For most search advertisers the initial conversion after the click is just another step in the funnel. Beyond applications there are approvals, beyond leads there are signups and enrollments, beyond purchases there is lifetime value. Generally speaking, there are initial conversions that lead to some ultimate conversion.
Ideally you would focus on ultimate conversions: like approved applications, confirmed subscriptions, or enrolled students. Unfortunately these ultimate conversions are often infrequent or have a long lag. So, initial conversions at the top of the funnel are needed as a proxy for the ultimate conversion. This is essential for tail terms which get infrequent traffic but are the best opportunity for incremental lift. For example if your conversions are applications and approvals, the applications will be more common than approvals and so will be a useful proxy metric for approvals.
The graph below shows the number of keywords with initial and ultimate conversions for a typical client. Light squares are initial conversions only; dark squares are ultimate conversions. Including the initial conversions more than doubles the number of keywords with 'revenue coverage'. The trick of course is deciding how much weight to place on these early funnel proxy conversions.
Keyword Coverage Map
Each square represents one keyword.
Do those light green cells indicate potential for ultimate conversions and if so what is the likelihood of conversion? If an application has a 50% chance of leading to an approval it’s worth half of an approval. So if you have a $10 cost-per-approval target you might value an application at $5. This is pretty easy if the conversion rate is always the same.
Naturally it’s not that easy. There is a huge variation in post-click conversion rates across keywords. In general an application or a lead from a brand term is much more likely to convert than one from a non-brand term. A targeted term is more likely to convert than a general term. There are any number of variations you can see on specific terms depending on your business and brand – for example keywords containing ‘fast’ will have a different conversion profile to ones containing ‘cheap’ or ‘best’.
Below you see another example from one of our clients that shows a stark variety in post-click conversion rates. This highlights the danger of assigning a fixed value to first level conversions. Some approvals are more valuable than others.
Valuing all applications at a flat $5 would not give you the best yield for your SEM spend. In Regions with low conversion rates you would be over-valuing leads. To get a more accurate proxy value you need to be more granular. Group your campaigns according to conversion rates after the click.
For some businesses there is an added layer of complexity. There are not only different conversion rates but different values for the ultimate conversions. A final conversion from California may have more value than a final conversion from Nevada for example. If this is the case just repeat the process just mentioned. It increases the number of metrics and estimates you need to make but is essential to making your spend efficient.
This presents a more complicated performance measurement and bidding strategy but also represents a significant opportunity to improve your budget allocation. Really digging into your post-click conversion data is essential to leveraging your SEM efficiently. For even more detailed techniques for managing your post-click conversion data see the recent post on Search Engine Land by Dr. Siddarth Shah, Director of Analytics here at Efficient Frontier: The What, Whys & Hows Of Multiple Metric Optimization.
Shay O'Reilly
Business Analyst
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