Getting Your Pay-per-Click Return on Investment
To know whether or not your pay-per-click (PPC) campaign has paid off, you need to do a little math. There are four formulas for computing PPC return on investment (ROI).
Return on Ad Spending (ROAS)
Ad spending refers to the cost of marketing your goods or services. To get your ROAS…
ROAS = (Revenue – Cost) x 100%
However, this formula is too simplified; getting the amount of revenue and ad spending requires separate formulas. ROAS can also be computed via the percentage change formula.
ROAS = [(Revenue – Cost) / Cost] x 100%
Return on Investment (ROI)
ROI encompasses a broader aspect of ad spending, including production and logistics costs, not just the PPC costs. ROI can be computed using the second method of computing for ROAS but by replacing cost of campaign with the amount of investment.
ROI = [(Revenue – Investment) / Investment] x 100%
Due to the scope of ROI, this is a more realistic gauge from a business perspective.
Profit per Impression (PPI)
An impression refers to the number of times a visitor viewed the page once. It's not the same as the number of unique visitors since ads can be randomly generated. You can get impression data from analytics tools.
PPI = [(Revenue – Cost) / Impressions] x 100%
Profit per Click (PrPC)
PrPC can be computed the same way as PPI but with impressions replaced by clicks.
PrPC = [(Revenue – Cost) / Clicks] x 100%