Onlynaturalpet.com makes money from their paid search marketing campaigns. Not just ROAS, but actual profit.

The amazing thing isn’t that it’s true. It’s that we know it.

We know exactly how much profit and where it comes from. Which engines. Which campaigns. Which ad-groups. Which keywords.

This is unusual because the search engines reporting systems, and most analytics packages, can’t report on profit or ROI. Isn’t it amazing that they ignore the goal?

Instead they focus on ROAS, which is a lousy measure, and just maybe tell you how you can manually calculate ROI if you’re willing to do the work – every time you want to know. (Some thoughts on what’s wrong with ROAS here, here, and here.)

But the software systems aren’t the only barrier to measuring profitability. Doing so also requires the advertiser know their cost-of-goods-sold (COGS) for each item and be willing and able to provide that information to the system on a regular basis. We’ve worked with many retailers where the marketing dept either doesn’t have access to the data, permission to share it, or can’t keep up with rapidly changing market prices.

The Omniture Solution for OnlyNaturalPet.com

Both of these obstacles have been overcome in our work for OnlyNaturalPet.com. We’ve augmented the standard Omniture SiteCatalyst and SearchCenter with an add-on Omniture Vista Rule that allows us to upload COGS data for each SKU which then becomes an available reporting metric.

From this COGS we create calculated metrics for a whole range of interesting measures like gross and net margin, profit and ROI.

Of course this works so well because onlynaturalpet.com provides us with complete cost/margin lists for their entire inventory. Given their expanding range of products, we plan to update these files monthly.

Reporting with Profit Visibility

Note that we’ve purposely chosen a small set of keywords, and not the most profitable at that, and changed a few numbers around, to provide this illustrative report.

When reports display profit and ROI right next to cost and revenue, it gets a lot easier to make what are typically hard decisions when running paid search campaigns.

For onlynaturalpet.com the loss from trying to sell dog collars over the last quarter has been clear, the keywords and creative while not perfect were not culpable, and so at least for now we’ve pulled the plug on much of the ad-group.

Elsewhere profitability makes it clear (even before our bidding tools and other software kick-in) where we can spend more, work to expand, test more creative, etc.

As compared to managing campaigns without clear profit visibility, it’s like someone switched the lights on.

This post is part of a case-study series on the Commerce360 management of paid search campaigns for onlynaturalpets.com. It is being done with the kind permission of Only Natural Pet Store, and some data has been changed to keep PetSmart guessing. For your convenience, we’re keeping a list of all posts in the series.