The single most important number in AdWords

Posted by Josh on Monday, April 7th, 2014.

AdWords is a very powerful, flexible system, and with that comes complexity. This complexity can obscure some very important information, such as if and when you’re running out of your daily budget. This is where one of the most important and frequently overlooked numbers comes into play: Impression Share (IS). This is the percentage of people who search on your keywords that are being shown your ads. It’s one critical measure of your campaign’s effective reach. If you are bidding too low or your budget runs out before the end of the day, IS will be substantially less than 100%.

It’s tempting to leap to the conclusion that you want 100% impression share, but that is likely not the case. To see why, let’s look at the two primary methods of losing impression share: “Lost IS (budget)” and “Lost IS (rank)”. The first shows how much visibility was lost because your account ran out of money before the end of the day. The latter shows how much was lost because your ad rank is lower down the page and thus they aren’t shown as often. (Higher ranked ads get shown more often, not just higher on the page.) If either of these quantities are non-zero, then your IS will be less than 100%.

Lost IS (budget) > 0%
There are two interpretations to seeing a value of Lost IS (budget) above zero. First is that you could acquire more traffic by increasing your budget. The second is that you could be paying too much for your traffic. I’ve written before about how you can increase traffic by lowering your bids. Either way you look at it, you should strive to lower Lost IS (budget) to something close to zero as it represents lost opportunity. If you really can’t increase your daily budget, you should lower bids to get more traffic.

Lost IS (rank) > 0%
If your bids are low enough that your ad shows well below other ads, they also will get swapped out for competitors’ ads more often. The only solution is to increase ad rank by some combination of improved ad quality, landing page quality, or increased bids. Note that increasing bids means higher cost-per-click and thus higher cost-per-visit which may not make economic sense. If such is the case, then a high Lost IS (rank) may be perfectly normal.

So what is the most important number in AdWords? It’s not Impression Share, which can be substantially less than 100% for good reasons. The answer is Lost IS (budget). It is a measure of how well you’ve deployed your budget. Either you should spend more or bid less to strive for a value close to zero.