Profitable Google Ads – 7 Steps to a Revenue Faucet

Profitable Google Ads campaigns are the goal, but as any experienced marketer knows, paid advertising can be a double-edged sword. It can be a budget sinkhole or a revenue faucet. Let’s explore how to avoid the former and embrace the latter.

On one hand, platforms like Google Ads provide unparalleled visibility and targeting capabilities. You can use paid ads to get your products and services in front of purchase-ready buyers. People who respond to search ads have, for the most part, done their research, and they are ready to buy.

But beware, poorly managed ad campaigns can quickly become money pits, draining your marketing budget without any return on ad spend.

What’s the secret to profitable Google Ads search campaigns?

What’s the key to harnessing the power of Google ads while avoiding the pitfalls?

How can you be sure to recover your ad spend profitably?

Basically, should your business use Google Ads?

This post will help you get started with Google ads, enabling you to use this powerful channel as a sustainable revenue source for your business.

Don’t Leave Empty Handed!

Get Digital Tips & Tricks Delivered to Your Inbox

• Please provide your email address.*
• Comments
  This field is for validation purposes and should be left unchanged.

Δ

We will never share your email address.

I will share the seven steps you should follow to recover your Google Ads costs through sales and achieve a positive and profitable return on ad spend (ROAS).

Many YouTube tutorials show you how to set up campaigns. In this post, I highlight the important stuff not covered in “how-to” videos. You’ll learn how to:

• Calculate your allowable cost per order,
• Optimize campaigns for maximum conversions, and
• Gradually scale budgets for top performers.

Hopefully, after reading this post, you’ll have a proven framework for profitably turning ad spending into sales. You won’t be an expert—Google Ads is a deep resource—but you will know enough to get started safely. By the end, you’ll have an actionable plan to stop viewing Google Ads as a scary expense and start seeing it as a revenue faucet for your business.

7 Steps to a Profitable Google Ads Revenue Faucet

Before we dig in here, I want to set your expectations. This is especially important if you haven’t used Google Ads in the past. Being successful at Google Ads requires three things:

1. You will need to be patient. Testing typically requires at least three months. It takes time for Google to understand what works for you. Until you’ve generated at least 30 sales in 30 days, you are still in test mode.
2. You will need a budget. During the test phase, there will be some scary times when the conversions aren’t happening, and you aren’t seeing the sales you need to. THIS IS NORMAL! Don’t panic, and don’t start cutting the budget. See point one: Google needs time to determine what works for you.
3. You will need to pay attention to the details. ‘Optimizing’ means carefully considering what’s happening to determine the keywords that work for you. Water the flowers and prune the weeds. Optimizing does not mean rapid or large changes. Make your adjustments gradually and slowly. See point one above.

We recommend that you start with a simple search campaign and this is what we cover in this article. There are other campaign types, for example, you may have heard that Performance Max is generating great results. This may well be true and the other campaign types are definitely something to consider once you have some history in your Google Ads account. The more history you have, the less guessing Google needs to do. Spray and prey is not a strategy.

Did I mention it’s important to be patient?

Step 1 – Calculate Your Allowable Cost per Order

Your allowable cost per order (ACPO) is the foundation for ensuring your Google Ads spend is profitable.

What is this thing I’ve never heard of?

The ACPO is a profit-first calculation used to set your ad budget. Because it directly ties your ad spend to your business’s revenue, costs, and profit goals, it provides the ultimate limiter on your marketing.

First, let’s define, in detail, what the Allowable Cost per Order is.

The ACPO represents the maximum amount you can spend to acquire each new customer order and achieve your desired profit margins.

By calculating your campaign ACPO up front, you have a clear guardrail for how much you can invest to acquire revenue profitably.

With this ACPO spending limit, spending on marketing and paid ads is less scary. You won’t be guessing. You will know what your limit is. The ACPO brings reality-based discipline to your spending. By understanding the campaign’s ACPO, you don’t need to fear eroding your margins and recovering marketing costs through sales revenue will be easier.

For example, if your ACPO is $75, this tells you that you can spend up to $75 in advertising to acquire each new $150 order and still hit your profit targets because your profit is baked into the ACPO.

This is why the ACPO is the ideal budgeting metric. You will use the ACPO as the basis for optimization, and once you’ve established your Google Ads account, you can use it for the CPA smart bidding strategy.

So, how is this magic number calculated?

To calculate your Allowable Cost per Order, use this formula:

Average Order Value – (Fixed Costs + Variable Costs + Desired Profit) = Allowable Cost per Order

Let’s define our terms:

1. Average Order Value—is the average revenue you anticipate for the products/services you plan to sell with the campaign. The average order value includes the value of the primary product plus the amortized value of upsells and downsells included in the sales funnel. I’ve also seen marketers include a percentage of lifetime value in the average order value.
2. Fixed Costs are the business’s fixed costs amortized to a sales unit, such as overhead, admin labor, etc., divided by the number of units it plans to sell. This is the most challenging element, so we’ve provided more detail below.
3. Variable Costs—are the variable costs per unit sold. Variable costs include the product and campaign expenses, such as the cost of goods, creative development and production costs, shipping, etc., divided by the number of units you expect to sell.
4. Desired profit—is the desired profit per order.

To put all this in the real world, the following lays out how a course creator would determine each element required to calculate the ACPO.

There are two elements in the Average Order Value.

1. A course creator needs to consider the price points for each product in the sales funnel, and
2. They also need to estimate the likelihood of customers purchasing upsell and down-sell offers.

Here are the steps to follow to determine fixed costs.

1) Determine the Revenue from Each Product

A course creator is planning a campaign to sell the following products and, based on past experience, they anticipate customer uptake behavior:

• Primary product (course): $500
• Upsell VIP coaching: $750 (10% of customers take this offer)
• Down-sell workbook: $24 (50% of customers take this offer)

Primary Product Revenue: since every customer buys the primary product, the anticipated revenue is $500

Upsell VIP Coaching Revenue: 10% of customers purchase the upsell, so the anticipated revenue per customer is $750 x 0.10 = $75

Down-sell Workbook Revenue: 50% of customers purchase the down-sell, so the anticipated revenue per customer is $24 x 0.50 = $12

2) Calculate the Average Order Value (AOV)

Combine the revenues from the primary product, upsell, and down-sell offers to get the average revenue per order.

Total revenue per order = primary product revenue + average upsell revenue per sale + average down-sell revenue per sale.

Total Revenue per Order = $500 + $75 + $12 = $587

The Average Order Value (AOV) for the course creator’s campaign is $587.

This value reflects the average amount each customer spends per order, considering the different offers and the likelihood of purchasing them.

Determining the fixed costs attributed to a sale trips people up often. It involves identifying and allocating constant costs, sometimes called operating costs, incurred regardless of the number of units sold. Fixed costs typically include operating expenses such as rent, salaries, insurance, software and website subscriptions, and equipment depreciation.

To illustrate this, let’s walk through the calculation step-by-step:

1) Determine the Total Fixed Costs

Imagine a course creator with the following fixed monthly costs:

• Office rent: $2,000
• Salaries: $10,000
• Insurance: $500
• Software and website subscriptions: $500
• Depreciation of equipment: $200

Total fixed costs per month:

$2,000 + $10,000 + $500 + $500 + $200 = $13,200

2) Estimate the Number of Orders per Month

Let’s assume they expect to complete 200 orders per month. This estimate includes the campaign’s projected sales and the expected sales from other efforts.

3) Calculate Fixed Cost per Order

Fixed Cost per Order = Total Fixed Costs / Number of Orders

Fixed Cost per Order = $13,200 / 200 = $66

The fixed cost attributed to each sale is $66.

The course creator must also identify the campaign-related costs to calculate the variable costs per order associated with the campaign.

For example, creative development, campaign management, and customer support are three campaign-specific costs only incurred when developing the campaign. Variable expenses are allocated based on projected sales.

Here’s a step-by-step approach.

A course creator has the following variable costs:

• Creative development (ad and landing page design and copy, and email marketing): $3,500
• Campaign management: $2,500
• Customer support: $1,000

The course creator anticipates selling 100 units with the campaign.

1) Determine the Total Variable Costs

Creative Development Costs – $3,500

Campaign Management Costs – $2,500

Customer Support Costs – $1,000

Total Variable Costs = $3,500 + $2,500 + $1,000 = $7,000

2) Calculate the Variable Cost per Order

Divide the total variable costs by the anticipated number of units sold to find the variable cost per order.

Variable Cost per Order = $7,000 / 100 = $70

Plug these numbers into the formula to get the campaign’s allowable cost for acquiring each new order profitably.

ACPO = Average Order Value – (Fixed Costs + Variable Costs + Desired Profit)

ACPO = $587 – ($66 + $70 + $100)

ACPO = $351

Our course creator can spend up to $351 to profitably acquire a new customer.

The article How Knowing Your Allowable Cost per Order Gives You Freedom provides an in-depth look at how to calculate your ACPO.

Since the plan is to sell 100 courses, the course creator knows they can spend up to 100 x $351 = $35,100 to obtain one hundred new course subscribers.

Remember, hope is not a strategy.

By setting your marketing budget with the ACPO, you’ll tie every dollar you spend on Google Ads and other channels to specific revenue and profit targets. The ACPO aligns your marketing budget with your business goals.

“The art of war teaches us to rely not on the likelihood of the enemy’s not coming, but on our own readiness to receive him; not on the chance of his not attacking, but rather on the fact that we have made our position unassailable.” ~ Sun Tzu – The Art of War

Step 2 – Start with a Realistic Test Budget

Once you’ve calculated your allowable cost per order (ACPO), you want to avoid diving into Google Ads with a massive budget.

There are lots of variables to consider.

For example, the initial ACPO calculation is often based on estimates and past experience.

You can control keyword selection, bidding strategy, landing page, and ad copy. Still, there are factors outside of your control, such as the weather, the economy, and consumer sentiment.

All these things and more can affect your campaign.

The smarter approach is to use a small test budget to validate your assumptions and performance before scaling up.

When launching a new Google Ads campaign, testing and optimization are required to maximize its efficiency.

This takes time.

And, as mentioned above, the initial ACPO and pretty much everything else in the beginning is based on a lot of assumptions. You want to validate these decisions.

If you choose an initial budget that is too large, you risk burning through a lot of money while your campaign is still underperforming.

This will require some patience, but we’re trying to avoid senseless spending and create a revenue faucet.

A smaller test budget limits your downside risk and lets you experiment and learn what works (and what doesn’t) with lower stakes. Once you identify a winning campaign, you can gradually open up the faucet to increase volume.

But how small should the budget be? How do I determine a test budget?

I cannot emphasize this enough—a profitable Google Ads search campaign begins and ends with keywords.

Use the Google Keyword Planner (free) to find your keywords and estimate costs per click. You can also use tools like Keywords Everywhere (low cost, and I’m a fan) and tools from ahrefs, SEMrush, and MOZ to find keywords. They all have free tools to get you started, but their power shines when you pay for their pro plans. While the subscription cost is moderate when you start, you can get by quite nicely with the free tools.

Keyword research is a process and not the purpose of this post. Follow the link to learn more about keyword research.

Your goal is to have a list of ten to fifteen related moderate to low-competition keywords with estimated volume and Cost-per-click ranges.

In this example, prepared for an existing client, we’ve identified a group of keywords related to older golfers who experience pain in large muscle groups. The product offered is a $499 package of equipment and training.

As you can see in the image above, the CPC ranges from $0.04 to $5.45. I appreciate that this is simplistic, but you can start with the average (.04 + 5.45) / 2 = $2.745 and adjust your bids accordingly. Start bidding below the average for modified broad match keywords and above for exact match keywords. The objective of the test is to determine a realistic average CPC, but this is a good place to start.

The average conversion rate for Google Ads across all industries on the search network is 3.75%. (source Wordstream)

However, this product falls into the fitness equipment category, and there isn’t an average conversion rate available, so you should look at related categories to estimate a conversion rate for the fitness equipment category.

For example, let’s consider the following:

• The general average conversion rate is 3.75%
• The healthcare industry has an average conversion rate of 3.36%.
• The e-commerce sector has an average conversion rate of 2.81%.

These numbers change, so checking the latest benchmarks as part of your planning process is a good idea.

Considering these factors and the specific nature of the product and target audience (a $499 equipment and training package for older golfers), it’s reasonable to estimate a conversion rate between 2.5% and 3.5% for your campaign.

To be conservative, we’ll use a 3% conversion rate as a starting point. This considers that the target audience (older golfers) is specific and likely interested in solutions to play more often with less pain.

Remember that this is an estimate. Many factors will influence the final conversion rate. For example, ad quality, landing page design and copy, and targeting precision can all affect your conversion rate.

As with the estimated CPC, we’ll monitor the test campaign closely and adjust as needed.

A Google Ads campaign is a waterfall with several levels, from impressions to clicks to conversions. We need to understand the waterfall required to break even. We’ll work backward from the allowable cost per order to determine each level.

Let’s break this down step by step:

1. Allowable cost per order: $250

2. Average CPC $2.745

Now, let’s calculate the waterfall:

1. Clicks needed to break even:

$250 (allowable cost per sale) / $2.745 (average CPC) ≈ 91.07 clicks

You need at most 91 clicks to generate one profitable sale.

2. Impressions needed:

We need to assume a click-through rate (CTR) to determine the required impressions. The average CTR for Google Ads across all industries is about 3.17%.

   Impressions = Clicks / CTR

   Impressions = 91 / 0.0317 ≈ 2,870

Like the other metrics discussed, monitoring and adjusting the CTR using actual test results is important.

The waterfall to generate a sale using your $250 allowable cost per order would be:

1. 2,870 impressions to generate
2. 91 clicks, which should result in
3. One order (sale)

Keep in mind that this is a simplified calculation based on averages. Your performance will vary depending on ad quality, landing page copy, targeting, and CPC competition.

At the risk of sounding like a broken record, monitoring actual test campaign performance and adjusting or confirming the assumptions as the test progresses is crucial.

A starting test budget of $2,000 to $2,500 per month would be appropriate for a single keyword search campaign, targeting older golfers with a fitness equipment and training offer to help them play more often with less pain.

This budget range aligns with the recommendations for newcomers to Google Ads or those with limited experience while still allowing for market competitiveness.

How did we get to this number?

1. The average CPC is $2.745 (calculated from the range shown in Keyword Planner).
2. Your allowable cost per sale is $250, which means you need about 91 clicks to generate one sale (250 / 2.745 ≈ 91).
3. A $2,000 to $2,500 budget would generate 728 to 910 monthly clicks (2000 / 2.745 ≈ 728 and 2500 / 2.745 ≈ 910).
4. This many clicks will provide enough data to evaluate the campaign’s performance. If your conversion rate meets expectations, it should also generate 8 to 10 sales ($4,000 to $5,000).
5. The recommended budget aligns with the advice to allocate at least $2,000 for a fair test of a single keyword.

However, you’re likely targeting multiple keywords, so you will need to consider a larger budget. Let’s look at how to adjust the test budget for 10-12 keywords.

1. Increase the overall budget. With 10-12 keywords, you’ll need a larger budget to give each keyword a fair chance. But you do not need to 10X the budget. A reasonable starting point would be to multiply the initial budget by 3-4.

If we take the recommended $2,000-$2,500 monthly budget for a keyword, then a $6,000-$10,000 budget for testing 10-12 keywords makes sense.

2. Allocate budget per keyword. Back-test this assumption by allocating the budget per keyword. For example, if you have a $7,500 monthly budget and 12 keywords, you’d start with $625 per keyword per month.

3. Prioritize keywords. Not all keywords are created equal. You would allocate more of your budget to the keywords more likely to perform. Your assumptions are formed based on experience, keyword relevance, search volume, and conversion potential. You might allocate 60-70% of your budget to your top 3-4 keywords and the remaining 30-40% to the others.

4. Consider keyword costs. The targeted keywords have CPCs ranging from $0.04 to $5.45. Adjust individual keyword budgets based on their specific CPCs to ensure each gets enough clicks for meaningful data.

5. Use an extended test period. With more keywords, you’ll need a longer test period to gather sufficient data. Plan for at least 2-3 months of testing to account for all keywords and potential variations in performance. Of course, the test period can be shorter if you increase the budget.

6. Use automated bidding strategies. If you have multiple keywords, consider using Google’s automated bidding strategies, such as Target CPA or Maximize Conversions, to optimize your budget allocation across keywords.

7. Monitor and adjust. It’s a test, so closely monitor each keyword’s performance and be prepared to move the budget from poor-performing keywords to those showing promise.

A larger budget may seem scary, but it’s not happening in a vacuum. An $8K to $10K Google Ads test budget will generate 2,900 to 3,600 clicks, which, if your estimates are sound, will result in ≈$18.K to $23.5K in sales.

The goal is to gather enough data to decide if Google Ads is a profitable channel and then determine how best to use it to maximize the budget’s impact.

When optimizing the test campaign, i.e., determining which keywords to invest in and which to drop, we need to consider whether or not differences in performance are statistically significant.

I’m not going to go into all the math here. It is excessive and unnecessary for our needs.

What you’d like is at least 100 clicks on each keyword. But getting to this level will likely take more time and treasure than you have.

Here’s a basic guide for determining what’s working and what’s not.

1. Start with a smaller set of keywords. Initially, focus on 5-10 highly relevant keywords per ad group rather than 15 or more. This allows for more targeted ad copy and better budget allocation. You can add more keywords and assets later.

2. Use single keyword ad groups (SKAGs) for your most important terms. This means having just one keyword per ad group for your highest-potential keywords. This makes it easier to track and assess the results.

3. Monitor performance closely. Instead of waiting for 100-200 clicks per keyword, which could take a long time with your budget, look at early performance indicators like:

• Click-through rate (CTR)
• Quality Score
• Average position
• Conversion rate (even with fewer conversions)

4. Set a reasonable time frame. Give your keywords at least 2-4 weeks to gather initial data, even if you reach less than 100-200 clicks per keyword.

5. Use relative performance. Compare keywords against each other within your account rather than against industry benchmarks that might require more data.

6. Consider conversion trends. Even with fewer than 100 clicks, you can see which keywords are more likely to convert.

7. Utilize Google’s automated bidding strategies. These can help optimize your budget across keywords, even with limited data.

8. Be willing to make decisions with less data. While more data is always better, waiting for enough data may not be feasible with your budget. Be prepared to make initial optimizations based on the data you have available.

This approach allows you to optimize your campaign sooner, making incremental improvements as you gather more data over time. It’s a more practical method for advertisers with limited budgets who still want to make data-driven decisions.

For example, say your ACPO is $100, and you want to test getting 20 conversions per month initially. If the estimated average cost per conversion is $50, the calculator would recommend a small starter budget of around $1,000 per month.

A $1,000 budget allows you to run tight, highly targeted campaigns to start generating conversion data and sales. As you optimize ads, offers, and landing pages, you can reinvest profits to scale up the number of keywords and the budget gradually.

The key to not risking your entire budget is patience and monitoring performance to identify what’s working. A lower test budget provides breathing room to improve performance before ramping up spending. You can read more about campaign testing in our post, Campaign Testing – 7 Things You Need to Know.

Step 3 – Target Transaction-Intent Keywords

I mentioned this before, but it’s worth reiterating: Identifying the keywords to target is crucial in determining whether your Google Ads generate profitable revenue.

Please note that I said ‘keywords,’ not ‘Cost per Click.’ It’s the keywords that matter. A more expensive keyword that converts is better than an inexpensive keyword that generates clicks (cost) and no conversions.

The right keywords will deliver a steady stream of motivated buyers, while the wrong ones can lead to lots of wasted ad dollars.

Keywords are key (sorry) to Google ads being a revenue faucet rather than a budget drain.

The ideal keywords to target with Google Ads are those with high purchase search intent. You want to get in front of searchers looking to buy a product or service like yours right now.

Keyword research tools like Ahrefs, SEMRush, and Google’s Keyword Planner can help identify these high-intent terms. Look for keywords containing:

• Product names (e.g., “buy Sony headphones”)
• Model numbers (e.g., “iPhone 14 Pro”)
• Transactional words like “buy,” “purchase,” “deal,” etc.

Using Google to test for search intent is smart and free. It isn’t a high-potential keyword if you search a keyword and the search engine results page (SERP) shows information articles. If the SERP shows lots of product listings, then Google judges that the keyword has transactional intent, which makes it a keyword you should consider.

You should also analyze search volume and competition metrics to gauge keyword potential. Higher search volumes but lower competition can signal an opportunity.

Long-tail, specific keyword phrases are often better than broad, generic terms for attracting purchase-ready searchers. For example, “women’s running shoes size 8” is more targeted than “running shoes.”

However, purchase intent alone isn’t enough. You should also consider the cost per conversion estimate for each keyword relative to your allowable cost per order (ACPO).

Google’s Keyword Planner provides many metrics for each keyword.

For example, use the following to project the cost per conversion:

• If a keyword has a $1 CPC
• And your conversion rate is 2%
• You can expect a $50 cost per conversion (1/.02).

If your ACPO is $75, the keyword is a candidate to target.

The ideal keywords will have the following:

1. Transactional search intent
2. High volume and low competition scores
3. Relatively low cost-per-conversion estimates—the cost per conversion is lower than your ACPO

Every keyword you will test won’t be ideal. Generally, transactional intent is most important, volume is next but mitigated by the competitive score, and the cost per conversion estimate is least important as you will determine your campaigns’s metrics in the test.

By focusing your Google Ads budget on these high-intent, profitable keywords, you set yourself up to start strong.

Step 4 – Optimize Ads and Landing Pages for Conversions

Even if you’re targeting the perfect high-intent keywords, your Google Ads campaigns will only recover costs if the ads generate qualified clicks and the landing pages convert those clicks into sales.

Your Google Search ads need to achieve two goals: catch the eye of potential buyers among the other ad being presented on the SERP and clearly convey the unique value of your offer.

Some tips for writing clickable ad copy:

• Use keywords from the user’s search query in your headlines and descriptions
• Call out promotions, discounts, or unique selling points
• Don’t be cute—plain-spoken headlines will perform better
• Highlight benefits over features
• Ask questions or use calls-to-action to drive clicks
• Test different value propositions and language

Our post, Why Benefit Headlines Perform, will get you started with the information you need to craft clickable headlines.

For example, an e-commerce brand selling noise-canceling headphones might test ad copy like:

“Noise-Canceling Headphones | 50% Off”

“Immersive Audio Anywhere. Noise-Canceling Headphones on Sale.”

“Need Focus Music? Try Our Top-Rated Noise-Canceling Headphones.”

Pro Tip: Use the most effective ad copy in other keyword campaigns.

But a clickable ad alone isn’t enough. Your landing pages need to deliver on the promise made in your ad copy through a seamless, conversion-optimized experience.

A side note from my past: I managed a 7-figure digital budget for a name-brand automotive retailer. The media team was fine-tuning the campaigns and seeing single-digit improvements. I asked to see the landing pages, and they were, being charitable here, not great. We put time and thought into optimizing the landing pages and used A/B Split testing to select the winners. The results were a 50%+ improvement in conversions—landing pages matter.

Some landing page best practices:

• Fast-loading design that puts the offer above the fold
• The above-the-fold copy needs to be congruent with the ad copy and reinforce the value proposition and benefits
• Use persuasive copy in a natural tone, visuals, and social proof like testimonials and reviews
• Remove unnecessary links, navigation, and distractions
• Make their pathway clear—introduce a clear call to action early and often to drive the conversion

For example, searching for “ai marketing automation masterclass” generates a number of sponsored listings on the SERP.

The ad for a course at MIT stands out for me. (I did a computer music course at MIT in college.)

The ad’s headline, ‘6-Week MIT Online Short Course | AI: Business Strategy Course,’ clearly communicates the benefits offered and the description, Learn How Generative AI Tools Like ChatGPT Can Enhance Your Business. Register Online Now reinforces the benefits you can expect if you click through to the landing page.

The MIT | Sloan Course landing page follows best practices well:

• Colors and fonts are consistent with the brand’s online presence.
• There are no exit points (navigation) to distract visitors.
• The page communicates the program’s benefits using simple but powerful language that is congruent with the ad headline and description.
• The CTA is displayed loudly and proudly above the fold. It scrolls you to the lead form at the bottom of the page, so you know there’s more information if needed.
• The hero section doesn’t take over the display port, so it’s clear that more information is available below the fold.
• The content down the page answers the prospect’s questions and reinforces the program’s features and benefits.
• The page uses the faculty bios as reasons to believe their offer.
• There’s a video.
• Then, a testimonial is displayed—more reason to believe.
• The page then overcomes obstacles.
• Finally, the page displays the lead form.

Aligning your ads with a compelling landing page experience will maximize the chances that clicks become sales.

Step 5 – Implement Conversion Tracking

What gets measured—gets done.

Conversion tracking is vital for understanding whether your Google Ads campaigns are recovering their costs through sales. Even when you use a Manual CPC Bidding Strategy, you need conversion tracking to take advantage of the Enhanced CPC AI. Conversion data is also critical for calculating your return on ad spend (ROAS) and optimizing keywords.

Google provides several conversion tracking options depending on your goals:

• Website conversions: Track when someone submits a lead form, makes a purchase, or takes a specific action on your site after clicking your ad.
• Phone call conversions: Count calls from your website, ads, or call extensions as conversions.
• Import offline conversions: Upload conversion data from call centers, stores, or manual sources to attribute it to your Google Ads campaigns.

For most online businesses, website purchase conversions are what you need.

Phone conversions make sense if you are a retail or service business.

Offline conversion data is helpful if you use Google ads to drive attendance at an event where sales happen.

To track these in Google Ads:

1. Place a code snippet on your checkout confirmation page using a tracking template like Google’s global site tag or the Google Analytics 4 tag.
2. Link your Google Ads account to your Google Analytics property or import purchase events directly.
3. Set up conversion value rules to record details like revenue, order ID, and other purchase data.

With this tracking in place, purchase conversion data flows into your Google Ads account at the campaign, ad group, keyword, and ad level.

ROAS is a key metric for Google Ads campaigns. It measures the revenue generated for every dollar spent on advertising.

You calculate the ROAS by dividing the total revenue attributed to ads by the total cost of those ads.

ROAS = Total Conversion Value / Total Ad Spend

It’s often shown as a ratio (e.g., 5:1) or a percentage (e.g., 500%). A 5:1 ROAS says you earned $5 for every $1 spent on Google Ads.

For example, if your Google Ads campaigns generated $50,000 in tracked revenue from purchases and you spent $10,000 on them, your ROAS would be 5.0 ($50,000/$10,000).

A ROAS above 1.0 means you recovered your ad costs through sales revenue. The higher the ROAS, the more profitable your Google Ads campaigns.

In the real world, an ROAS of 3:1 or higher is considered good, and using the ROAS metric to monitor keywords and ad groups is helpful. However, conversion revenue is gross and doesn’t consider campaign and product costs. Always compare your cost per acquisition (CPA) to your ACPO to ensure profitability.

Tracking conversion value and ROAS at a granular level lets you quickly identify your top and underperforming keywords. Those insights allow you to reallocate budgets to double down on what’s working and spend less on what’s not covering its ad spend.

Water the flowers and prune the weeds.

One quick note about this: you should track the CPA and ROAS numbers. CPA and ROAS bidding strategies can also be used. Don’t consider this approach until you have at least 30 sales in 30 days.

Comprehensive conversion tracking is essential for ensuring your Google Ads investment generates enough sales to be profitable based on your allowable cost per order.

I’ve barely scratched the surface here, but it’s enough to get started. There are lots of good tutorials on YouTube that you can use to dig into all this.

Step 6 – Continuously Optimize Top Performers

You’re not done yet! Even after you’ve used conversion tracking to identify top-performing keywords, you must continuously monitor and optimize your campaign to drive the best results.

With conversion data flowing in, you can analyze at a granular level which campaigns, ad groups, ads, keywords, and landing pages generate the most conversions and revenue relative to their cost.

For example, you may find that a particular ad group targeting “buy leather couches” has a stellar ROAS of 8.0 – meaning it generates $8 in revenue for every $1 spent on ads. Meanwhile, another ad group for “modern living room furniture” has a ROAS of just 2.5.

The smart move is to shift more of the budget to the “buy leather couches” ad group and its top keywords to maximize returns. You can move the budget away from the underperformers to:

• Increase bids on the top converting keywords
• Add more keyword variations around that theme
• Create more targeted ad groups and ads

This “doubling down” approach allows you to cut wasteful ad spending and reinvest the budget into successful campaigns.

It would be best to investigate why the “modern living room furniture” ad group isn’t performing. A few underperforming keywords may be dragging down the high performers. Always look at the details.ƒNIT

But what about those ad campaigns, groups, or keywords with a ROAS below 1.0—meaning they actually lose money?

You have two options:

1. Adjust bids down, modify ad copy and landing pages, and try to improve their performance with lower ad spend.
2. Pause them entirely to stem the losses if optimization attempts fail.

The goal is to reach an acceptable ROAS threshold, even if it is lower than your top campaigns. As long as they can recover their costs, they can still contribute.

However, don’t be afraid to cut losing campaigns completely. It’s better to remain disciplined and reallocate that wasted spend to your money-makers.

The key is using your ROAS and conversion data to continually identify your most effective and profitable Google Ads campaigns and channels. Then, reward the winners with more budget while starving the underperformers until they become profitable or are cut altogether.

Step 7 – Open the Faucet Slowly

We’re at the end—you’ve calculated the allowable cost per order, started with a test budget, targeted high-intent keywords, optimized ads and landing pages, and tracked conversions and ROAS to continuously optimize your Google Ads campaigns.

Your campaign generates a strong return on ad spend, generating sales revenue with a cost per sale that is less than your ACPO threshold.

The final step is to gradually scale the budgets for these money-making campaigns to increase sales volume while maintaining profitability.

Let’s say you have a Google Search campaign with an ROAS of 6.0 – meaning it generates $6 in revenue for every $1 spent on ads. And your ACPO analysis shows you can acquire new orders profitably with that 6x return.

This campaign is a proven winner, so you’ll want to increase its budget to drive more sales. However, wait to double or triple the budget. Doing so immediately could lead to inefficiencies as the extra spending gets spread across less targeted areas.

Instead, take an incremental approach:

1. Increase the budget by 20-30% for the next 2-4 week period
2. Monitor ROAS closely during this time to ensure it remains high
3. If ROAS holds steady, increase the budget by another 20-30%
4. Rinse and repeat, scaling up the budget gradually

Opening the faucet slowly lets you maintain your profitable ROAS as you add more impressions and conversions from your top campaigns.

But watch everything closely. You will reach a point where you’ve maxed out the market. The key is taking a data-driven, step-by-step approach to budget increases. Consistent incremental increases aligned with your allowable cost per order and using ROAS to monitor performance will generate sales like you are increasing the flow from a faucet.

Never Stop Optimizing for Profitable Google Ads Campaigns

Using Google ads is an ongoing process, not a one-and-done tactic. You must continually analyze your ROAS and conversion data and adjust bids, budgets, targets, and ad creative to maintain and improve profitability. Customer behavior and competition constantly shift, so your campaigns must adapt.

Find keywords with transaction intent using Google’s Keyword Planner or one of the other keyword research tools mentioned. Determine the CPC range for each keyword. Build your search campaign using the identified keywords and a manual CPC bidding strategy with Enhanced CPC enabled. You will need to set up conversion tracking on your website for this. Bid in the lower range for broad match keywords and in the higher range for exact match keywords.

Set up calendar reminders to review performance on a weekly or monthly cadence. During these audits, ask yourself:

• Which campaigns have a ROAS above my target? How can I scale them further?
• Which keywords, ads, or ad groups are underperforming? How can I optimize their performance or reallocate that budget?
• Look for new high-intent keywords that you can test.
• Are there opportunities to expand targeting into new locations or audiences?
• Can I improve quality scores through better ad relevance?
• Are there new ad extensions, formats, or automation features to test?
• How can I improve landing page performance?

Don’t consider smart bidding strategies until you have thirty conversions in thirty days. Once you have enough conversion data, consider switching to either the Target CPA or the Target ROAS bidding strategies.

Based on your findings, don’t hesitate to pause campaigns or shift budgets aggressively after you have at least thirty days of data. The data should guide your decisions, not gut instinct.

Always be testing—creating a profitable revenue faucet requires constant experimentation and optimization.

Marketers with patience who regularly make data-driven adjustments will see success from Google ads. By closely monitoring your allowable cost per order and ROAS, you can ensure your Google Ads investment is a revenue faucet, not a cash drain.

Related Posts

The Ultimate Guide to Creating a Profitable Online Course

Create and sell online courses. Learn how to use your knowledge to transform lives and earn income.

Read more…

Mastering Mid-Funnel Marketing

Learn how mid-funnel marketing supports the buyer’s journey to conversation and improves customer lifetime value.

Read more…

How to Craft a USP for a Business Like Yours

Learn how a USP that’s unique, clear and compelling breaks through the noise.

Read more…

Author: James Hipkin

Since 2010, James Hipkin has built his clients’ businesses with digital marketing. Today, James is passionate about websites and helping the rest of us understand online marketing. His customers value his jargon-free, common-sense approach. “James explains the ins and outs of digital marketing in ways that make sense.”

Use this link to book a meeting time with James.