Calculating ROI for PPC

Calculating ROI For Pay Per Click (PPC) Ads

In order to understand the return from PPC ad campaigns, you need to turn know:

  1. Value of a conversion
  2. Conversion rate
  3. Number of clicks
  4. Average cost per click

Knowing these four variables allows you to calculate the ROI of the ad campaign as a percentage of the overall ad campaign spend.

For our example, assume you spend $1 per click, and that a conversion is worth $45. You convert at 3%, and obtain 1000 clicks over a given period. Your calculation is then:

PPC ROI = ((Total revenue – Total cost) / Total cost) x 100

= (((Value of a conversion x Conversion rate x Number of clicks) – (Average cost per click x Number of clicks)) / Total cost) x 100

= (((45 x 0.03 x 1000) – (1 x 1000))/ (1 x 1000)) x 100

= (1350 – 1000)/1000 x 100

$350 or 35% Time and labor have not been incorporated in creating the PPC ad campaign.

Alternatively, you can use a quick ROI calculator. Return on Investment (ROI) calculator for blog and business content.

Calculating ROI For Blogging & Organic Search

Using the same values for the value of a conversion, $45, and a slightly lower conversion rate of 0.5% because organic traffic is not as focused as a well honed PPC ad campaign, where a blog post takes up 4 hours of time to write – including research, writing, socialising and promotion (non-paid), at  $35 per hour:

Blog post cost = Number of hours x hourly rate

= 4 x $35

$140

= (((45 x 0.005 x 1000) – 140) / 140) x 100

$85 or approx 60%

PPC vs. Organic Search Content

While the numbers in the above calculations suggest that blogging was more successful (having a higher relative ROI), there are several important things to note:

  1. The PPC ad campaign risked $1000 in cash whereas the blog post had no cash risk
  2. The PPC ad ROI calculation did not take into account the cost due to labor
  3. The blog content ROI calculation gave a lifetime ROI, the ad ROI calculation gave the immediate ROI

Does PPC offer a better ROI than organic search content for you? If you are looking for complete marketing solutions ideas, Australian freelancer or IT contracting Melbourne, contact us for a FREE no obligation quote.