Pay-Per-Click ROI Calculator

When you run Pay-Per-Click (PPC) Ad Campaigns such as Google AdWords, you have to keep an eye on your Return On Investment (ROI).

With any ad campaign, there are four important "input" numbers that you need to know so you can calculate "output" numbers such as ROI:

• Monthly Ad Spend: How much money you want to spend per month for ads. This is your monthly ad budget. You have control over this number.


• Conversion Rate (%): How many clicks convert into sales, expressed as a percent. Calculated as: number of sales divided by number of clicks, expressed as a percent. For example, 3 sales from 250 clicks is a 1.2% conversion (i.e.: 3 / 250 * 100 = 1.2). You can estimate this number by looking at the past performance of your ad campaigns. Conversion rate will vary depending on a wide variety of factors, including the products you're promoting, your marketing efforts, your competition, SEO, search engine placement, the season, the economy, and more. Use a realistic conversion rate; typically, less than 2.0% for online sales. Note: Past conversion rate is not a guarantee of future conversion rate.


• Cost Per Click ($): Cost per click (CPC) is how much you are being charged per click by the ad network. Typcially, when you create an ad, you set the maximum CPC you're willing to pay for that ad. You have control over this number.


• Average Revenue Per Sale ($): How much money you make (on average) per sale. You can estimate this number by looking at your past sales history. You have some control over this number by promoting higher priced items. Note: Past sales are not a guarantee of future sales.

Once you have the above numbers, it is possible to calculate the following monthly estimated numbers (assumes that all of your monthly ad budget gets spent):

• Estimated Clicks Per Month: Number of clicks in the month. Calculated as: ad budget divided by cost per click.


• Estimated Total Sales: Number of sales. Calculated as: number of clicks times the conversion rate. For example, 250 clicks with a conversion rate of 1.2% would be 3 sales (i.e.: 250 * 1.2 / 100 = 3). Note: The number of sales is only an estimate and is not guaranteed!


• Estimated Cost Per Sale: Cost for each sale. This number had better be less than the revenue per sale otherwise you're losing money per sale!


• Estimated Total Revenue: Total revenue from the sales. Calculated as: total number of sales * revenue per sale.


• Estimated Total Profit: Estimate of how much money you would make. Calculated as: Total revenue (income) minus monthly ad budget (expense). This number had better be positive otherwise you're losing money!


• Estimated ROAS: Estimated Return On Ad Spend. If this number is greater than 100%, you're making money; if exactly 100%, you're breaking even; if less than 100%, you're losing money.


• Estimated ROI: Estimated Return On Investment. If this number is greater than 0%, you're making money; if exactly 0%, you're breaking even; if less than 0%, you're losing money.

Keep in mind that the above numbers are all estimated numbers. Past PPC performance is not a guarantee of future PPC performance.

Rather than calculating all these numbers by hand, you can use this handy PPC ROI Calculator.

By the way, if you're using Google AdWords for your PPC ad campaigns, AdWords can be a great way of getting traffic to your website, but it can also get very expensive if you don't know what you're doing. I suggest that you check out Beating Adwords.