ROI is a good metric to use as it measures profits made in relation to capital invested and therefore the efficiency of your investment. You can then compare the ROI of this campaign with that of other online or offline campaigns and decide where your money will work harder in future.
To help measure your AdWords ROI you will need to track conversions (actions that you want your customers to take after clicking on your ad, such as a purchase). Free tools are available to help you do this – try Conversion Tracking or Google Analytics.
Put simply ROI is how much profit you have made from your ad compared to how much you have spent on your ad. Take the revenue that resulted from your ads, subtract the advertising costs, then divide by your advertising costs and multiply by 100 to get your ROI percentage.
For example, let’s compare the following AdWord campaigns
| Campaign X | Campaign Y | |
| Total Spend |
£1,000 |
£250 |
| Click throughs |
5000 |
1000 |
| Conversions |
50 |
25 |
| Conversion rate |
0.01 |
0.025 |
| Revenue |
£1,500 |
£750 |
| ROI |
50% |
200% |
|
|
As you can see, although Campaign X generated more click throughs, conversions and revenue, Campaign Y was actually more efficient with an ROI of 200%. While both campaigns were profitable it would be worth investing more in Campaign Y next time. For more information on conversion tracking or measurement tools from the experts at Varn get in touch with us today.
Read our most recent blog on this topic: Does your Google AdWords campaign create a profit or just increase your turnover?
