TPE #38: why and how to track profit in Google Ads
Apr 17, 2023Read time: 3 minutes
Welcome back to The PPC Edge!
In this issue, we’ll talk about an advanced tracking technique you can use to track real profit, not just revenue.
Let’s dive right in!
Why every brand should track profit
Most advertisers only track revenue and use Return On Ad Spend (ROAS) to analyze and improve campaigns. The problem: these metrics don’t tell you anything about your profitability.
Google will push the products that are most likely to get conversions and won’t look at profit margins. You might be getting a lot of conversions and revenue, but that doesn’t automatically mean you’re optimizing for more profit.
The solution: implement profit tracking and enable Profit On Ad Spend (POAS). These are the benefits:
- See gross profit data in Google Ads.
- Stop unprofitable ads and scale hidden winners.
- Increase Profit on Ad Spend and know exactly how much profit you make.
- Deliver better input to let Google improve campaign performance (profit).
Let’s look at how to get your profit data in Google Ads.
How to track profit in Google Ads
There are a few ways to implement profit tracking Google Ads. You can import your own profit data, or you can automate it with a tool like ProfitMetrics.io.
If you’re manually importing your own profit data, you need to know how to calculate the profit on every order. Take the turnover and deduct all fixed (cost of goods sold) and variable costs (shipping & handling, payment fees etc.):
It’s a huge pain to do this manually, so we always use ProfitMetrics. It’s the best profit tracking tool out there and you can configure your profit margins easily (plus they have additional benefits such as server-side tracking, conversion booster, a solid dashboard etc.).
ProfitMetrics is easy to set up and you can start tracking profit in less than 20 minutes.
After implementing, you will unlock new columns in Google Ads with gross profit and POAS data:
With this data, you instantly see which campaigns are profitable, and which ones aren’t.
How to use profit data in Google Ads (and the danger of switching to POAS)
You can do two things with this newly unlocked data in Google Ads:
1: Analysis and reporting: see which campaigns are (not) profitable.
The first way to use your profit data is for analysis and reporting purposes. Simply check which campaigns are (not) profitable and report back to your client or team. The new profitability insights are good conversation starters and can help you determine your next steps: optimize certain campaigns, adjust targets and budgets etc.
2: Optimization: actively steer on profit data and POAS.
The second way to use your profit data is to actively steer on it (going from ROAS to POAS). Important note: do NOT make a cold turkey switch from ROAS to POAS! Your campaigns will likely suffer because Smart Bidding will optimize for a much lower target, essentially giving it a signal to spend more.
Important remarks when changing bid strategy from tROAS to tPOAS
If you want to actively steer on profit (POAS) instead of revenue (ROAS), take these points into consideration:
- Gather data as secondary conversion goals (30 days and >100 conversions)
- After 30 days, make the POAS conversions primary and apply campaign specific goals.
- Create a 50/50 campaign experiment and test its impact and effectiveness.
- Use Portfolio Bid Strategies with a Max CPC cap to prevent overspend.
- Base your initial POAS target on the achieved average POAS.
- If your CPC increases heavily, adjust your budget to avoid overspend.
- Avoid making changes to your base or trial campaigns during the test.
- Exclude the ramp-up period (~1 week) and keep in mind your conversion lag.
Do NOT take POAS tests lightly and only run them if you know exactly what you’re doing. You have to be ready for overspend in the beginning and must have a concrete testing plan.
The best way to start out, is by implementing profit data and gathering data through secondary conversion goals. That way, you can familiarize yourself with the new data, analyze which campaigns are (not) profitable, and report back to your client or team.
These tips will get you going, but there is much more that goes into profit tracking that we can’t share in this short newsletter.
If you want our help in implementing profit and POAS for your accounts, you will love our Conversion Tracking Mastery course. We'll take you through the entire implementation of all advanced Google Ads tracking techniques, step-by-step.
If you want to master POAS, as well as other advanced conversion tracking techniques (Value Based Bidding, Consent Mode, Enhanced Conversions for Leads and so much more), then enroll here.
TLDR recap
Implement profit tracking and enable Profit On Ad Spend (POAS) to unlock these benefits:
- See gross profit data in Google Ads.
- Stop unprofitable ads and scale hidden winners.
- Increase Profit on Ad Spend and know exactly how much profit you make.
- Deliver better input to let Google improve campaign performance (profit).
The easiest way to track profit in Google Ads is with a tool like ProfitMetrics.
That’s all for today, see you again next week!
Cheers,
Bob & Miles
If you want our help in implementing profit and POAS for your accounts, you will love our Conversion Tracking Mastery course. We'll take you through the entire implementation of all advanced Google Ads tracking techniques, step-by-step.
If you want to master POAS, as well as other advanced conversion tracking techniques (Value Based Bidding, Consent Mode, Enhanced Conversions for Leads and so much more), then enroll here.
Disclaimer: this newsletter is NOT sponsored by ProfitMetrics but we did include affiliate links. We only ever recommend tools we actually use ourselves. ProfitMetrics is a fantastic company with a big, positive impact on the PPC world and we’re 100% sure you will improve your campaigns by using their tool.
