For every PPC account and display ad campaign, we create a conversion value model for each type of conversion event and (related), select a method for click attribution modeling. When a conversion occurs, the value for that conversion is distributed (“attributed”) up through the sales funnel, with weighting as defined by the click attribution model.
In our conversion value model, what we are after is the gross margin (value) that each conversion action is producing. In the case of a display campaign that advertises products, the conversion value would likely be (sales price-sales tax)*(average gross margin).
Conversion value modeling is important because it allows for calculating the two most important metrics in paid search: return on ad spend, and advertising margin. But more importantly, it provides valuable information back to the automated bidding algorithms, which use machine learning to maximize the performance of the campaign.