The Tend Blog

A blog about growth

by Ryan Evans
Jun 13 '16

Why is it so hard to calculate ROI in Google Analytics?

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A lumberjack came across a leprechaun napping under a tree in a vast forest. Knowing that leprechauns can not tell a lie the lumberjack asked the leprechaun “I know that you are bound by the truth and can not tell a lie. Reveal where you have buried your pot of gold”.

The leprechaun replied “You are correct, I can not tell a lie. Here, under this oak tree you will find the gold you seek. All you must do is dig it up.”

But the lumberjack had no shovel so before he departed to his tool shed he said. “Remember, you are bound by leprechaun law to tell the truth. Tie this ribbon around the tree to mark the spot and promise me you will not move this ribbon or the gold”.

“A leprechaun can not tell a lie. I won’t touch the ribbon or the gold”

But when the lumber jack returned, he saw that the leprechaun had tied an identical ribbon to every standing tree in the vast forest, making it impossible to tell which tree marked the location of the gold.

Lots of data can be helpful. But sometimes the vastness of data obscures simple truths.

Google Analytics is powerful. You can see pageviews, bounce rates, time on site, pages per visit, and on and on and on for hundreds of different metrics. But do you know what’s really hard to figure out? ROI. Yep, the single most important thing most people want to know from an analytics software is extremely hard to decipher in Google Analytics. It can be done. But it pretty much requires Avinash Kaushik and John Nash to figure it out.

Clearly a company that makes self-driving cars and affixes the internet to your eyeballs can calculate ROI on marketing. So why don’t they?

I have two theories as to why Google Analytics is so difficult for people to get clarity on ROI.

1. Google Analytics is trying to create a powerful tool for all of it’s users.

Damn near everyone uses Google Analytics. Huge companies, small companies, ecommerce companies, SaaS companies. People who only care about page views and people who only care about sales. One person’s killer ROI metric might be meaningless to someone else. Creating a tool that serves all of those users is extremely difficult and Google Analytics has done an amazing job of creating a tool that serves all of those groups pretty well.

2. Providing clear ROI numbers might cause people to spend less money on Adwords.

Google analytics uses last click attribution as a default setting, which means that the most recent click receives all the credit for the conversion. So Imagine if someone clicks on an ad from Facebook, leaves, comes back via a Google Ad and buys something. In that case Google Adwords would be assigned 100% of the credit and Facebook would get 0%. But is that accurate? For most businesses, no. No it’s not. In fact, it’s a bit misleading don’t you think?

As customers travel down the funnel from awareness to consideration to purchase, paid search is often closer to the purchase. Let’s use our marketing for someone looking for an analytics tool as an example:

Marketing Tactic Customer thought Customer Action
Facebook ad Tend huh? It does some kinda analytics I guess. Now what did Kayne say? Nothing
Retargeting ad 1 I really should dig into my marketing a bit. Maybe later Nothing
Retargeting ad 2 What exactly does this Tend thing do. I guess I'll take a look Visits site and signs up to email list
Marketing email Oh I get it. Conversion tracking. This is kinda cool. As soon as I read this email from my crazy uncle, I'll check it out. Reads email from crazy uncle
Marketing email 7 Ugh. I get too many emails. Unsubscribes from email list
Tweet Tend blog post Oh yeah, those guys, I really need to take a look at this Nothing
Sees that friend sells company for $69 million on TechCrunch What am I doing with my life? Nothing
Googles "conversion tracking", clicks on a Tend paid search ad Why didn't I do this earlier? Becomes customer

In that short example, Facebook, retargeting ads, email newsletters, Twitter, blogging and word of mouth get 0% of the credit for that customer. Paid search gets 100%. This sort of customer path happens a lot and Adwords is often towards the end of the customer’s process.

The credit of acquiring that customer, and the cost to acquire that customer, really should be spread among all the different marketing activities. But often, people only tie a direct cost of that customer to paid search. When you look at it that way, you start thinking things. Things like…

“Hmm. I sure do spend a lot of money on paid search”

“Wow, I guess blogging isn’t so stupid. Our posts actually drive people back to our site and they often end up buying something”

“If I stopped doing paid search spend, would customers still find me through my other marketing efforts?”

“How much would sales decrease if I cut paid search back a bit?”

“If I did less paid search search and more blogging, what would happen to sales?”

Those are dangerous questions for Google. Especially when spending boatloads of money on paid search has become such a religion. I’m not saying that everyone would flee Google in droves. Paid search IS often super valuable. But assigning 100% of the value to it when it’s just the last stop on a customer’s journey is a bit more than generous. It’s not exactly in Google’s best interest to make that clear.

Google Analytics is a wonderful tool and can show you many things. But don’t trust the Leprechaun to show you ]where the gold is.


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