Wednesday, June 04, 2008

Why ComScore Paid Click Reports Aren't Valuable For Advertisers

Every month there is a comparison report released by ComScore that discusses the paid click search engine battle between Google and Yahoo!. For example, you may have recently read a headline titled, "Google moves further ahead of Yahoo in paid ad clicks".

The press simply eats these reports up because they enjoy writing about the big battle between Yahoo! and Google. But if they ever took the time to break the data down and really analyze it, they may be surprised to see that while more clicks mean more money for Google, it also may mean a higher CPA (Cost Per Acquisition) for their advertisers.

So are these reports really valuable to advertisers? Should advertisers think that just because Google drives more paid clicks that they should only use Google (because a lot of advertisers do think this way)?

Since those writers don't have the time to sit down and actually analyze the real data, I decided I'd do it for them and help answer these questions.

So here it goes (Note: Data is just an example).....

Let's say we have an advertiser that sells used cars and wants to advertise on Yahoo! and Google. The advertiser also has analytics tracking available so that they can see what they've learned after a week of tracking their new campaigns.

Here are the totals after a week of tracking...

Bidded Keyword: "used car"

Total number of Yahoo! clicks: 5
Total number of Google clicks: 10 (as ComScore data shows....Google drives more paid clicks)

Cost Per Click (CPC) on Yahoo!: $1
Cost Per Click on Google: $2 (Google tends to be more expensive vs. Yahoo! due to heavier keyword competition)

Total number of Conversions on Yahoo!: 3
Total number of Conversions on Google: 3

Total Spend on the Yahoo! ad: $5 (5 clicks x $1)
Total Spend on the Google ad: $20 (10 clicks x $2)

Total Cost Per Acquistion/Conversion (CPA) on Yahoo!: $1.66 ($5 / 3 conv)
Total Cost Per Acquistion/Conversion (CPA) on Google: $6.66 ($20 / 3 conv)

With data in hand, what has our new advertiser learned?

1. Google did drive more clicks because Google is more popular: 20 clicks (Google) vs. 5 clicks (Yahoo!)
2. Each campaign received the same number of conversions: 3

But what did our advertiser really learn?

1. It only cost him $1.66 to get 3 conversions from Yahoo! It cost him nearly four times the amount ($6.66) to get the same 3 conversions using Google.

But wait, the ComScore report says, "Google moves further ahead of Yahoo in paid ad clicks". As an advertiser, shouldn't that be a good thing? No, not if you enjoy blowing your ad budget to get the same number of conversions that you could have received from using Yahoo! Simply put, as an advertiser would you rather pay $1.66 for 3 conversions or $6.66 for 3 conversions?

In the end, with these ComScore reports, click data only means so much. As an advertiser, clicks only mean so much and can only go so far when making important campaign budgeting decisions. It's CRUCIAL that as an advertiser, you measure your conversions so that that you can calculate your keyword CPA's. Otherwise you could be paying too much. And as Turko says on KUSI news in San Diego ...."It ain't right!"


Anonymous said...

I get your point, but check your math. $6.66 is much closer to 4X $1.66 than it is to 6X as you wrote.

Matt Lillig said...

Thanks for catching the error. I made the change.

Noirblood said...
This comment has been removed by the author.
Noirblood said...

Wait, what makes you think that there will be 3 conversions out of 10 clicks on Google and 3 conversions out of 5 clicks on Yahoo! Is the conversion rate really that much higher on Yahoo!? If not, then isn't your whole argument kind of weak?