How to Calculate Your Pay-Per-Click ROI
December 17, 2017 Posted by admin
Pay-per-click ads can be a very effective marketing tool. When you use pay-per click services, the first thing that comes to mind is an increase in visitors to your website that will turn into leads. Given that each PPC ad targets a specific potential market, it is able to drive more people that may be interested in what you offer. But, what you should be aiming for is the increase in customers and sales and not just more people coming to your website. PPC services are beneficial if you are able to convert each click into a lead. The primary goal of setting up advertisements is to make sure that people who are willing to buy are directed to your website and make a purchase. To make sure that your PPC ads are maximized according to your cost of investment, it is important to calculate your return. Calculating the ROI of your PPC ads will give you the assurance that they are working and generating profit for you. The goal is always to maximize profit and reduce costs, so if your PPC ROI is higher, then than means your ads are generating a profit and giving you back more than you put in. So, how do you calculate your PPC ROI? First, you need to calculate the Return on Ad Spend. This simply means that you have to calculate your revenue versus the cost of your advertisement. Deduct your total advertising cost from your generated revenue and divide it by your total cost to give you the total percentage of your Return on Ad Spend. Ideally, you would have a 100% or greater rate, which would mean that you would be more than doubling your profit over the cost of the ads. The second thing you need to do is calculate your Return on Investment. It may initially seem the same as your Return on Ad Spend since your investment is the cost of your PPC ads. However, keep in mind that you are also using overhead for processing your PPC ads. This overhead includes labor costs, the cost of processing the orders, etc. Consider these costs as well to give you a more accurate ROI figure. Lastly, calculate your profit based on two given metrics for PPC ads: impressions and clicks. This counts the number of impressions and clicks on your ads and uses that figure to determine your return. Simply divide the number of impressions or clicks by the total cost of your ad. The main reason for calculating your ROI is to evaluate each PPC ad in your campaign and determine what is working and what's not. Just like with any other business decision, if something's not working for you, you need to eliminate it to reduce your costs and replace it with something that works better.