Articles, Blog

Calculating The Return On Investment From Your PPC

December 5, 2019


Hi, I’m Sam, and today I want to look at how
you calculate your return on investment from your PPC campaigns. Before we begin, I need you to ask yourself
one question. Do you know how much money you’re actually making off the
back of your PPC campaigns? Because I speak to so many people, and a lot
of the time they kind of have an idea that they’re making a profit out of
their AdWords campaign, but they don’t actually know how much they’re
making. A lot of the time, even though you think you’re making money, you
might not be making as much as what you actually are. It’s important that
you start to look at this, and if you’re running PPC campaigns, you need
to know exactly how much money you’re making off the back of doing so. To start with, I’m going to look at the return
on ad spend. This is one of the most common ways that people work out
how much money they’re kind of making from AdWords or Bing or whatever PPC
platform that you’re running. It’s the easiest way of doing it, but it’s
definitely not the most accurate. Even if this is the only way that
you can do it, you’re better off doing one way rather than not doing anything
at all. Looking at the return on ad spend, which is
abbreviated to ROAS, which is the way you’ll most commonly see it, in order
to work this out you take your PPC revenue — so how much have you made
from PPC over a set period of time. You take away your ad spend — how much
have you spent on clicks on your PPC campaign to drive that traffic into
the website and to generate the revenue off the back of it. Then, you
take that figure and you divide it by your PPC spend. Now this will tell you
that you’re either making money or you’re not making money. Obviously, if this starts to become a minus
figure, your revenue isn’t as much as what your costs are, and that’s an
absolute no-no. You shouldn’t be doing PPC, or you should be doing it, but
making it more cost effective and making it better. This is one way of doing it. The most accurate
way of working out your ROI is to actually look at the actual ROI. Now
this is a lot more difficult to work out because you need to know a lot more
data in order to calculate the figure, but if you can do it, this is definitely
the most accurate. To do this, you take the PPC revenue the same
way as you’ve done before, but this time you minus the total costs. Now
these costs can be things such as your employee costs, the product costs
of how much you’ve paid for that product, or if it’s a service that you’re
selling, how much does it cost you to sell that service, how much are your
staff costs, what’s the fulfilment of it, all these different costs
that come in off the back of actually selling something. All these costs
need to come into this total cost figure here. Once you’ve worked that
out, you then divide it by the total cost again. This will tell you your
return on investment from your PPC spend. Now if you just look at the PPC spend in this
example here, it’s not giving you the true reflection of exactly how much
money you’re making. But as I said earlier, if you can’t work this figure
out down here, then at least go with this route here. Now, to get at these
both as a percentage, you simply times them by 100, and then that gives you
your percentage figure. The higher the percentage, the better ROI that
you’ve got. Now, there are some ways that you can work
to improve the return on investment from your PPC campaigns. I’m not
going to go into too much detail on these because we’ve done a load
of videos and blog posts on this subject, so you can go and have a look at
those. Some of the things that you want to touch
on are looking at your negative keywords. There’s going to be a lot of traffic
coming into your website from your PPC campaigns that might not necessarily
be relevant. So looking through your search query report, uncovering
the keywords that are irrelevant, and adding them into your negative
keyword list helps you to reduce the amount you’re spending on wasted
traffic that’s not going to convert for you. Moving on from that, you can start to look
at the underperforming keywords, ad groups, and ad text. Any of those three
things that are driving lots of traffic to the site but they’re not actually
converting, or you’re converting at a high cost per acquisition
or a high spend, you can start to whittle those out and get rid of those. Likewise,
if they’re not actually converting at all, always keep refining and
removing the keywords that don’t actually work for you so that you’re
constantly looking to reduce your spend so that the revenue that you get
off the back of it is coming in with a higher ROI. Other things that you can look at doing is
improving your ad text, always split testing your ad copy, looking to see
which ads perform better than others, pausing the poorest performer, then
making a new version of the better performer and seeing if you can constantly
try to get that to improve all the time. Also, have a look at
what your competitors are doing from their ad text. See if you can actually
take a few bits of ideas from them and see if they work within your ad copy,
because chances are if something’s working for others, it will probably
work for you as well, so always worth giving that a test. Some other things that you can look at doing
is ad scheduling. If you’ve got your ads set up to run 24/7, using the
time of day and hour of day reports in AdWords you can see which times
are performing better for you. If you’ve got times that just don’t work for
you at all and you’re not generating any conversions, why not switch
them off or at least lower how much you’re willing to spend on a click during
those periods so that you’re spending the money on the times that actually
convert best for you. There are a couple of top tips. As I said,
we’ve written a number of blog posts and we’ve filmed a number of videos
on the subject of saving money with PPC or improving your PPC campaigns.
So do take a look at those. If you’ve got any questions, then please do get
in touch. Thank you very much.

3 Comments

  • Reply Owaish Raza August 17, 2014 at 6:07 am

    thanks sam good job

  • Reply House Music by dattrax August 26, 2014 at 11:31 pm

    Great tips! Thank you!

  • Reply Koozai April 20, 2015 at 10:00 am

    Do you know exactly how much your earning from your paid search campaigns?

    Learn how to calculate the return on investment from your PPC here.

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