Every business that is spending $1 on Google Adwords will earn an average of $2 in revenue.
Does that mean your business is destined to make a profit with Google Adwords?
You want to get what you paid for. You want to earn revenue based on what you’re spending on Google Adwords, Facebook advertising, or another form of advertising that uses clicks to measure results.
But how do you do that? How do you measure the ROI of your AdWords and your cost per click?
You have to know how to calculate cost per click. You have to calculate the ROI. When you learn how to calculate the cost per click, you can start strategizing.
You can figure out how to produce a higher ROI for your business.
Here’s what you need to know in order to succeed with Google Adwords and how it can help your business exponentially growth.
You’ll find a guide to understanding your AdWords ROI, PPC ROI, PPC formula, PPC calculator, and Google ROI.
How to Calculate Cost Per Click
Cost per click can be calculated by taking advertising costs and dividing it by the number of clicks. The result will tell you how much you’re spending on advertising and essentially tell you what your revenue is.
You may also want to know what the average cost per click is because it can give your business some insight into how much the average advertiser spends.
The average cost per click formula is average CPC = total cost of clicks divided by the total number of clicks.
You can figure out how much you’ll be charged with each click on Google Keyword Planner.
Reasons Why Your CPC is High
If your business sees a high cost per click, resulting in more money being spent, it could be for a lot of reasons.
It could be the competition is high in the keywords you’re using on Google Adwords, or your competition is running similar ads.
It could also be your quality score depending on your use of keywords, ad relevance, and other factors.
Why It Matters
This is why it’s valuable to understand how to calculate your CPC. It determines your ad spend and your overall profit as a business. You want to ensure the money you’re spending on Adwords on another form of advertising is giving you the best value.
You have to figure out how much of a profit margin you’re willing to take based on your return of investment from Google Adwords or another form of advertisement.
Why Pay Per Click is a Remarkable Strategy
Knowing what’s a good cost per click for your industry gives you not only insight, but it also gives you the advantage over other competitive businesses.
It gives you an advantage because you can look at specific metrics that can help you strategize and figure out how to target your market. It’s a strategy to understand why they click more or less.
You can zone in on this target audience and figure out what’s wrong with your ad if it’s the copy, the image, or something else that is not bringing in clicks.
Measuring your cost per click gives you an opportunity to really know your target audience, which can give you more profit.
You can also measure your spending goals and determine if you are getting the amount of traffic to your site to bring in more clicks.
If a certain kind of advertising is not working for your business, you can assess if you want to continue with it. Cost per click is a measuring tool that works across various advertising platforms, so you’re not limited to using just one advertising platform.
You can decide what’s going to bring your business the most profit from a specific advertising campaign with a profitable cost per click.
What’s the ROI?
While we mentioned the average ROI for a business, it’s insightful to take a deeper dive into the analytics and see what is producing the best investment for your business.
Your Google ROI
To calculate your Google Adwords ROI, take the revenue from your ads, subtract your overall costs, then divide by your overall costs. The result will tell you your overall profit.
However, you will also need to track your conversions. You may have clicked on your ad, but maybe some of them stop when they get to a certain point in your funnel. Conversions can help you take a deeper dive into what your ROI is.
Your PPC ROI
Another helpful tool for determining your return on ad spend is taking the sales from PPC, subtract it from the cost of PPC, divided by PPC cost.
To avoid any confusion, here’s an example.
Let’s say the sales from PPC was $2000 and the amount of money you paid for PPC was $1000. We would subtract both numbers, which would be $1000, and then divide it by $1000, resulting in 1.0 = 100%.
That is how you figure out your return on ad spend.
How to Optimize Your Cost Per Click
Calculating your cost per click is just the beginning if you want to succeed and bring a profitable ROI.
After you calculate cost per click and your ROI for any kind of advertising, you need to assess which is bringing you the most profit. You have to figure out if you need to test your offer more. Maybe it’s the copy, the image, or the placement of the ad that could be improved.
That’s why you now have a measurable tool in assessing what is going wrong and right with your advertising.
That’s how your business can succeed beyond your competitors.
Now you have all the tools required for understanding your CPC ROI or Google Adwords ROI. You have the tools to succeed.
If you need help, we can help you master these tools and do the work for you.
You can see how we help businesses like yours and how we help them succeed beyond their expectations.