Last week we released the 2016 AdWords Industry Benchmark Report. The report includes unique data about the down-funnel impact AdWords is having for companies across six different industries.
Today, we will take a closer look at the data for software and SaaS companies. (Don’t work for a Software/SaaS company? Check out the full benchmark report here, which includes data for six industries.)
AdWords’ Impact On The Funnel
First, let’s take a look at AdWords’ contribution to three key marketing metrics: leads, opportunities, and revenue.
In the Software/SaaS industry, AdWords drives, on average, 16% of all leads, 14% of all opportunities, and 11% of all revenue. The declining impact as we get further down the funnel shows that companies in this industry still tend to use AdWords as a top-of-the-funnel lead gen channel.
What’s more, the leads that are generated by AdWords are converting at a lower rate to opportunities and then to customers compared to the rest of marketing. This could mean that leads from AdWords aren’t high quality (maybe not targeting ads strictly enough), or companies aren’t doing a good job nurturing leads from AdWords, among other possible reasons.
Revenue Per Lead From AdWords
Looking more closely at the down-funnel impact of AdWords, we see that the average closed revenue per lead from AdWords is $227.
But when we take into account the fact that for many companies in the Software/SaaS industry have sales cycles that can span several months or even years, we need to take into account future revenue that will be generated from the leads created in the time frame that we analyzed. For that reason, we must include projected revenue, which is based on a statistical model that takes into account historical data based on factors like win rate to predict future revenue. When we include projected revenue, the average revenue per lead jumps to $679.
In addition to giving us a benchmark for what marketers in this industry can expect from AdWords leads, it tells us something about the nature of this industry’s marketing and sales cycle. Because the revenue per lead value, when taking into account projected revenue is nearly 3x the closed amount, we can tell that the average cycle must be at least several months.
When analyzing your revenue per lead against the benchmark, it’s important to note that there are several factors that contribute to the ratio: lead volume, cost per lead, lead-to-customer conversion rate, and deal size. To further investigate why your revenue per lead ratio is what it is, you must look into each of these factors.
Cost Per Lead, Opportunity
Next, we take into account cost. How much do marketers in this industry spend to create a lead on AdWords? What about a sales opportunity?
According to the data, Software/SaaS companies spend on average $344 to generate a lead and $2,569 to generate a sales opportunity on AdWords. The competition for many keywords in the Software/SaaS industry can be very high, which may contribute to these seemingly high figures. Furthermore, deal size can vary quite a bit in this industry -- enterprise deals vs. small business deals -- which makes a big difference when comparing these figures, in particular. When your potential deal is worth millions of dollars, you can afford to spend a lot more on each lead and opportunity compared to a company that has potential deal sizes in the hundreds or thousands of dollars.
It’s important to take into account the potential revenue, which leads us to the next benchmark.
Return on Investment (ROI)
The last benchmark that we take a look at may be the most important. When we look at both the revenue and the cost together, we see that companies in this industry see the second lowest return out of the industries that we analyzed. Taking into account only closed revenue, marketers in this industry can expect an ROI just above 100% -- they make their money back. When taking into account projected revenue based on the leads generated and the money spent within the time period, the ROI jumps to 251%.
Many Software/SaaS companies are in extremely competitive fields which can drive up the cost, which likely contributes to the industry having the second lowest return. Despite that, AdWords still seems to be a profitable channel for marketers.
Looking at year-over-year trends (roughly H1 2015 to H1 2016), we see that not a lot has changed for this industry. AdWords’ impact on the top of the funnel is down slightly, while its impact on the bottom of the funnel is up slightly.
Contribution to leads is down 4% and contribution to opportunities is down just over 1%. On the other hand, contribution to revenue is up 0.65% and when taking into account projected revenue, is up just under 0.20%. Finally, revenue per AdWords lead is up $58.
Marketers in this industry seem to be slowly shifting their efforts to a more full-funnel strategy, trying to use AdWords as an equal contributor throughout the entire marketing funnel.
Download the complete 2016 AdWords Industry Benchmark Report below.