Today @robert_brady confirmed what a number of PPC practitioners have feared. Google Adwords is miscalculating your CPAs (Cost per Conversions). Check out his article here.

After hearing the news we dug into one of our accounts and did some pay-per-click data analysis. While our numbers didn’t turn out as dramatically as Robert’s did we did find solid and statistical evidence that:

**Yes Google Adwords is Miscalculating your PPC CPAs****It’s Getting Worse**

## Monthly, Weekly, and Daily Evidence of CPA miscalculating

We took one of our accounts that has been running for years and began our data analysis. While the Google Adwords account did run back as far as 2010 we only did the actual data analysis from 2012 to 2013 due to outliers and better visibility. Feel free to click on the graphs below for a larger image.

We’ve calculated unaccounted cost as:

((Cost/Conversions)*1-Click Conversions) - Cost

We’ve calculated the real unaccounted cost percentage as:

(((Cost/Conversions)*1-Click Conversions) - Cost)/Cost

## Month over Month Analysis: General Trends

With the Month over Month analysis from 2012-2013 we can see a small but certain increase in the percentage of Adwords spend that goes unaccounted for within the CPA calculations. While there is a drop in miscalculation in June and July the trend-line still holds a 99.3% statistical significance.

## Week over Week Analysis: Google is misplacing $300,000,000?

With the Week over Week analysis from 2012-2013 we can see better the ups and downs of the CPA inaccuracy. It seems that for most of 2012 and a good portion of 2013 the percentage of Adwords spend that goes unaccounted for rises and falls in weekly and bi-weekly patterns.

Unaccounted spend percentage peaked out towards the end of March at almost a 15th of a percent and beginning or April and has been going steadily down for the past few months of 2013. This isn’t a huge percentage of ignored spend a month but even .06% of $50 Billion Dollars (Google’s 2012 Consolidated Revenue) is $300,000,000 in unaccounted advertiser spend every year.

This weekly trend-line has a statistical significance of 99.9%.

## Day over Day Analysis: This is happening A LOT

With day over day analysis we see more fully the wildly volatile nature of these CPA miscalculations. Here we also see that there are days where CPAs will actually be showing higher than they should be instead of following the general trend of under-allocating spend through campaign conversions.

The low and negative percentage of unaccounted costs really blur the reality of things when we were looking at the data through the weekly and monthly lenses. There was a day where cost is HUGELY unaccounted for at .422%. This is 8,340% higher than the two year average! If this event was consistent across all of Google’s advertising channels for a single day it would represent $57,808,219.18 in unaccounted spend.

This daily trend-line has a statistical significance of 99.9%

## Miscalculated CPAs: The Bottom Line

- Google is incorrectly allocating ad spend to conversions
**FREQUENTLY**and nearly**CONSISTENTLY** - The percentage of unaccounted spend likely exceeds the
**100’s of millions of dollars a year**mark - Someone needs to be held accountable.

Tweet, Like, Comment, and Share.

## 6 responses to “Adwords is Miscalculating Your CPA & It’s been Getting Worse”

Whao…

I just assumed that this figure was always correct….

I’m guessing it is some sort of bug rather than a major conspiracy – but you never know…

I wouldn’t be surprised if we’re seeing a ’rounding error’ but somehow that always sounds very nefarious. At the end of the day we didn’t see numbers far above 1% of attributed spend even in the worst months. It probably wont destroy anyone’s account but it is a discrepancy with potentially giant implications.

This thing is indeed a rounding error. It happens like this:

Let’s say you have 100 Conversions for a total cost of $123.45. The correct CPA is $1.2345, which is reported as $1.23. Using your formula we arrive at an unaccounted cost of $0.45, which would be about 0.4 % of unaccounted spend.

I did the math for many of our accounts and arrived at similar numbers (around .6 %). However, this number doesn’t mean anything. It’s not actually hidden cost or anything tangible. It’s just the result of a rounding error multiplied by a big number.

Shouldn’t it be fairly simple to check if there is anything more than rounding? For example calculating cost/conversions and rounding to 2 decimal places, then seeing if that’s different to the reported CPA.

Thanks for your input, Martin. It will be good to hear from Google and have them confirm that it is nothing more than a rounding error. In Robert Brady’s case, he talks about instances where they report $180 CPA but it is really costing more than $200. That large of discrepancy seems like more than a rounding error.

Here is the link to Robert’s post on cost per conversion stats.