Cracking the Code: Lowering Google Ads Costs and Maximizing Impression Share

"All right, how are you doing today, Garrett?"

"Doing great, how are you?"

"Hey, fantastic, thank you. Um, we're gonna make this one a little bit shorter. Sounds like you got some Thai food to eat with your wife."

"That's right, lunch plans, lunch date."

"Yep, that's awesome. Um, for anybody who wants to weigh into the conversation, I'm basically arguing that Penang Curry is much better than yellow curry. But I think Garrett's a little bit of a wimp when it comes to spice."

"I am very much a wimp with the spice."

"So, if you lost all your respect for him, I understand."

"That's probably already been gone if that's what caused the respect, but I understand."

"I don't know, I mean, different people care about different things. For somebody that loves marketing, they probably like you. But if they're really into curry or into spice and curry..."

"That's right, yeah, same thing."

"Yeah. Well, I'm super excited for today's episode. We've been talking about this a lot, and this is a topic that has a ton of myths and misunderstandings, not just among real estate investors but also among professionals. This is a topic where actual professional PPC marketers can't get it right after years of their career."

"Yeah, which is crazy. We have to have so much internal training around this within our company, and I don't think it's that complicated. So, hopefully, we can distill it and get through some of those myths and really understand what's going on and make something out of this."

"Definitely, yeah. And, if that's not enough mystery and hype, let's make it extra buzzwordy: black hat marketing for you. What if I could tell you that with this one trick you could cut down your lead quality or cutting down your cost per lead by 35 percent? Experts don't want you to know this one trick about Google Ads PPC."

"That's great. Stay tuned for more. You should definitely be a copywriter for ClickFunnels."

"That's right. All right, let's jump into it. Okay, so this is all surrounding impression share, and really there's kind of this fun trio of metrics surrounding impression share. But let's talk about first, like, what is impression share?"

"In very simple terms, it's basically how often your ads show up as a percentage of the total number of searches made for the keywords that you're bidding on."

"Exactly, and it is based on your criteria, right? So, it's like when you're eligible."

"Right. So, theoretically, 100 percent impression share means every time your ad could show, you show. Versus 10 percent might mean that 10 percent of the time you show. A lot of people, when they first hear about their metric, they're just like, 'Okay, perfect, how do I get it to 100?' Like, that's their idea."

"Right. And they almost think of an agency like the role of the agency is to get that number as high as possible. Pump it up because your job is, for a budget, to get me the highest impression share possible. Where's that logic flawed?"

"Well, I think where it's flawed is that not every search is of equal value, both from the person making the search and from what's being searched. If they were all equally great, then sure, max it out, get as much as possible. But that's not the case. Different searches are gonna bring you a better ROI, and different people making those searches are also going to give you a different ROI. So, you have to maximize that value on both a person and the search."

"Oh, absolutely. And you have the other layer, which is the cost, right? Everything's gonna have a different cost of what it takes. It's kind of like saying every house in the market we should be buying if we're a wholesaler. That's not the case because you intentionally avoid houses that sell for too much. And if somebody else is coming in willing to pay way more, then you don't want the house. I mean, of course, in real estate, if you could just be really good at sales and negotiation and even though there's a higher offer you could win the deal, that's great. In this world of PPC, there's no such thing as that, right? It's just kind of like it goes for whatever it goes for."

"Yeah, it's an auction."

"Yeah, it's an auction. So, I think that's super interesting. Then there's also the component of only certain things are feasible with a certain budget, right? So, higher impression share generally correlates with more leads if the quality of the... Well, assuming all the targeting parameters are the same. If you could take everything else the same and go from 20 to 40 percent impression share, you do get more leads. Usually costs more money though, right? But it never is all the same. So, that's where optimizing towards impression share just doesn't make sense unless all your other parameters are there. So, let's talk about this trio of metrics, right? We have search impression share, that's one of them. What are the other two?"

"The other two are gonna be subsets of that larger metric. They're going to be the percentage of your share that you've lost due to budget and the percentage lost due to rank."

"Let's dig in. Just before we get any further into that, I want to clarify exactly how this works. So, these three numbers, if you add them together, they equal 100. All right, so you have your entire universe of what's possible, and you're either showing up or you're not showing up because of budget or you're not showing up because of rank. Those are the only three options."

"Right, it's going to fall into one of those buckets. So basically, those two that you mentioned are lost impression share metrics. What's the difference between a lost impression share to budget and a lost impression share to rank?"

"So, rank is kind of a black box from Google, exactly how it's measured. But the simplest way to look at it is it's a combination of your bids, your ad quality, your keyword quality, and your landing page quality. But the biggest factor by far is your bids. So when we say rank, it's probably easiest to kind of just turn rank into bids because that's kind of the main purpose of this podcast. There are other ones we've done where we have talked about rank from ads and from landing pages, but for now, let's just focus on bids as the main driver of that metric."

"Well, yeah, I think that's really appropriate because the way some PPC marketers would look at this is like, 'Oh no, I have a lot of lost impression share to rank. I need to work on all those other things.' But really, those other things are where there is no limit to how good they can be, and you should always be working on them. So I don't think this is a signal that you need to work on them. I think those should always be maxed out. So assuming you're always doing everything you can there, then the only thing left to change is bids, correct? I don't think you should just start looking at writing your ads in a relevant way the second that you have a high impression share last rank, correct?"

"So basically, that's bids. Would it be fair to simplify that and say it pretty much means somebody else is bidding higher than you?"

"Yeah, so you didn't show up because somebody else was willing to pay more."

"Yep, okay. And what about budget?"

"Essentially, if we look at your ads being active over a given day, in essence, is how early in the day your ads stopped running because your budget was used up too early in the day. So if you're limited by budget, that means that your budget ran out, but there were still available impressions to be captured if your budget wasn't already used up by the clicks that were captured."

"Yeah, totally understood. I think a good comparison to this is picturing going to an auction. In this auction, they're going to sell 100 widgets throughout the day."

"I love a good widget."

"Yes, I love a good widget too. I don't know why 'widget' is just like the default word that people always use for stuff like this, but I'm just following the trend. Okay, I can't say that with a straight face. I'm gonna use the word 'widget.'"

"There's going to be 100 widgets sold during the day. Let's just say the day ends, and you have bought 25 of those widgets. That is a 25% impression share, basically assuming the widget is an impression. That's what Google sells. So let's talk about how that could have happened throughout the day. Let's just say on that day, the average widget ended up selling for forty dollars, but you were bidding a hundred dollars for those, and you just bought the first 25 that came, and then you basically just had to go home after the first 25 sold because you were out of money. Now you've got the next 75 that may be sold for less than what you were willing to pay because you're willing to pay 100 bucks for a widget, right? So the next 75 sold for 40 bucks or whatever the case is, and you didn't get those. That's lost impression share to budget because you were willing to pay the price, your bids were sufficient, but your budget was not. Even though this is worth it to me, I don't have the money to pay for it according to my budget. That's how you set your daily budget in Google."

"The other side of that would be you bought 25 widgets during the day and you bought them for 100 bucks each. Then, maybe you had 100 grand already at that auction, and you're ready to spend 100 grand, but you're only willing to pay 100 bucks for a widget. But then 75 of those widgets sold for 120, 150, 200, whatever the case is, something that you couldn't afford. So you weren't getting them not because you didn't have the money, you had plenty of money, but you just weren't willing to pay the price on an individual level. That's your last impression share to rank, correct? Do you think that's a decent enough analogy?"

"Yeah, and what's important to look at here is that both of those outcomes aren't necessarily good or bad. In your business, you could sell those, you know, again for two times your bid, and that's a win. It's important as you're going through this process to understand that your success isn't based on the metrics themselves. It's based on how those metrics help you get to the outcomes in your business that matter. You can crush it with these metrics and still be in the red as a business. Likewise, you can keep those low and think, 'Wow, I'm so frugal,' and you're losing out on all this volume that you could be capturing at a good margin. It's not black or white like high is good, low is bad. It's more like where does it have to be to kind of maximize, kind of reach that top point of that bell curve."

"Absolutely, there is totally a point. To bring that into the analogy, let's just say these widgets—I'm a wholesaler of widgets, right? Let's just say I can sell those for 200. If there is somebody who is now bidding 500 on that widget and buying it, what's the best thing for me to do? Not get competitive."

"Yeah, I want to pay 600 when I can only sell it for 200. Come on, agency, get me that widget for twice my price. Yeah, get upset at my bidder. That's the last thing I want to do, right?"

"Right, the best thing I could do is say, 'Okay, that's not the price that works for me,' and leave. In that way, losing to the rank is actually sometimes a really good thing if it's the right loss that you're doing because there's always some fool who's gonna pay too much, especially in these competitive worlds that we play in, especially where people don't understand these metrics and how they work."

"You talked about how there's not really good or bad, but there is optimal. I want to kind of clarify that a little bit because it's not like we want a certain impression share lost due to budget or rank or whatever the case is, but I would say that we do. Lost to rank is generally not a bad thing; however, lost due to budget can be a bad thing because it proves potential inefficiency."

"This is where most people get lost, so I'm gonna try to tiptoe nice and slow through this, and I'm hoping you can help make this super clear to understand. I think taking it back to this auction analogy, if we're just remembering that scenario, if we're going through and buying, you know, paying 100 bucks for every widget for the first 25, and then the rest of the day they sell for five dollars but we ran out of money, how could we more efficiently manage that whole situation?"

"It'd probably be that we're bidding less money for those widgets because we don't need to bid that much in order to win the number that we need because we're just going to run out of budget anyways, right? So we might be better off taking that same amount of money and bidding fifty dollars instead of a hundred dollars, and then maybe we could buy 40 widgets with our budget instead of 25 or, you know, whatever the numbers would work out to. It depends on what other people are bidding and stuff like that."

"There are two metrics. I don't know if this is just too deep, but I kind of think of it like there's one metric that doesn't exist in Google Ads but it absolutely should. It's one that's called potential spend, and I'll try to explain what this means. I can't tell if you're smiling at me like I'm just gonna lose everybody or like this makes sense."

"No, no, this is what like a deep cut that people need to really understand. I really think this is the level. There are different things sometimes we talk about on this podcast that a real estate investor, if you're working with an agency to manage it, you don't need to know that, right? You don't need to know all about keyword match types and different types of bid strategies and stuff. This you need to understand. This is basic foundational economics of your business as it relates to PPC. I think it's really important."

"As far as most people get for this, they see, um, I can't believe we haven't even mentioned this yet, they see this big red thing in the Google Ads account that says 'limited by budget.' This is basically just Google highlighting something in these underlying metrics, and they're telling you to do one thing. It's not necessarily what you should do, right?"

"For those that can't see, Garrett, he's raising his finger as if Google just wants you to spend more money."

"Right, blow that budget."

"Yeah, but it's not exactly the way to talk about it, so let's make sure we understand the metrics first, and then we'll dive into it. Because it's not just are you limited by budget or not; it's to what extent are you limited by budget, and that can't be shown by just a red sign that says, 'Hey, you spend more money.' But this potential spend—when we're talking about potential spend, and again, this isn't a metric that exists in Google, this is one you have to calculate yourself or just even understand theoretically."

"I wonder if we could put a link to this formula in the podcast show notes. I'm totally down to do that."

"Yeah, we can link to this formula instead, which, as far as I'm aware, I've never seen any other PPC marketer even talk about this. In the whole world of PPC, I don't know why nobody talks about this. But it's basically, picture you have an unlimited budget, right? Infinite dollars that you can spend, but your bids are fixed at whatever your bids are."

"Let's just say you're in a target CPA bid strategy, and you're bidding 300 per acquisition. What you're basically telling Google there is there are two constraints: one, I don't want to pay more than this cost per lead, and two, I can't spend more than my budget. But in this case, the budget's infinite, right? So you're basically saying, 'Give me as much volume as you can without surpassing that cost per lead.'"

"With their standard model of diminishing returns and stuff, basically, the higher—this is like basic supply and demand economics, right?—the higher the tolerance for cost per lead, the more volume you can get at that tolerance. There is, with the limited number of people that search on Google and within your parameters for your keywords and your locations, etc., there's a finite number there. With your bids at that certain point, there's a finite number. There's auctions that you're going to win, so this is the amount of money that you would spend if you had no budget."

"For example, let's just say if I bid a hundred dollars for clicks and I could get 10 of them, then I would spend a thousand dollars even if I had an infinite budget, just because a thousand is all I would get to because other people are outbidding me or whatever the case is. But I wouldn't have limitations by budget because I have an infinite budget, so that's your potential spend."

"The next thing to think about is how does your potential spend interact with your budget. If you calculate out your potential spend and your potential spend is higher than your budget, then what you have is limitation by budget. If your potential spend is lower than your budget, then what happens is you're underspending, and people get frustrated by this because they're telling Google, 'Spend ten thousand dollars a month,' and then they spend five thousand dollars a month. So it's kind of this swinging game, right?"

"As you change your bids, you change your potential spend. If your potential spend gets below the budget, now you're underbidding. Now you're underspending, right? You want to spend your 10 grand a month; now you're spending five. If your potential spend gets higher than your budget, this is like the silent killer of Google Ads because what's going to happen is it's going to say 'limited by budget.' Everybody's gonna say, 'Oh, Google's just trying to get you to spend more money,' but there are actual viable metrics behind this that are showing, 'Hey, your potential spend is higher than your budget.' That doesn't mean that you need to raise your budget. It means that your bids are incompatible with your budget, which means that you either have to lower your bids or you have to raise your budget. But if you do nothing, what you're doing is you're paying a premium without getting the volume that should be associated with paying that premium. I hope that made sense. Help me clarify it, fill in the gaps."

"It made sense to me, but if I can try to explain it like a pleb, I will try."

"So basically, your account has a fixed amount it can spend, and the goal is to—and tell me if I'm doing this explanation incorrectly—this calculator's goal is to find the sweet spot between maximizing that spend while not paying a premium to get to that point."

"Yeah, it's basically, think of it like this: there's a law of diminishing returns, right? Companies that spend more money actually have a higher cost per lead. So if that's true, and that's aside from any data advantages or whatever the case is, right? So there's a lot to potentially unpack there, a very controversial statement, but let's just say we cut all that out and we just say, 'Yeah, if you have a higher impression share, you have a higher cost per lead,' and we have data that proves exactly that, like a very clear correlation between impression share and cost per lead. So basically, you kind of have to decide."

"Yeah, I want to pay 600 when I can only sell it for 200. Come on!"

"Agency, get me that widget for twice my price. Yeah, get upset at my bidder."

"That's the last thing I want to do, right? The best thing I could do is say, 'Okay, that's not the price that works for me,' and leave."

In that way, losing to the rank is actually sometimes a really good thing if it's the right loss you're doing because there's some fool who's going to pay too much, especially in these competitive worlds that we play in, especially where people don't understand these metrics and how they work. You talked about how there's not really good or bad, but there is optimal. I want to kind of clarify that a little bit because it's not like we want a certain impression. Sure, I lost you to budget or rank or whatever the case is, but I would say that we do like loss due to rank is generally not a bad thing. However, loss due to budget can be a bad thing because it proves potential inefficiency.

This is where most people get lost, so I'm going to try to tiptoe nice and slow through this, and I'm hoping you can help make this super, super clear to understand. But I think taking it back to this auction analogy, if we're just remembering that scenario, if we're going through and buying, you know, paying 100 bucks for every widget for the first 25 and then the rest of the day they sell for five dollars, but we ran out of money, how could we more efficiently manage that whole situation? It'd probably be that we're bidding less money for those widgets because we don't need to bid that much in order to win the number that we need because we're just going to run out of budget anyways, right? So we might be better off taking that same amount of money and bidding fifty dollars instead of a hundred dollars, and then maybe we could buy 40 widgets with our budget instead of 25 or, you know, whatever the numbers would work out to. It depends on what other people are bidding and stuff like that.

There are two metrics. I don't—I mean, it's not me if this is just too deep—but I kind of think of it like there's one metric that doesn't exist in Google Ads, but it absolutely should. It's one that's called potential spend, and I'll try to explain what this means. I can't tell if you're smiling at me like I'm just going to lose everybody or like this makes sense.

"No, no, this is a deep cut that people need to really understand."

I really think this is the level. Sometimes we talk about stuff on this podcast that, like a real estate investor, if you're working with an agency to manage it, you don't need to know that, right? You don't need to know all about keyword match types and different types of bid strategies and stuff. This, you need to understand. This is like basic foundational economics of your business as it relates to PPC. I think it's really important. As far as most people get for this, they see—

"I can't believe we haven't even mentioned this yet—they see this big red thing in the Google Ads account. It says, 'Limited by budget.'"

This is basically just Google highlighting something in these underlying metrics, and they're telling you to do one thing. It's not necessarily what you should do, right?

"For those that can't see Garrett, he's raising his finger as if Google just wants you to spend more money, right?"

"Blow that budget."

"Yeah, but it's not exactly the way to talk about it, so let's make sure we understand the metrics first and then we'll dive into it."

So, because it's not just, "Are you limited by budget or not?" It's to what extent are you limited by budget? That can't be shown by just a red sign that says, "Hey, spend more money."

When we're talking about potential spend—and again, this isn't a metric that exists in Google; this is one you have to calculate yourself or just even understand theoretically, and that's okay—I wonder if we put a link to this formula in the podcast show notes.

"I'm totally down to do that."

"Yeah, we can get a link to this formula instead, which as far as I'm aware, I've never seen any other PPC marketer even talk about this in the whole world of PPC. I don't know why. I don't know why nobody talks about this."

Basically, picture you have an unlimited budget, right? Infinite dollars that you can spend, but your bids are fixed at whatever your bids are. So you're bidding—let's just say you're in a Target CPA bid strategy, and you're bidding 300 per acquisition. What you're basically telling Google there is there's two constraints: one, I don't want to pay more than this cost per lead, and two, I can't spend more than my budget. But in this case, the budget's infinite, right? So you're basically saying, "Give me as much volume as you can without surpassing that cost per lead."

With their standard model of diminishing returns and stuff, basically, this is like basic supply and demand economics, right? The higher the tolerance for cost per lead, the more volume you can get at that tolerance. There is, with the limited number of people that search on Google and within your parameters for your keywords and your locations, etc., a finite number there. With your bids at that certain point, there's a finite number. There's auctions that you're going to win, so this is the amount of money that you would spend if you had no budget.

For example, this should say if I bid a hundred dollars for clicks and I could get 10 of them, then I would spend a thousand dollars even if I had an infinite budget, just because a thousand is all I would get to because other people are outbidding me or whatever the case is. But I wouldn't have limitations by budget because I have an infinite budget. So that's your potential spend.

The next thing to think about is how does your potential spend interact with your budget? So, if you calculate out your potential spend and your potential spend is higher than your budget, then you have a limitation by budget. If your potential spend is lower than your budget, then what happens is you're underspending, and people get frustrated by this because they're telling Google, "You know, spend ten thousand dollars a month," and then they spend five thousand dollars a month. So it's kind of this swinging game, right?

So, as you change your bids, you change your potential spend. If your potential spend gets below the budget, now you're underbidding, now you're underspending, right? You want to spend your 10 grand a month, now you're spending five. If your potential spend gets higher than your budget, this is like the silent killer of Google Ads because what's going to happen is it's going to say, "Limited by budget." Everybody's going to say, "Oh, Google's just trying to get you to spend more money." But there are actual viable metrics behind this that are showing, "Hey, your potential spend is higher than your budget." That doesn't mean that you need to raise your budget; it means that your bids are incompatible with your budget, which means that you either have to lower your bids or you have to raise your budget. But if you do nothing, what you're doing is you're paying a premium without getting the volume that should be associated with paying that premium.

"I hope that made sense. Help me clarify it, fill in the gaps."

"It made sense to me, but if I can try to explain it like a pleb, I will try."

So basically, your account has a fixed amount it can spend, and the goal is to—tell me if I'm saying this incorrectly—find the sweet spot between maximizing that spend, like maximizing how much of that maximum available, while not paying a premium to get to that point.

"Yeah, it's basically, think of it like this: there's a law of diminishing returns, right? Companies that spend more money actually have a higher cost per lead. So if that's true, and that's aside from any data advantages or whatever the case is, there's a lot to potentially unpack there, a very controversial statement. But let's just say we cut all that out and we just say, yeah, if you have a higher impression share, you have a higher cost per lead, and we have data that proves exactly that, like a very clear correlation between impression share and cost per lead. So basically, you kind of have to decide."

It's just that you're exposing a problem that was already there. So keep that in mind: if you have a decrease in quality when you change bids, it could be due to you getting results out of luck, not from good targeting in the first place.

"So let's make this actionable," you say. "I'm a business owner, listening to this, and I'm trying to figure out what to do. Maybe I'm managing my own PPC, but I think more of the people listening to this are probably just trying to figure out how to win in this game. So many people are so frustrated because they hear about all the success in PPC, but they can't seem to figure it out themselves, right?"

"So if I'm a business owner trying to know enough to be dangerous, trying to figure out what this means and how I can adjust my strategy according to this, let's talk about some actionable insights."

"Yeah," I reply. "I would say that the first step is to go into this episode's show notes, go to the link for the bid calculator, and plug in your numbers. See what that tells you, and that's going to give you an idea of how far off you are right now."

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