Before beginning, Let's discuss the most important key terms of Google ads
1. Click through rate(CTR)
2. Cost per click(CPC)
3. Cost per action(CPA)
4. Quality Score
Click through rate
CTR is a metric that helps advertiser to know that how many clicks he is getting per number of impression.
In other words, this is a metric that tells us how many clicks we got out of 100 impressions.
Formula to calculate CTR
Why do CTR matter?
Cost per click
You run ads and you will start getting clicks on your ad copy but how much a click costs you? CPC is the answer.
The amount that you loss or spend on a single click on your ad, is CPC.
How it is calculated
your cost per click will always be less than or equal to your maximum bid because Google never deducts higher than your maximum bid for a click from your ad account, Maximum bid creates an upper line on your ad spend.
Cost per action
Again a Important metric, in some campaigns we call it cost per acquisition. This is the most important metric because it doesn't matter how good your quality score is and how less you are paying for a click, in the end every business require sale or conversion.
CPA indicates the amount that you pay for each acquisition. The less your CPA is the less you pay, and the more customer you can acquire in the same budget which means more profit.
Your CPA will always be higher than the CPC because not everyone who clicks on your ad will purchase form you.
How Quality Score Affects Cost Per Action
When you try to see a strong relation between Quality score and cost per acquisition, the The higher the Quality Score, the lower the cost per action. So when you are optimizing your quality score, you are optimizing your CPA as well.
Impact of Quality Score on CPA
photo by worldstream
What is Quality Score
Quality score is the rating that Google gives to your ad on the basis of keywords that you have used and how relevant your ad is.
to learn more about Quality scores you can refer to the article of worldstream on PPC
Your Quality Score depends on multiple factors
- Click through rate (CTR) is a metric that measures the number of clicks an ad receives in relation to the number of impressions it receives. It is calculated by dividing the total number of clicks by the total number of impressions. A high CTR is generally seen as a positive sign, as it indicates that the ad is relevant and engaging to users.
- Cost per click (CPC) is the amount that an advertiser pays for each click on their ad. It is calculated by dividing the total cost of the ad campaign by the number of clicks received.
- Cost per action (CPA) is a metric that measures the cost of acquiring a customer or conversion through an ad campaign. It is calculated by dividing the total cost of the campaign by the number of conversions or actions (such as purchases or leads) received.
- Quality Score is a rating given to an ad by Google based on factors such as the relevance of the ad's keywords, the relevance of the ad's text, the quality and relevance of the landing page, and the historical performance of the ad account. A high Quality Score is generally seen as a positive sign, as it can lead to lower costs per click and cost per action, as well as higher ad rankings.
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