position. - but again, I think it all comes down to cost per conversion and what you can afford to pay for a lead.