There are a number of factors which limit the accuracy of typical PPC Expense/Revenue reports.

• Deleted Cookies or other internet issues – Everyone doing business online has learned that all tracking has some significant limitations, which impact accuracy from a little (5% is considered typical) to a lot (cookie deletion rates have been reported in excess of 40%).

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• Offline Conversions – Many visits that start with a paid search click end with a purchase in-store, via phone, or at home from a different computer. These cross-channel transactions typically aren’t tracked in the paid search reports.

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• Attribution – Many visitors come to your site several times before they purchase, and use different tracked channels for each visit – once via paid search, another via email, another by typing in the URL. Which visit gets the credit for the sale depends on the capabilities of the system and in some cases the revenue attribution option is set in your analytics package. In any case, usually only one click gets the credit which means other do not.

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• Latency – the fact that many people buy on a different day than their click, and paid search reports don’t accurately match clicks-to-purchase beyond the boundaries of the report time frame.

Each of these were mentioned in the comments of our Friday Quiz post question about problems with paid search reporting. And each definitely contributes to PPC report inaccuracy.

Deleted cookies became a visible issue most recently when Comscore reported that nearly 1/3 of all visitors removed cookies (first and third party) at least once per month. (More on the story here, and here.) While if true this behavior would overstate unique visitors (the metric in discussion in the report) it would cause PPC revenue attribution to be understated – as cookies are the most common way analytics packages and search networks connect visitors to their later purchases.

Offline conversions are an obvious and well discussed topic. This fact also under-states PPC revenue and attributions. There are inceasing ways to connect revenues from some channels (like phone orders) back to the PPC click that caused them, and via surveys and other methods many multi-channel retailers are learning how to at least factor offline sales back into their understanding of their paid search results.

Attribution is another systemic issue – people visit multiple times via multiple sources and at some point you (or your reporting software) has to decide which visit source gets the revenue credit for an eventual sale, if cookies or offline didn’t make it impossible to track in the first place! (Some very thoughtful posts here, here, and here.) The industry default is ‘last click’ but some analytics packages (such as SiteCatalyst and Coremetrics) provide control over that. (related post here)

What I Meant Was

These three issues – cookie issues, offline conversions, and attribution – are reasonably well understood and thereby can be taken into account by analysts and marketers. In my experience that’s not true for the issues we’re calling purchase latency, and that was the issue meant to be the ‘answer’ to our quiz.

A paid search report for a given time period – I used December 2007 as the example in the question – shows the PPC clicks count and expense during that period, and the sales from PPC (based on the selected allocation method) during that period. But any connection between those click and that revenue is in effect a coincident of time.

The fact is that every such PPC report is filled with revenue from left-0ver transactions (whose clicks took place before the reporting period) and what we’ll call incomplete transactions (whose revenue at least partially might come after the reporting period). Any hope of even approximate accuracy is based on the idea that there is a consistency over time for those keywords, those clicks, and those items across the time periods before and after the report. That’s not a good hope to base tens of thousands of dollars (or more) of spending decisions.

Our Winner

So I’m naming Tim Schaeffer the winner of our first Friday Quiz and a $50 iTunes Gift Certificate. Tim posted first, and concisely described the problem as:

If your product / service has a long purchase cycle ( 2 weeks), if someone clicks on your ad Dec 22nd. but doesn’t buy until Jan 3rd then the Dec 2007 report would show the click but no sale … and Jan 2008 report would show a sale but 0 clicks (assuming you only had 1 click on the keyword or just for logic sake).

More To Follow

In the next post I’ll share a lot more thoughts about this issue of conversion latency and it’s impact on PPC reporting.

Thanks to everyone for visiting and particularly those who participated in the quiz. Look for more on future Fridays.