In his book Ultimate Guide to Pay-Per-Click Advertising, internet marketing expert Richard Stokes helps you master advanced search engine strategies from top search engine marketers to increase your sales. In this edited excerpt, the author outlines the key information you need to track in order to measure the effectiveness of your pay-per-click ad campaigns.

You wouldn't run your business without occasionally looking at your income statement and balance sheet, would you? Yet you'd be surprised at how many small-business advertisers rarely take more than a casual look at their online advertising campaigns.

Knowing your overall campaign data will help you answer questions like:

  • What's a reasonable clickthrough rate to expect for my ads?
  • Am I spending too much (or too little) on advertising this month?
  • How much revenue could I earn each month from my paid search campaign?
  • Is my advertising for this particular keyword hurting or helping me?

There's no way to answer these questions without having a working knowledge of how your campaign has performed in the past. Without it, you'll never be able to make informed decisions about your campaign. With it, your eyes will open to problems and opportunities that were invisible before.

Here are the key statistics to watch:

  • Your average daily and monthly campaign spend
  • Your average impression share and coverage, i.e., the percentage of search engine users who are seeing your ads (also known as reach)
  • The number of visitors (clicks) you typically receive on both a daily and monthly basis
  • Your average clickthrough rate, or CTR, meaning the percentage of people who see your ads and actually click them
  • Your average conversion rate, or the percentage of visitors to your site who buy from you
  • Your spend relative to your competitors' (optional, but highly recommended)

The two most important statistics you need to track are your daily and monthly campaign spend. This will help you answer questions such as:

  • Are you spending $10 a day or $100?
  • How has your campaign spend changed over the past month?
  • What does a normal month look like?

Start by looking at your absolute dollar spend every day (or try to). If you don't do this, you may be in for some rude surprises when a keyword gets way more clicks than you were expecting and your campaign spend goes through the roof.

It's also a good idea to maintain a trending chart to help you distinguish between normal daily fluctuations and abnormal ones.  With it, you can see that when costs are highest and when they trend down. A chart can also tells your what's perfectly normal for daily cost fluctuations. Anything outside of the normal range should set off the alarm bells.

The next two statistics to track are coverage and impression share. Impression share is the percentage of the available search impressions in which your ads appear across all your keywords. Coverage is similar, except that it doesn't take traffic into account and can be used on individual keywords. These metrics tell you how much traffic you're leaving on the table.

Impression share is a nice-to-have, but coverage is indispensable because it tells you exactly where the problems lie by revealing places where your quality score lags behind your close competitors.

You'll also want to track both the daily and monthly clicks you're receiving from your pay-per-click campaigns. As with campaign costs, you need to be able to distinguish between normal daily fluctuations and trends either up or down.

Having charts of your costs and clicks is helpful, but it doesn't give you the whole picture. It's very easy to miss important changes in your campaign if you try to eyeball the charts against one another. For this reason, we also want to track the average daily clickthrough rate. By knowing what is normal and what is not, you'll be able to see when something may possibly be wrong with your campaign and dig deeper to find the cause.

The final one of our must-have statistics is our average website conversion rate. If your website pulled in twice the revenue this month than last, you might just pat yourself on the back and move on. Before you do, though, be sure to check out the average conversion rate. If it lags behind your sales, you may be missing out on something big.

The last metric is competitors' spend. Dramatic changes in your competitors' spend often provide valuable insights into their businesses. For instance, if you see a long-time competitor increase their bids, it's often a sign that something is working. Check their landing pages for new products, feature improvements, or even new layouts and copy.

On the other hand, if a competitor's bids and/or budget drop, it's often a sign that something isn't working. Aside from the strategic advantage this data gives you, it's also very handy for benchmarking your own campaign spend and traffic versus that of your competitors. This helps ensure you can at least achieve parity with your rivals.