Pay-per-click return on investment (or PPC ROI) provides an accurate assessment of the value of your digital marketing efforts. Find out how to calculate this metric — and how to improve it.
Here, you’ll find:
- What is PPC ROI?
- How to calculate PPC ROI: 7 formulas
- How to get started tracking PPC ROI
- Expert tips to improve PPC ROI
- Metrics to measure PPC ROI
- Challenges advertisers face with PPC ROI tracking
- Best tools for tracking PPC ROI
What is your pay-per-click advertising really worth to your business? Calculating PPC ROI reveals the value of your strategy so you can make data-driven decisions about your marketing.
In this article, we’ll cover everything you need to know about this metric, including how to use an ROI calculator, what to measure in Google Ads, and how to optimize for maximum value.
What is PPC ROI?
PPC ROI is a metric that compares the profit from an ad campaign to its total costs. It measures how much your ads earn after all related expenses, like ad spend, production, and labor costs.
Why monitor this metric? It tells you if your advertising strategy is profitable and which ad or campaign contributes the most value, given all the expenses required to get results.
PPC ROI vs. ROAS
PPC ROI and return on ad spend (ROAS) are metrics that help you understand how ad campaigns perform and the value they create. But there’s a key difference between the two:
- ROI gives you insight into the full value of your PPC marketing strategy. It factors in ad spend, campaign revenue, and the margin on the product or service.
- ROAS gives you insight into the success of a campaign. It factors in campaign cost and total revenue but not the margin on the product or service.
How to calculate PPC ROI: 7 formulas
How profitable is your digital advertising strategy? Is PPC worth it? Use these PPC ROI calculations to get data-driven answers:
- ROI
- ROAS
- Cost per conversion
- Profit per impression or click
- Break-even cost per conversion for forms
- Break-even cost per conversion for complex sales cycles
- Break-even ROAS
1. ROI
Measure ROI when you need to step back and see a complete picture of your advertising strategy. A PPC ROI formula reveals how much you’re actually earning from PPC ads.
ROI = ((Total Advertising Revenue – Total Advertising Costs) / Total Advertising Costs) x 100%
For example: (($500,000 – $100,000) / $100,000) x 100% = 400%
2. ROAS
Calculate ROAS to know whether an ad campaign is working. ROAS is a helpful benchmark for PPC campaign performance.
ROAS = (Total Advertising Revenue / Total Advertising Costs) x 100%
For example: ($500,000 / $100,000) x 100% = 500%
3. Cost per conversion
Track cost per conversion to determine how much you spend for lead generation. Many marketers use this metric to measure form fills.
Cost per Conversion = Total Campaign Cost / Number of Conversions
For example: $100,000 / 1,000 = $100
4. Profit per impression or click
Monitor profit per impression (PPI) to place a value on brand awareness. This metric tracks what you earn from every impression of your ad.
Profit per Impression = Total Campaign Revenue / Total Campaign Impressions
For example: $500,000 / 5,000,000 = $.10
To calculate how much you earn from the website traffic your ads generate, measure net profit per click.
Profit per Click = Total Campaign Revenue / Total Campaign Clicks
For example: $500,000 / 500,000 = $1
5. Break-even cost per conversion for forms
Define your break-even cost per conversion to find out how much to bid on advertising. This metric ensures you earn (rather than lose) money on lead generation.
Break-Even Cost Per Conversion = Conversion Rate x Total Campaign Revenue
For example: 10% x $500,000 = $50,000
6. Break-even cost per conversion for complex sales cycles
If you manage advertising for a B2B company with long, complex sales cycles, you need to know your break-even cost per conversion. By measuring this metric, you can ensure your efforts pay off over multiple touchpoints.
You can calculate break-even cost per conversion for various actions throughout the sales cycle. For example, you can track actions like lead magnet downloads or booked meetings.
Break-Even Cost Per Conversion = (Action Conversion Rate / Sales Conversion Rate) x Average Profit Per Sale
For example: (30% / 10%) x $1,000 = $3,000
7. Break-even ROAS
Determine your break-even ROAS to ensure your ad campaigns are generating a profit. This metric factors in the profit margin for each conversion.
Break-Even Return on Ad Spend = (1 / Profit Margin) x 100%
For example: 1 / 80% = 125%
How to start tracking PPC ROI
To measure a campaign’s success and fix broken PPC strategies, you need a reliable workflow. Follow these steps to create a PPC ROI tracking system:
- Establish goals
- Define KPIs
- Set up conversion tracking
- Build visual reports
Establish goals
Start with the main objective. What do you want to achieve with PPC as a business owner or for your clients?
This is your conversion goal. It depends on your business model and sales funnel.
Typical conversion goals include:
- Phone calls for businesses that book appointments
- Lead generation forms for businesses that collect contact information
- Ecommerce sales for businesses that sell products online
Define KPIs
Take your conversion goal a step further. How many conversions do you need to secure in a set time period?
This is your key performance indicator (KPI). It helps you stay on track to meet the campaign goal.
Based on the conversion goals above, your KPI could include:
- 50 phone calls per week
- 200 lead generation forms per week
- 100 ecommerce sales per week
Set up conversion tracking
Keep count by configuring conversion tracking in your advertising platform. Google, Microsoft, Amazon, and other PPC platforms offer native conversion tracking.
For example, Google Ads (formerly Google AdWords) supports tracking website, app, phone, and offline conversions.
Use the goal you set to choose the type of conversion you want to track. Then assign a value and set the conversion window and attribution model.
Follow the instructions to install the conversion on your website to get accurate data.
Build visual reports
By default, most PPC platforms provide analytics in table format. This format has the data you need, but it’s challenging to interpret data quickly or spot trends.
Instead, create dashboards or visual reports that make it easier to monitor ROI and other important metrics. You can do this in your advertising platform of choice.
Here’s how to create a custom dashboard in Google Ads. Open the “Reports and Insights” panel, and add scorecards for all the metrics you want to track. PPC metrics like cost, conversions, and conversion value are essential to measure ROI.
Expert tips to improve PPC ROI
Is your PPC ROI average at best? Use these tips to create an ROI-driven campaign and generate more value from your advertising strategy:
- Monitor user journeys
- Build landing pages for specific keywords or audiences
- Track UTM codes
- Use exact match keywords
- Include negative keywords
- Add ad extensions
- Time ad campaigns based on data
Monitor user journeys
When your ROI is lower than you’d prefer, don’t guess the reason. Monitor the user journey to find helpful clues about the:
- Number of clicks most prospects complete before converting
- Path potential customers take on the way to a conversion
- Marketing channels with the most valuable touchpoints
- Place where prospects tend to drop off without converting
With HawkSEM’s ConversionIQ™ (CIQ), we track the entire user journey from first click to conversion. This platform reveals every step so you can see which campaigns, ads, and landing pages provide value — and which don’t.
Then you can focus your marketing efforts on the channels that drive the best results. This may include PPC, paid social media, search engine optimization (SEO), or a combination of all three.
Build landing pages for specific keywords or audiences
Stop sending all PPC advertising traffic to the same landing page. Technically, a single landing page can work for multiple personas and keyword lists. But it won’t drive optimal results. Instead, it’ll likely decrease ROI in PPC campaigns.
To increase ROI, build dedicated landing pages for each target audience. On each page, use copy, creatives, and calls-to-action (CTAs) designed to appeal to each audience.
Make sure each page repeats the language, offer, and CTA from the PPC ad. Taking these steps can improve the landing page experience, one of the three factors of Google Ads’ Quality Score.
To make these destinations even more relevant to the ad copy and the audience, use a landing page builder with dynamic content. Platforms like Unbounce and Landingi can add the keyword that triggered the ad to the landing page copy automatically.
Track UTM codes
Which ad or keyword is driving clicks and conversions? You’ll get more detailed data if you add UTM codes to landing page URLs. Then you can track this data in a website analytics tool like Google Analytics.
The easiest way to add UTM codes is from campaign settings in Google Ads. View “Additional Settings” and open the “Campaign URL Options” panel.
Then create a tracking template. Essentially, you can include a final URL suffix that automatically adds the campaign name, keyword, and any other pertinent information.
Use exact match keywords
Choosing a keyword match type is a balancing act. Broad match gives your ads the most opportunities to display on search engine results pages (SERPs). But there’s a chance they’ll appear on searches less relevant to your keyword — which can decrease your ROI.
To increase ROI, consider changing any broad match or phrase match keywords to exact match. This match type gives you the most control over when your ads show. This match type can limit delivery somewhat. But it tends to attract a more specific audience — which prompts more qualified leads.
To use exact match, add brackets around any search keyword during ad setup, like in the example below. Alternatively, you can change match types for any active keywords.
Include negative keywords
Use negative keywords if irrelevant search queries continue to trigger your search ads. Instead of triggering ads, negative keywords prevent your ads from showing based on specific words or phrases.
Similar to standard keywords, negative keywords have match types. You can input broad, phrase, or exact match keywords to exclude as narrow or as wide a range of queries as possible.
In your Google Ads account, navigate to the “Search Keywords” tab. Then open the “Negative Search Keywords” panel and add a list. Select the campaign or ad group to which the list applies.
Like keyword types, negative keywords require balance. Add too many, and you’ll prevent ads from appearing when they can attract high-quality leads.
Add ad extensions
Technically, ad extensions are an optional feature for search ads. However, they’re essential components when using PPC advertising for ROI.
Extensions are extra details that may appear when your search ads are triggered. They can include:
- Call extensions that let prospects tap to call your phone number
- Structured snippets that highlight certain elements of your products and services
- Callout extensions that show unique selling points
- Image extensions that display one or more images on SERPs
Add extensions at the ad level. You may need to open the “More Asset Types” dropdown to see all the available options.
Time ad campaigns based on data
By default, PPC ad campaigns run around the clock. But that may mean your ads show at the wrong time for your audience. This can result in poor quality leads, wasted spend, and low ROI.
Check when and where your ads showed to find the ideal times for your audience. You’ll see an hour-by-hour breakdown, complete with performance metrics.
Find the hours with the worst performance, and exclude them from your ad schedule. Keep monitoring this data to ensure your ads show at the most valuable times for your audience (and don’t display when they’re unlikely to get results).
Metrics to track to measure PPC ROI
Want more insight into your ROI? Track these PPC metrics to improve your search engine marketing strategy:
- Cost per click (CPC)
- Clicks
- Click-through rate (CTR)
- Conversion rate
- Quality Score
- Cost per conversion
- Impression share
- Total conversion value
Cost per click (CPC)
CPC reflects how much you spend every time a prospect clicks to open your landing page. If costs are too high, review your keywords, match types, and bids to ensure they fit the goals you want to achieve.
Clicks
Clicks reveal the traffic volume your ads generate. If clicks are low, review your impressions and PPC bids to ensure you’re bidding enough to compete in the ad auction.
Click-through rate (CTR)
CTR indicates how often prospects click your ad versus how often it displays. If CTR is low, review your ads to ensure they align with search intent and include compelling offers.
Conversion rate
Conversion rate shows how often prospects complete the desired action versus how often they click on your ad. If your conversion rate is low, check your landing page to ensure it successfully guides prospects toward a conversion.
Quality Score
Quality Score is a comparative Google Ads metric showing how your ad quality measures up against other advertisers. If your Quality Score is low, improve ad relevance, landing page experience, and expected click-through rate.
Cost per conversion
Cost per conversion shows how much you spend for every conversion. If your cost per conversion is high, review your landing page to ensure it aligns with the ad and keyword that triggers it.
Impression share
Impression share reflects how often your ads appear compared to the total impressions they’re eligible to have. If your impression share is low, consider increasing your keyword bid or your campaign budget.
Total conversion value
Total conversion value reveals the revenue for an ad, ad group, or campaign. If your conversion value is lower than expected, review your ROI metrics to ensure you generate a profit rather than a loss.
Challenges advertisers face with PPC ROI tracking
Even marketers experienced with PPC management run into ROI challenges. Watch for these common issues and be prepared to take action to optimize your PPC strategy:
- Finding the source of ROI problems
- Attributing ROI across multiple touchpoints
- Accessing accurate ROI reporting
- Parsing multiple data sources
- Tracking PPC ROI in a cookieless world
Finding the source of ROI problems
Pinpointing the root cause of low ROI can be challenging for PPC professionals. When in doubt, audit your ads.
“When you find yourself in a situation with low ROI, the first step is always to reassess the campaign’s target keywords and ad copy,” explains Mateusz Calik, CEO of Delante.
“Usually, the problem comes from a mismatch between what the audience is searching for and what the campaign offers. Tune your targeting criteria in these situations and optimize ad copy to align with user expectations.”
Attributing ROI across multiple touchpoints
When your sales cycle becomes more complex, your user journey often has multiple touchpoints. Measuring ROI across them can be tricky — but not impossible.
“The biggest ROI tracking challenge? Attribution complexity,” says growth marketing expert Abhi Bavishi. “Multiple touchpoints complicate the ROI narrative. To address this, we refine our attribution models. We aim for a more nuanced view of the customer journey.”
Accessing accurate ROI reporting
If you rely on Google Ads data alone, you’ll be operating on a delay. To monitor and optimize ROI effectively, you need accurate data.
For Stefan Valentin, ads specialist at Irresistible Me, the biggest challenge is platforms not accurately reporting ROI with the current budget spend. “We try to look at multiple reporting sources before making a decision on the ads,” he says. “We use our integrated tracking from Shopify and a few other sources.”
Parsing multiple data sources
Many PPC professionals use more than one tool to monitor ROI. But data doesn’t always align across tools.
“The biggest challenge with ROI tracking is bringing together sources of data effectively,” suggests Derrick Kwa, performance marketing head for Pink Orange Media. “For example, purchase data on ad platforms may differ from actual purchase data from your store (because of cookie tracking, etc). Make sure you’ve defined what you’re using as your single source of truth for your metrics, and combine that with the ad platform data.”
Tracking PPC ROI in a cookieless world
Many reporting systems rely on cookies, which Google and Apple intend to deprecate in the near future. As a result, advertisers need an alternative solution for tracking ROI.
“A cookieless future is allegedly coming,” shares Calik. “I’m shifting focus toward first-party data and contextual targeting to maintain accurate tracking and personalization. It’s good to leverage CRM data in this process.”
“As Apple and Google go cookieless, the best solution is to lean on first-party data to track ROI,” advises Kwa. “Make sure the ad data is passed to your site via UTM parameters (or the equivalent), and store that directly.”
Best tools for tracking PPC ROI
Don’t rely on Google Ads data alone. Use these tools to track and report on PPC ROI.
- ConversionIQ provides full-funnel attribution and conversion data designed to optimize ROI.
- Google Analytics tracks activity and conversions on your website after potential customers click through from an ad.
- Looker Studio is a Google product that lets you build custom PPC ROI dashboards to share with colleagues or clients.
- Dedicated PPC reporting tools like Dataslayer or Supermetrics automatically pull data from multiple platforms to manage PPC analysis from a single dashboard.
- Ecommerce platforms like Shopify and BigCommerce provide data on the ecommerce customer journey.
- CRM tools like HubSpot and Salesforce provide data on leads, especially for longer B2B sales cycles.
The takeaway
By tracking ROI, you can understand the true value of your PPC strategy. When you monitor metrics throughout the user journey, you can improve campaign performance, optimize ROI, and increase overall profit.
Need help with conversion tracking or PPC management? We’re here to help. Contact HawkSEM for a free consultation to optimize your PPC campaigns.
This post was originally published in August 2014 and was updated in November 2020.
