About Pay Per Click (PPC) ROI

What is Pay Per Click (PPC) ROI?

Pay Per Click (PPC) Return on Investment (ROI) is a financial metric that measures the profitability of PPC advertising campaigns. It compares the revenue generated from a PPC campaign to its cost, expressed as a percentage. A positive ROI indicates that the campaign is profitable, while a higher percentage suggests greater efficiency in generating returns from the advertising investment.

Formula for PPC ROI

The formula to calculate PPC ROI is:

\[\text{PPC ROI} = \frac{\text{Revenue} - \text{Cost}}{\text{Cost}} \times 100\%\]

Where:

• \(\text{Revenue} = \text{Clicks} \times \text{Conversion Rate} \times \text{Average Sale Value}\)
• \(\text{Cost} = \text{Clicks} \times \text{Cost per Click}\)

Calculation Steps

1. Calculate the total cost of the PPC campaign by multiplying the number of clicks by the cost per click.
2. Calculate the revenue generated by multiplying the number of clicks by the conversion rate and the average sale value.
3. Subtract the cost from the revenue to get the profit.
4. Divide the profit by the cost.
5. Multiply the result by 100 to get the percentage ROI.

Example

Let's calculate the PPC ROI for a campaign with the following parameters:

• Clicks: 1,000
• Cost per Click: $0.50
• Conversion Rate: 2%
• Average Sale Value: $100

1. Cost: \(1,000 \times $0.50 = $500\)
2. Revenue: \(1,000 \times 2\% \times $100 = $2,000\)
3. Profit: \($2,000 - $500 = $1,500\)
4. ROI: \(\frac{$1,500}{$500} \times 100\% = 300\%\)

Visual representation:

Therefore, the PPC ROI for this campaign is 300%, meaning the campaign generated $3 in profit for every $1 spent on advertising.