Know Your PPC ROI

The virtual world does not give license to forsake metrics that determine success for specific marketing tactics.

Just like a brick and mortar operation, knowing the true cost of business activities helps web entrepreneurs focus their efforts on what produces the most profit. And as the old saying goes, if you can track it, you can control it.

This gives marketers a heads up when a tactic is failing so that a change of course can be plotted or that expense scuttled.

A key metric online businesses should pay attention to is the Return on Investment (ROI) for Pay-Per-Click (PPC) advertising. To do this, marketers must track clicks from each PPC network and compare these to resultant conversions, which can be anything that the website owner desires for the user to do: register for a newsletter, join a forum, participate in a contest, etc.)

Here’s an Easy Way to Calculate ROI

To start, each click must be multiplied by the keyword bid price to determine “Cost.” “Conversions” must then be multiplied by an assigned dollar value to establish the “Income.” To determine “Gain,” subtract the “Cost” from ‘”Income” and “ROI” is stated as a percentage of Gain divided by Cost. (An ROI of 100% means that for every $1 cost, there was $2 in income.)

A simple way to look at this equation is as follows:

(Income - Cost) / Cost = ROI %

Using this method, marketers not only can track the “success” of various PPC networks in terms of clicks, but also compare ROI from each to help find the most-effective partners.