Google Ads Key Metrics

This answer explains key cost aspects of Google Ads from the perspective of a residential real estate agent. After reading this answer, you will be able to run basic cost/benefit scenarios and make informed decisions about your advertising strategy.

The percentages used below are commonly seen in the real estate industry. Your actual metrics will depend on market conditions and other factors.

Your Google Ads campaign operates on a daily ad budget. In the example below, we will use a daily budget of $15 over a 14-day period, which means your total ad spend will be $210 ($15 per day x 14 days).

When users search for keywords related to your business on Google, your ads may appear, and if users click on the ads, you'll be charged for those clicks. This cost is called the cost per click (CPC). Each time an ad appears, that's called an impression.

CPC is determined by an auction algorithm controlled by Google. The total amount you pay for all clicks over a given period is referred to as ad spend. You are not charged for ad impressions; you are charged for clicks. Hence the term pay-per-click.

CPC fluctuates depending on market conditions and other factors, typically from $0.50 to $15 or more per click. It takes a week or two after setting the daily budget to determine the average CPC.

In this example, we're using an average CPC of $3, so with a daily budget of $15, you can expect to receive five ad clicks per day (5 clicks x $3 CPC).

Here are the key metrics so far:

• Daily ad budget: $15
• 14-day ad spend: $210
• Average cost per click (CPC): $3
• Total ad clicks: 70

Not every user who views your ad will click on it. In our example, we will assume five clicks for every 100 ad impressions.

• Click-through rate (CTR): 5%

When someone clicks your ad, they're directed to a landing page on your website. If they immediately return to Google, it's referred to as a bounce. In this example, if there are two bounces out of 5 clicks, the bounce rate is 40% (2 bounces / 5 clicks = 40%).

• Bounce rate: 40%

On the landing page, users may register or request information, generating a lead. The percentage of users who submit a lead versus the total number of ad clicks is called the conversion rate.

If two users submit leads over the 14-day period, the conversion rate is 2.9% (2 leads / 70 ad clicks = 2.9%).

• Conversions (leads): 2
• Conversion rate: 2.9%

Since the total cost over the 14-day period is $210 and two leads were generated, the cost per lead is $105, also referred to as the cost per conversion.

• Cost per conversion: $105

Now consider a scenario where the average cost per click (CPC) is $0.50 instead of $3. Assume that the other metrics stay the same. Your 14-day ad spend of $210 now yields 12.18 conversions (about 12 leads) at a cost of $17.24 per lead.

This information gives you an idea of how certain key metrics can impact return on investment (ROI) when it comes to Google Ads.

Understanding these concepts enables you to make informed decisions about your advertising strategy.

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