Calculating ROI For Pay Per Click (PPC) Ads
In order to understand the return from PPC ad campaigns, you need to turn know:
- Value of a conversion
- Conversion rate
- Number of clicks
- 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
= $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:
- The PPC ad campaign risked $1000 in cash whereas the blog post had no cash risk
- The PPC ad ROI calculation did not take into account the cost due to labor
- 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.