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The short answer
Whether 20 clicks with no conversion means anything depends on your conversion rate. At 10% it happens by chance about one time in eight; at 2% it happens most of the time. Set the click bar from your own conversion rate, the lower the rate the more clicks, and add a money bar, so a search has spent enough to be judged.
Where the rule comes from
Every Google Ads course has a version of it: if a keyword or a search gets 20 clicks without a conversion, pause it or add it as a negative. It is easy to remember and easy to apply to a spreadsheet.
The trouble is that it treats every account the same. A shop converting 1 visitor in 10 and a B2B service converting 1 in 50 get the same number, and only one of them is well served by it.
How often zero happens by chance
If a search converts at the account's normal rate, the chance of seeing zero conversions in n clicks is (1 − rate) to the power of n. That is all the arithmetic you need.
At 2%, a perfectly good search shows zero conversions in its first 20 clicks two times out of three. The rule blocks it most of the time.
A better rule, from your own numbers
Decide how sure you want to be, then find the number of clicks at which zero would be unlikely by luck alone at your conversion rate. Below that number, zero is not evidence yet. The lower the rate, the higher the number.
Then add a money bar, because clicks are not all priced the same. A search that has had 80 clicks at €0.20 has cost €16. One with 80 clicks at €4 has cost €320. A search should also have spent well past what a conversion should cost you, with no result, before it is called waste.
Use typical numbers, and keep converters
Work out the conversion rate and the cost per conversion from figures that are typical of the account. One runaway campaign should not move the bar for everything else.
And never block a search that converted anywhere in the account. If it converted in one ad group and not in another, it belongs in the first one, not in a negative list.
How Optizads applies it
Every waste check in Optizads is judged on the numbers of the account it runs on, not on one rule for everyone. A search is only named once it has had a fair chance to sell, and it is never proposed as a negative if it converted anywhere in the account in the past year.
Try the arithmetic on your account with the free wasted spend threshold calculator.