The concept

Here's a fundamental question that many AdWords advertisers ask:

Are my AdWords ads helping me make a profit?

To help get the answer, you'll want to understand your return on investment (known as ROI). ROI measures the ratio of your advertising costs to profits -- how much you've spent on advertising compared to how much profit you've made from those ads.

ROI is typically the most important measurement for advertisers because it shows the real effect that AdWords has on your business. While it's helpful to know the number of clicks and ad views you get, it's even better to know how your ads relate directly to the success of your business.

Why it matters

Here are just a few of the benefits of knowing your ROI:

  • Make more informed decisions about your budget and bid amounts so that you're spending the right amount to meet your business goals.
  • Understand which ads and keywords affect your profit the most so that you can focus your efforts and advertising budget on those things that you know are likely to bring money in.

How it's used

To measure your ROI, you'll need to track conversions, actions that you want your customers to take on your website after clicking your ad such as a purchase, sign-up, or download. AdWords has two free tools that help track conversions resulting from your ad: conversion tracking and Google Analytics. Use these tools in your AdWords account to quickly see how many sales or other conversions your AdWords ads are generating. Once your account builds up some conversion data, you can choose settings that automatically try to increase your conversions.

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