Arranging Pay Per Click (PPC) advertising is very easy. Services like Google AdWords and Facebook advertising can be used by pretty much anyone who owns a website. Getting an account set up is fast and publishing basic text ads is simple too.
In fact, it’s almost too simple. When it’s so easy to set up a PPC ad campaign, many who are new to the world of online commerce head to AdWords first. Because it’s so easy, they use it as their primary method of attracting traffic. In the long term, relying on paid advertising can be very expensive indeed. It may work out a lot cheaper to build links, research keywords, and mount an SEO campaign, but that takes time and knowledge, while PPC doesn’t require much of either.
PPC advertising can work well, but it’s a mistake to assume it’s providing value for money when it may not be. Too find out if a campaign is delivering a good return on investment, the first thing you need is some basic math.
First, work out the dollar value of a visitor to your website. Any good analytics tool will show you the number of unique visitors per week or per month. Take the total value of your sales over that period and divide it by the visitor numbers. If 3305 different people looked at the site and you made $800 in sales, the average visitor spent 24 cents.
If you’re paying more than 24 cents per click, there is a problem. Unless the average AdWords visitor spent a lot more than the average organic visitor (very rarely the case), your paid advertising is costing more than it’s making. You can either hope things improve, try to reduce the amount you pay per click by choosing different keywords or lowering bids, or stop the campaign and try something else.
Calculating the value of a visitor is a good simple way of finding out if paid advertising is working, but there are complications. Firstly, the visitors you get through ads usually behave very differently to those who arrive as referrals from other websites or through organic searches. In almost all industries, visitors coming through organic search tend to stay longer on site, explore more deeply, and spend more than those coming through paid ads.
It is possible to look a little closer. You can segment out traffic that comes from paid ads and calculate the value of that kind of visitor more accurately. Divide the amount spent by AdWords visitors by the number of clicks to get the dollar value, or simply compare the amount spent on advertising to the amount you made if all your traffic is coming through paid advertising.
AdWords (and most other paid ad providers) and Google Analytics can offer a huge amount of information on who is doing what and the exact behaviour of visitors arriving through advertising. However, there is often no need to look too deeply. Stick with simple math- if you’re paying more than a visitor is worth, something needs to change if you’re going to make a profit.