Tracking Adwords conversions for Paypal transactions is fairly simple if you already have your Paypal merchant account, your Google Adwords account, and associated Google Analytics account. If not, sign up!

Google is going to track your Adwords sales conversions by checking to see if the user visits your “conversion page” after they click on your Adwords ad. The conversion page is just a “thank you” page. You can set up your Paypal “Buy Now” buttons or Paypal shopping cart to redirect the user to the page you have created for this purpose, as follows:

1. Create a “thank you” page on your Website.
2. Log into your account at http://www.Paypal.com
3. Click on the “Merchant Services” tab
4. Click on the “Web Payments Standard” link
5. Click on either the “Buy Now” button link (sell single items) or the “Add to Cart” button link (sell multiple items).
6. Click on Get Started
7. Create your button
8. At the bottom of the page click “Add More Options”
9. Go down to “Customize Your Buyer’s Experience (optional)”
10. Enter the url of the “thank you” page on your website. Make sure to set “Auto Return” to “On”.

Now log into your Google Adwords account:

1. Navigate to your Adwords campaign.
2. Click “Converstion Tracking” in the top navigation.
3. Click on the “Start Conversion Tracking” button at the bottom of the page. If you are already using conversion tracking, click on “Get conversion page code” in the left column.
4. For “Conversion Type” check “Purchase/Sale” then click “Continue” at bottom of page.
5. Select the color for the Google conversion blurb that will appear at the bottom of your page and click “Continue”.
6. Find your tracking code at the bottom of the page, and cut and paste into your “thank you” page.
7. If haven’t already, set up your site in Google Analytics and allow Adwords to share the conversion data.

Now, to test if the conversion works, just click on your ad in Google, then visit your “thank you” page (no actual transaction needed). You should see the conversion recorded in Analytics the next time it updates.