How does wasted ad spend affect your account? At first glance, you might think that wasted ad spend and cost per conversion would have a linear relationship: every 10% increase in wasted ad spend would increase your cost per conversion by 10%. Boring, but not too bad, right? This is unfortunately not the case. In fact, wasted ad spend and cost per conversion have an exponential relationship . Because cost per click has a significant effect on cost per conversion, let's take a look at how wasted ad spend varies with cost per conversion for AdWords accounts with a cost per click around $1.00. Wasted ad spend has an exponential effect on cost per conversion Basically, for every 10% increase in wasted ad spend, your cost per conversion increases by 44-72%.
Advertising Continue reading below Everytime. For example, let's say you're currently wasting 30% of your budget on non-converting image masking service research and your cost per conversion is $10.00. If you start bidding on a number of new keywords and your wasted ad spend increases to 40%, your new cost per conversion will be around $14.40 to $17.20. [pullquote] Every 10% increase in wasted ad spend increases your cost per conversion by 44-72%. [/pullquote] If your wasted ad spend increases from 30% to 76%, your cost per conversion will be around $53.79 to $120.20. That's an increase from 540 to 1,200%! And this trend is true for every industry, conversion rate, and average cost per click. The fact is, the more money you waste on non-converting search terms, the less money you can invest in the search terms that matter.
Now, as exciting as this observation is, it's important to note that this model only explains about 60% of the variation in the data (for statisticians, R 2 = 0.597 after regression at the logarithmic level). However, it is an accurate model of the data (ρ <0.001). Therefore, the exact rate at which increased wasted ad spend affects your cost per conversion will vary from account to account while following the trends described in this article. Advertising Continue reading below That said, controlling your wasted ad spend is one of the best and most predictable ways to control your cost per conversion.