Search Funnels are a set of new reports describing the Google.com search ad click and impression behavior leading up to a conversion.
Currently, conversions in AdWords are attributed to the last ad clicked before the conversion. Search Funnels gives advertisers data on how "upper-funnel" keywords are assisting conversions before the last click. It also enhances basic conversion reporting for AdWords.
Conversions reported in this tool are tracked by the AdWords Conversion Tracking tag or are imported from Analytics after linking your AdWords and Analytics accounts.
Source: AdWords Guideline
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