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:
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
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.
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%.
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%
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