Is AdWords an investment or cost in your business?

Should you view AdWords as a business investment or cost? This is an important question as the way you approach AdWords will vary greatly depending on the answer.

When you compare AdWords with traditional forms of advertising such as billboards, direct mail, or printed media, it is a cost. After all, you probably view these other forms of advertising as a cost to your business. Why should AdWords be any different?

The fact is, you should view it differently.

The AdWords Difference

The difference with AdWords is the way you are charged. In particular, you only pay for AdWords when your campaign delivers a result. In most cases, that result is a user clicking on one of your ads to visit your website.

That in itself does not constitute an investment. It may be better than a magazine, for example, predicting how many people will view your ad. What you really need, however, is a direct connection between the ad and a resulting sale.

This is possible not as a direct result of using AdWords, but in how you set up the overall campaign. It is known as conversion tracking.

Conversion Tracking

The standard metrics you get from an AdWords campaign are:

  • CPC – Cost Per Click
  • CTR – Click Through Rate
  • Number of clicks
  • Total cost of campaign

In other words, you can see:

  • How many people potentially see your ad
  • How many people click on it
  • The average cost of those clicks
  • The total amount you spend

With conversion tracking, however, you will also know the number of sales you achieve as a direct result of a click on one of your AdWords ads. You can even get this information if the person doesn’t make the purchase immediately after the click.

Here’s an example to illustrate:

  • User does a search using a keyword you’ve targeted and sees your ad
  • The user clicks through to your website and views your landing page
  • The user is not ready to buy immediately so clicks away
  • Three days later the user returns to your website to complete the purchase

This scenario will count as a conversion for your AdWords campaign.

Focus on Returns

As a result of the above, you can focus all of your efforts when running AdWords campaigns on maximising returns. CPC, CTR, and number of clicks are all important, of course, but they are not as important as the returns you achieve.

Specifically, you will know the return achieved related to the amount you spent, i.e. Return on Investment (ROI).

So, when approached the right way, AdWords is clearly a business investment rather than a cost.

To make sure this applies in your business, here’s a recap on what you need to do:

  • Set up conversion tracking
  • Measure conversion rate
  • Analyse ROI

Benefits of this Approach

When AdWords becomes a business investment rather than a cost, you can start making changes so your campaigns reach their full potential. For example, you may be able to increase your budget to bring in more sales and profits, or you might be able to optimise your campaigns to maximise returns.

Generally, the best way to ensure AdWords is successful for your business is to ensure you view it as an investment. Get started today.