“Boost conversions, cut expenses.” – This is the mantra of every Google Ads user. Ideally, spending less while earning more would be a breeze. Chocolate fountains would grace every street corner, and student loan debt would disappear. If only it were that simple.

In reality, balancing the desire for customer base growth with reduced advertising spending is no easy task. However, a performance indicator bridges the gap: return on investment (ROI).

Measuring PPC Effectiveness

While we’ve previously discussed setting initial ad budgets, relying solely on spending to gauge account performance isn’t efficient. It might work for less measurable channels like bench ads, where attribution is unclear. However, if budget caps were the only metric for judging Google Ads performance, growth would be stifled based on an arbitrary limit. Conversely, while conversion goals provide aspirations, they don’t effectively guide account structure and optimization. You could spend a fortune on broad match keywords and get conversions, but it would be wasteful. Google Ads is not about random advertising and shouldn’t resemble direct mail campaigns. While budget and conversion goals are important considerations, daily performance demands more accuracy. This is where ROI comes in.

Determining Your Google Ads ROI

Calculate ROI using this formula: (Revenue – Cost of goods sold) / Cost of goods sold = ROI **Remember, “cost of goods sold” includes more than just the cost of a click. For physical products, factor in manufacturing and distribution costs. For lead generation, include the expenses of your nurturing campaigns.__.

Campaign-level ROI is a more flexible and valuable benchmark for optimization decisions than simply setting a daily budget and hoping for the best: Let your returns dictate your budget, not the other way around. A search campaign targeting bottom-of-funnel keywords will generally have a higher ROI than a broadly targeted Display campaign using something like keyword targeting. Remarketing to users who abandoned their carts yields a better return than showing ads to all website visitors. This level of detail is what makes PPC unique, allowing ROI to be an operational principle, not just an aspiration.

Why Google Ads Outperforms Traditional Advertising in ROI

Imagine standing at a crowded train station, staring at ads between tracks until the arrival of a packed train—itself covered in more ads—obstructs the view. These ads aim to be the sole focus in a dimly lit, visually unappealing environment. Thousands pass by, so these impressions must be valuable, right?

Not necessarily. Consider this rate card for train ads:

Let’s say a beverage company wants to advertise inside train cars across a city. The recommended ad count is 140, costing $75 per ad per month, plus a $10 installation fee. (140 ads x $75/ad) + (140 ads x $10/ad) = $11,900/month This hefty sum might buy an estimated 21 million impressions. However, measuring the impact on sales is unreliable. There’s no way to discern which ads led to new customers and which served as a backdrop for naps and distractions. While valuable for brand building (if the ads are engaging), ROI becomes a gamble, not a KPI. Now, consider Google Ads. Each keyword can be assessed. Underperforming terms or campaigns can be paused, while high-converting ones can be prioritized. An increasing number of advertisers are finding success with ROI-driven strategies. By prioritizing profits over unrealistic conversion goals or arbitrary budgets, they can identify and leverage the sweet spot between volume and efficiency. With that said, let’s explore the ROI expectations for search and display campaigns.

Achieving ROI Goals: Search

Search campaigns can be categorized into four groups: top of funnel, bottom of funnel, branded, and competitor. Each group has different ROI expectations. Understanding where returns are highest helps allocate budget effectively.

Branded

Some hesitate to bid on branded terms, assuming those searching their brand name are not “first touches.” While conversions should consider that these users might have already visited the website, branded terms are valuable for ROI. They offer a maximized Quality Score, with typically lower volume and competition compared to top-of-funnel terms.

Top of Funnel

These are research-oriented terms. Expect lower ROI compared to branded or bottom-of-funnel campaigns, requiring close monitoring of performance. Flexibility is key: capitalize on converting top-of-funnel terms. However, avoid unnecessary spending. Often, variations of these keywords exist that convert better at lower costs. Find them and watch your ROI soar.

Bottom of Funnel

Think of bottom-of-funnel keywords as the hidden gems of your account. These are long-tail or high-intent search terms that often have low average CPCs due to lower volume and less competition. The more you uncover, the better your Google Ads ROI.

Competitor

Controversial yet necessary. Bidding on competitor terms can be detrimental to ROI due to high costs and potentially irrelevant ad copy. However, a trick exists: RLSA. Instead of increasing bids, use remarketing lists to target these terms only when past visitors search for competitors (select “target and bid” instead of the default “bid only”). This indicates active comparison shopping, allowing you to present an irresistible offer and turn these often-ignored campaigns into profitable ventures.

Achieving ROI Goals: Google Display

The Display Network’s high impression counts can be deceiving, leading some to equate it with traditional advertising. While less-specific targeting options might resemble those methods, conversions from banner ads on random mobile apps won’t match those from refined search campaigns.

However, clicks are cheaper, and with CPC bidding, you pay only when someone clicks. The brand-building benefits of your banner ads appearing alongside your target audience’s favorite content across millions of websites come free. When someone who saw your banner ad later searches for your brand, clicks an ad, and converts at a low cost, you’ll wish you could recoup all the money spent on untraceable traditional advertising. The key is to leverage targeting methods effectively. In the provided graphic, website and keyword targeting, while useful for initial exposure, don’t typically yield high conversions. These are broad and inexpensive approaches. Conversely, remarketing to site visitors or using email lists for targeting can generate exceptional ROI. Avoid limiting your remarketing budget or setting unrealistic conversion goals for Display. Experiment with all targeting options, identify those driving leads or revenue, and optimize them further.

In a Nutshell

Manage your Google Ads account strategically: prioritize ROI to maximize your returns.