Thankfully, AdWords has a way of tracking your conversions through the use of cookies and the Google server. Every time a person clicks on your ad, AdWords attaches a cookie that identifies their computer and activity. When that potential customer finally reaches a conversion page (most often an order confirmation page) a tiny tracking conversion image becomes visible on your website. Google recognizes that image and records this as a successful conversion. Your conversion rate is the number of conversions you receive, divided by the number of visits.

So, why is conversion tracking beneficial to you? You should set up this tool for many reasons. The insight that you can gather from conversion data will help you make educated, researched decisions about your approaches to online advertising. Most importantly, it will help you optimize the keywords that trigger the highest responses.

For example, let’s say you own a company that sells purses and accessories. You are looking over the details of your AdWords campaign, and you can see how many clicks you have received but you want access to a more in-depth breakdown that tells you which of your selected keywords are converting into the most sales. Through basic conversion tracking you find that the keyword “Discount Handbags” has a 300% return on investment. Knowing this, you can now optimize your campaign by adjusting your bidding and adding similar keywords that are likely to draw the same high responses. In addition, by taking advantage of customized conversion tracking, you can also choose to report the dollar amount of each sale to determine the total value generated by each keyword in comparison to the total cost of the keyword. This will help you determine the best keywords in which to invest your advertising dollars. Using these conversion tracking tools can guide you in the direction of increasing the overall ROI of your AdWords Campaigns.

To set up conversion tracking on your AdWords account, you will need to obtain snippets of code to add to your conversion confirmation pages. To get started, go to your “Reporting and Tools” tab in AdWords and click “Conversions”, near the top. Click the “New Conversion” button, then name the conversion and select the category, or tracking purpose, you wish to associate with this entry. After you click “Save & Continue” you will be redirected to the Code tab to begin setting up the conversion code snippet settings. Follow the remaining instructions from Google as they guide you through your new conversion tracking settings. An advertiser ID will automatically be issued upon activation of conversion tracking. Google will use this to track your account in a transparent manner. If you wish, you may also opt to set up a visible Google Site Stats text block on your page that registers tracked conversions and allows you to view them there.

You should take advantage of this valuable tracking tool, as it is guaranteed to help you make better investment choices in AdWords. Knowing the results of each separate keyword sets you up for success and gives you the means to establish profitable campaigns now and in the future.

Because Google AdWords and Analytics use different means of tracking conversions, reporting differences are pretty much inevitable. One reason is because AdWords tracks conversions as unique customer acquisitions (1-per-click). If the same person completes multiple goals on your website it is only represented as one conversion in AdWords. Google Analytics, however, will count each conversion individually. Invalid clicks are also excluded but will appear in Analytics, as well.

In addition, the cookies that AdWords Conversion Tracking uses expire a lot quicker than Analytics’. A conversion is only counted in AdWords if the user converts within 30 days of clicking your ad, whereas in Analytics the cookies can last from six months to two years. For some companies this can result in data that is significantly underreported in AdWords.

To complicate matters even more, you can also view conversions within Google’s Search Funnel reporting in AdWords. They both receive data from the same tracking pixel; however difference in conversion counts will occur for a couple of reasons. First, the Search Funnel only reports conversions from ads on Google.com and excludes those resulting from the Search Partner and Display networks. Second, AdWords reports conversions at the time of the click whereas the Search Funnel goes by the time of the conversion.

Tracking conversions and using the data effectively is essential for running successful PPC campaigns. The same is true for understanding the differences in your reporting. Although it may be quicker and easier to rely on the data from only one source, make a habit of consulting the additional conversion statistics available to you.  At the very least be sure you are matching data against Google Analytics, which tends to be more accurate in most cases.