Want a Little-Known Formula to Estimate Profit per Search Term?

Tim Gilbert · 11 September 2017

Most people miss the key piece of information when they want to find out how much money each search term is earning or costing. Everyone knows to look at Average Clicks, CTR, conversion rate, cost, which products the search term found, as well as the gross and net from each of those products. The first three pieces of search term information are readily available from the SQR report. You can look up the price from the product feed, and either look up the exact net or estimate the net based on the average percentage for the company.

Here’s the hard-to-find information most people miss: the correlation between search terms and products leading to actual revenue. You can’t locate this information unless you already have your products divided into individual product groups in your Google Shopping Adwords campaigns or do an analysis to find the matches between search terms and products.

You can use the formula:

  1. Multiply each search term’s #Clicks by CTR and Conversion Rate to get the average conversions per month for each search term:
    • average clicks X average CTR X average conversion rate = average conversions per month
  2. Then calculate the average price and profit for all the products that relate to that search term:
    • average conversions per month X average group product price = average revenue
    • average conversions per month X average group product profit = average profit

Now you can make more informed decisions about appropriate bid amounts for each search term. If you want to go further, use an expected performance metric based on # impressions to prioritize your efforts. This would unlock the potential for examining the total bottom-line impact of an under-performing or well-performing search terms.

Also, the higher the search term specificity, the more you can optimize your bids.

You can also break up each search query into words and phrases to examine average profitability on a more granular basis. This would allow for search-engine-optimizing your product titles by adding the attributes that have the highest profit margins.

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