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Will Google’s New Profitability Model Forecast Business Success?

Recently, Google’s approached many agencies with their new Profitability model in AdWords. Their goal is to take a look at actual success of AdWords at a higher level, but also a more in-depth look at a businesses profits through their advertising campaigns. Many businesses are just learning about what this all means. Will it be successful? Only time will tell.

Lets dive into it a little further to understand….

Essentially, what it means for businesses is that we’re not just looking at clicks, impressions, even CPA anymore. Although, those metrics are still very useful. Google’s offering an even deeper dive into metrics that matter. Profits. Having a low CPA is great, but what if you’re so focused on CPA that you’re business isn’t generating enough profits to sustain your advertising. That could be a problem. This is where profitability modeling steps in.

With this new tool, Google’s allowing advertisers to enter very specific metrics into a customizable formula in AdWords that allows you to look at profitability on a campaign level. Having this new metric in AdWords allows us to get the knowledge we need to optimize between volume and efficiency and be able to maximize the opportunity. In that formula, Google allows advertisers to enter their Cost of Goods Sold (COGS), Revenue and Gross Margin % to get their Gross Profit. Here the definition:

Once these metrics are input into AdWords, we can then add a column at the campaign level to monitor and optimize for profitability. If the campaigns are profitable there’s a few steps you can take:

If your campaigns are not profitable, here’s what you can do:

It all seems pretty straightforward. We’d love to hear your comments on profitability and if you’ve implemented the model yourself. Leave us your thoughts.

The post Will Google’s New Profitability Model Forecast Business Success? appeared first on PEPPER GANG.

This post first appeared on Pepper Gang Blog | PEPPER GANG, please read the originial post: here

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Will Google’s New Profitability Model Forecast Business Success?


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