Google Tool Can Calculate What That Mobile Ad Is Really Worth

Adidas tested the AdWords-only calculator

Mobile doesn’t get enough credit. That’s largely the reason industry experts cite for mobile advertising’s pitiful pricing, often described as reaping pennies compared to the dimes online ads attract. To help rectify matters, Google has created a tool to let AdWords advertisers measure how mobile clicks lead to dollars.

“People are interested in the broad idea of, does mobile have a conversion problem. [Instead] we believe mobile has a measurement problem,” said Jason Spero, Google’s head of mobile global sales and strategy.

The new tool, the Full Value of Mobile Calculator, aims to measure what various mobile ad campaigns mean to a marketer’s bottom line, taking into account whether the campaign initially intended to drive calls, app installs, in-store traffic, mobile site visits or attribute cross-device attention and plugging in those metrics by connecting with an advertiser’s AdWords account.

To oversimplify the calculator's formula, it basically multiplies the number of people who take the initial call to action, like clicking to call a store, by the percentage who complete the next actions down the conversion funnel (i.e., completing a call and/or buying something), then multiplied by the value of the actual conversion (i.e., how much money the person spent). The result is the estimated revenue an advertiser received from the campaign.

The calculator arose from a partnership between Google and Adidas to help the sportswear brand determine how its search ads were driving people into the company’s owned-and-operated stores and how that translated into revenue. First, Google populated stats from Adidas' AdWords account on how many people clicked its ads to get directions to a store. Then Adidas and its agency iProspect ran some A/B tests, comparing markets in which it ran ads with those in which it didn’t and correlating foot traffic, to estimate how percentage of people who clicked for directions ended up in an Adidas store. (Twenty percent, it turns out.) Next, the brand factored in the portion of people who walk into a store and make a purchase—about one in five—followed by the average transaction amount, which was $70 to $75. After crunching all those figures, the companies were able to compute that each click on the ad’s store locator button was worth $3.20.

Adidas could take that $3.20 stat and conclude that that’s how much it would be willing to bid for click-to-store campaigns (though not necessarily how much it would need to bid, since AdWords operates as a second-price auction). That type of understanding is particularly important as Google migrates AdWords advertisers to the new Enhanced Campaigns bidding process. Rather than setting independent bids for desktop and mobile campaigns, Enhanced Campaigns tie the two together with advertisers placing a desktop bid price and how much more or less they’d be willing to pay to reach a mobile user. The change has been seen as Google attempting to buoy mobile ad rates by tethering them to their higher desktop counterparts. Spero said the Full Value of Mobile Calculator is “directly connected” to Enhanced Campaigns by providing the attribution to help marketers understand whether they’re effectively toggling their mobile and desktop buys.

While the calculator can be crucial to maximizing AdWords campaigns, Spero stressed that it’s only an estimator. For example, the ability to measure cross-device performance isn’t available yet and would be limited to users who are logged on to the Chrome browser on their phone and desktop computer with one account. To that end, the calculator doesn’t cycle its computations back to AdWords so that an advertiser can compute a mobile campaign’s value and have that instantly adjust its bid prices in AdWords.

“It’s not meant to be a real-time updating tool,” said Spero, noting that advertisers have to upload their AdWords data each time they want to use the tool and that if Google were to build a similar product to be used for bidding, it would launch through AdWords, not on a stand-alone site. The calculator will be available on the Full Value of Mobile microsite along with educational videos, case studies and tips.

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