As global digitization accelerates, organizations realize the impending need to invest in digital advertising.
In 2018, the total national ad spend exceeded $125 billion – and it is predicted to continue to rise YOY:
With rising expenditure comes increased scrutiny.
With cutthroat competition, not every ad campaign can drive conversions and offer adequate ROI.
So, how do you know if the money you’re investing is generating revenue or not?
This is where ROAS comes in.
ROAS, or return on ad spend, is a metric for online advertisers, enabling them to track the money they make.
By calculating ROAS, you will know how many dollars you earn for each dollar spent. Additionally, it will determine which ad strategies and techniques work well so that you can apply those to your other ad campaigns.
ROI, or return on investment, is a business-centric metric used to evaluate the effectiveness of your marketing efforts as a whole.
It helps you understand how ads are contributing to your overall business finances and profit.
On the other hand, ROAS assesses the performance of specific campaigns, ad groups, or keywords.
As it focuses on individual advertising campaigns, ROAS is an ad-centric metric. It measures the gross revenue generated based on each dollar spent on ads. This way, you can learn which of your paid ad campaigns are useful and which ones you need to stop pouring money into.
To calculate ROAS for Pay-Per-Click (PPC) ads, you need to know the total PPC revenue generated by your ad strategy and the total cost of managing your ad strategy.
This includes revenue you earn from all different sources, such as product purchases and lead conversions.
Similarly, your cost includes all the expenses you incur when running your ads, such as Cost-Per-Click (CPC), management fees, software upgrades, and partner/vendor costs. Additionally, if you have purchased clicks and impressions, they will add to your expenses.
Now that you have these two figures, you just have to plug them into the ROAS formula.
There are two formulas you can use:
Divide the revenue you made from your ad campaign with the amount you spent to run your ad.
So, for example, you spend $200 on a PPC campaign and make $400 in return. Adding these values to the formula will give you a ROAS of $2. This means you’re making $2 for every $1 you spend.
However, calculating ROAS through this formula only gives you a general overview. It doesn’t tell you the overall profitability of your campaign.
So, for example, you spend $200 and make $400. But your vendor fees also cost $50. Then, the ROAS you calculate will not accurately depict the return you get.
For this reason, it’s better to use the second formula.
If you subtract your cost from the revenue before dividing the result by the cost, it will give you an adequate ROAS.
This formula doesn’t require you to evaluate any new values since it only needs the total revenue and cost. And plugging values in this formula will help you determine your marketing budgets effectively.
ROAS is a metric that needs to be tracked regularly. Ideally, you should track your ROAS throughout the ad campaign instead of at one particular time.
Although there are many indicators you can utilize to assess the success of your marketing campaigns, the end goal of your business is to earn more money.
This means tracking conversions and sales isn’t enough on its own; you need to fit them within your ROAS tracking mechanism.
But first, you need to calculate your revenue. And you can do it by following the two steps below.
The first step is to track your conversions. And you can easily do that on online advertising platforms like Google Ads, Facebook, Twitter, and Bing Ads.
All you need to do is use these platforms to set up an ad campaign and conversion tracking. If you’re using Google Ads, you can even track phone call conversions.
This way, you will know which clicks on your PPC ads led to which purchases. In addition, you will stay updated on your conversion rates and purchases that result from ad clicks.
The next step is to connect your online advertising platform to customer relationship management (CRM) software.
By doing this, you can tie all your marketing data to a new lead. Hence, when a lead converts into a customer, you’ll know exactly which marketing efforts led to the sale.
So, by tracking your conversions and sales, you get access to your revenue data. Simultaneously, the advertising software you use will detail your ad spend.
Now, all you need to do is plug the values in any of the two ROAS formulas, and you’ll know whether your money is being spent right or not.
ROAS enables you to gather valuable insights – based on which you can make informed marketing decisions.
Since the final goal of advertising is to make money, calculating ROAS should be a priority. Even though conversion rate and click-through rates are essential, they don’t guide you regarding changes to your advertising model.
In addition, knowing your ROAS can help you do the following:
Using other metrics alone will not give you complete insights, so you will not make informed marketing decisions.
Think about click data – it tells you the best click-through rate (CTR) and the lowest cost-per-click (CPC). So based on this data, you might think you can evaluate which of your campaigns are successful. But that’s not possible because CTR and CPC don’t tell you the quality of clicks and the traffic you’re getting.
Similarly, conversion data helps you track conversions and point out areas of weakness in your strategy. But it will not determine the quality of traffic and leads you are receiving.
However, ROAS ties all these metrics together by providing you with actual numbers you’re earning and spending on each channel.
Additionally, various factors result in a lower CPC or conversion rate, but that doesn’t mean your campaign is unsuccessful. In fact, such campaigns can still have high profitability. But if you don’t calculate ROAS, you won’t know that.
And then you will make decisions that will cost more than you gain.
A good ROAS target depends on many factors, including your industry, average CPC, and profit margins. This means a satisfactory ROAS varies from business to business.
In addition, a good ROAS differs from campaign to campaign. For instance, campaigns that aim to raise awareness, grow subscriptions and build a following generally have a low ROAS.
But if you want to drive a greater number of conversions and sales, you should expect a higher ROAS.
Still, no general rule can determine how high your ROAS should be. But, most businesses do aim for an overall 4:1 ratio.
Getting $4 for every $1 spent gives you enough money to keep your business afloat or even make a profit.
Here is a breakdown of different ROAS targets you should be aiming for at different phases of your business:
Most businesses think if they make a sale that amounts as much as they spent on marketing, they will break even.
But that’s not true because when you factor in all your variable and fixed costs, you are likely making a loss.
So, making $1 for each dollar you spend on your PPC ad campaign is not enough.
Let’s say you spend $100 on marketing and make a $200 sale. It means you are earning $2 for every dollar you spend.
But, 2x ROAS is still low because fixed costs are generally high, resulting in a deficit.
As long as you get some consistent sales, you can break even with a 3x ROAS.
For example, you spend $50 on marketing, which results in a $150 sale. So, now, you have an added $100, which you can use to cover additional ad-running costs.
4:1 ROAS is where you start making a profit, which is why most businesses aim for at least a 4x ROAS.
When each dollar spent gives you $4 in return, you have enough money to make a profit. But ultimately, that depends on your business model and costs.
So, if you have very high variable and fixed costs, it may not result in a profit. But that is often not the case.
With a 5x ROAS, you can start using your marketing practices to grow your business.
At this stage, you’re making enough profit that you can afford to invest more in your marketing and customize various goal-specific ad campaigns.
In the end, the ideal ROAS for your business depends on your ROAS targets, business expenses, and marketing goals.
Also, if you have different PPC campaigns running simultaneously, set separate ROAS targets for each. Then, calculate their ROAS individually to see if they are bringing in enough cash.
But if your ROAS is still low, look into all other metrics and practices to identify the reasons behind it. Then, when you know which strategies are working, you can implement those across other campaigns.
Not being able to meet your ROAS target can be frustrating. But a low ROAS doesn’t always mean that your campaign is a complete failure.
Sometimes, you can make small changes to your current campaign to increase ROAS.
Some tweaks you can make are:
Placing an ad at the right location is key to attracting quality traffic. So if you have a low ROAS, consider changing the location of your ads.
For example, try placing them on e-commerce sites or social networking sites. Additionally, you can change the layout for your ad, such as converting a banner ad with a pop-up.
Your ad copy should gauge the user’s attention, resulting in the maximum number of ad clicks.
Similarly, your ad copy should be optimized for SEO so that your ad can show up organically in search results.
A helpful tip to follow is to use specific, long-tail keywords that are relevant to your brand.
For more detail, please visit our post outlining and weighing the difference between SEO and PPC.
Targeting 56.16% of all web traffic that comes through mobile phones can boost your ROAS.
If your advertising campaign is limited to desktops and isn’t generating high revenue, you should consider running mobile ads.
Use your ROAS to eliminate campaigns that are performing extremely poorly. Instead, use that money and effort on campaigns that show growth potential.
At the same time, try not to get carried away with spending on ad campaigns. So, place a cap on your budget for PPC campaigns because lots of click-throughs are only beneficial if your budget supports them.
Return on ad spend (ROAS) is a valuable metric that businesses of all sizes can use. And it helps you allocate adequate budgets for numerous ad campaigns.
Globally, 31% of all online users click on ads, which means investing in online advertising has a good chance of increasing leads. But to make the most of your marketing efforts, you need to strategize accordingly.
By regularly tracking your ROAS, you will make informed, data-driven decisions that will eventually boost your revenue.
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When you want to use paid search marketing platforms, Google Ads often leads the list. Because of its versatility, simplicity, and popularity, it’s obvious why it’s a popular choice. But when you drop all of your PPC advertising money into one marketing strategy, you could lose some leads.
That’s why some businesses explore paid advertising marketing outside of Google, with many turning to Linkedin Ads.
Google Ads and Linkedin Ads are highly efficient ways to market your products and services to businesses and consumers. But each marketing channel has its advantages and disadvantages. Whatever you choose, make sure you discuss the matter with your web development company.
Below is a closer look at each option.
We think it’s reasonable to conclude that Google reaches a vast audience worldwide – its ad reach is a stunning 4 billion people. Google search handles about 70% of desktop searches, and many companies report that they get about 90% of their organic traffic from the search engines. Also, up to 95% of the mobile search market comes from Google.
People use Google’s search a lot, and having the ability to target search terms with specific search ads is a massive benefit of Adwords. People tend to search for very specific things in Google, so if you can customize your Google advertising for your targeted audience, you’ll receive plenty of leads.
So, we can assume that most people’s targeted audience uses Google to some degree. That’s a massive advantage for companies when they want to target an audience.
However, businesses that want to narrow down their search may have issues getting their Google ads settings right with both Google Ads. And if you blunder when segmenting your audiences, your digital ad campaign could suffer.
LinkedIn features a narrower audience – 500 million users – namely businesses and business professionals. But this more limited audience makes it the perfect place for effective B2B marketing. LinkedIn lets marketers serve online ads to decision-makers and vital audience members in several ways.
Summary: For B2B firms that want to reach decision-makers, Linkedin is a terrific advertising platforms. If your B2C company intends to increase its reach, Google Ads could be the best fit.
When you target your audience with Google Ads, you have a few options: location, affinity, technology, buyer behavior, demographics, and interactions with your app or website.
No matter how much you know about your buyer, you may struggle to avoid clicks from worthless leads that cost too much.
In some cases on Google, people may not even know what they’re looking for. You can try to advertise to your desired targeted audience on Google Ads, but it can be challenging to get to the precise people who will most likely buy what you sell.
When people sign up for LinkedIn, they usually provide many details, such as their occupation, title/job title, experience, industry, education, interests, and more. All of this information can be leveraged for great advantage when you start your marketing campaigns.
Also, LinkedIn users can join many groups, start conversations, and obtain followers. The data is priceless when you want to target a specific audience and market to them. LinkedIn also has a Matched Audience that helps advertisers match their email marketing lists and website visitors with users on LinkedIn.
Many marketing experts think that LinkedIn Ads offer more value. LinkedIn has refined targeting, and you can make your product known to them so that you can tell them about something they didn’t know existed.
Summary: For B2B and B2C companies looking for a broad audience, Google Ads has enough targeting features. But for B2B firms that want to target specific groups, LinkedIn Ads has about 100 segmentation methods for micro targeting.
When you want lead generation, Google Ads has a broader reach and is the most effective. First, you can bring in a lot of prospects to your site without breaking the bank. The audience you’re after on Google visits the search giant with the idea to find the best product or service. This makes generating leads easier.
Getting leads from LinkedIn can be more challenging. Users of the platform may sign in to read industry news or talk to group members. No matter how perfect your ad is, viewers may not be in the mood to buy anything.
That said, Linkedin has a way to target ad leads through in-site messaging, which can generate plenty of leads.
When it comes down to dollars and cents, LinkedIn Ads usually are more pricey than Google Ads. As in Google, you can select cost-per-click or cost-per-impression.
LinkedIn also features a cost-per-send for InMail advertising. Typically, you’ll pay about $5 for each click, $6 for 1,000 impressions, and .80 for each send.
With Google Ads, the average CPC is $1. But to leverage that low cost, you need to work on your audience segmentation. If you don’t your ROI may be below what you want.
Summary: Advertising budgets for each platform depends on several factors. On average, Google Ads cost less than LinkedIn Ads. If your B2B company has a tight budget, you may want to focus on a limited variety of LinkedIn ads instead of a broad range of Google Ads.
So should you advertise with Google Ads vs LinkedIn Ads? Yes!
What we mean is, it depends. The correct choice depends on your budget, product or service offered, marketing goals, and target audience. You should not assume that when you need a digital marketing campaign, Google Analytics Adwords is the only choice.
It’s critical to evaluate the market, understand who your buyer is, and make a data-driven decision about the best marketing platform to reach your well-defined goals. One type of company might do better with Google Ads, and another may find LinkedIn Ads preferable.
The great news is you don’t need to choose between the two platforms. Many businesses use both, as well as Facebook, Instagram, and others. If you have the budget, it may pay off to diversify your paid search advertising to get the best ROI.
Pay-Per-Click (PPC) Digital marketing is a classic marketing strategy that’s commonly used to supplement organic web traffic, but it’s hardly the most straightforward way to increase your site’s audience. In fact, from a technological perspective, it’s a rather fussy practice. That’s why brands that want to include a PPC marketing strategy in their overall strategic decisions need to work with an experienced agency. Agencies facilitate ad distribution, track clicks, and calculate fees – and the best ones can help their clients thrive. Unfortunately, there are a lot of subpar agencies and bad actors out there, and you need to know how to spot them.
So, how do you know if it’s time to fire your PPC agencies? Keep an eye out for these 9 red flags. They could indicate you’re working with the wrong agency and that it’s time to make a move.
Companies leave their PPC agencies behind for all sorts of reasons, but according to a 2015 report by the Society for Digital Agencies (SoDA), the most common reasons include outgrowing the agency’s capabilities, cost overruns, and dissatisfaction with their strategy. These are all valid reasons, and ultimately many of them can be reduced to an agency’s failure to generate any or enough growth. After all, disliking the agency’s strategy isn’t likely to be much of a problem if that strategy is generating major growth. Similarly, a brand is unlikely to view itself as having outgrown the agency is their accounts continue to grow.
Ultimately, what these different reasons for firing PPC agencies demonstrate is that, any way you slice it, no one wants to work with an agency that isn’t making them money. So, while it might take a little while for your PPC ads to gain traction, if you’re not seeing growth based on the launch of or changes to your PPC campaign, it’s time to move on to a different agency.
While most brands work with a PPC advertising agency to run their campaigns, it’s not only possible but advisable for you to set up your own accounts with the major PPC advertising platforms, which include sites like Google AdWords, Yahoo, and Facebook. Still, if you’re not the most technologically savvy, it can be tempting to let your agency do it for you. Don’t give in to the impulse. Instead, ask them to guide you through it so that you can ensure that you’re the one with owner access rights.
Unless you have the owner access rights to your company’s PPC accounts, you can’t be sure you have unmediated access to your campaign metrics or feel good/ confident that you’ll be able to transfer your accounts to another agency or bring them in-house if needed. In other words, your agency could be misrepresenting best results to you or could refuse to relinquish control if you end your contract. You need to retain those rights and then give your PPC agent the appropriate permissions to manage your campaigns. If they balk at this arrangement, show them the door.
Typically, when you look at your company’s profile on a site like Google AdWords, you’ll see that your PPC agency has set up specific goals to help your business grow. These commonly include such metrics as Cost Per Acquisition, Return On Advertising Spend, and Cost Per Lead, though there are plenty of other valuable metrics that are worth tracking. Such measurements assure you that you’re spending your Digital marketing money in the right place, help you budget for ad spending, and offer insights into what’s working and what isn’t.
Unfortunately, you’ll occasionally encounter PPC advertising agencies that fail to set up these metric reports, and they’re not to be trusted. Even if they claim to be using an in-house system, it’s your right to demand they use the standard reporting system for each PPC platform and to fire them if they refuse to. Dashboard-based metrics exist to provide consistent measurements regarding the success of PPC campaigns ad those are the numbers you want to reference.
In a similar vein, some PPC advertising agencies skip the core metrics noted above in favor of less valuable but more appealing “vanity metrics.” Vanity metrics don’t help your business make money and they offer limited insight into your operations. Examples of vanity metrics include any campaign value based on impressions, engagement metrics that don’t drive conversions, and even many of the behavior-based metrics that used to be considered the gold standard in website evaluation, such as bounce rate or time on site.
Ultimately, vanity metrics don’t serve your company because they can be created artificially. An untrustworthy PPC agency might drive up engagement numbers by sharing a great meme on your brand’s landing pages, which will drive likes and other reactions, but won’t actually funnel clients to your site or create sales. Similarly, you can get a huge number of impressions by getting your PPC new ads onto a very popular site, but if no one is clicking on it, all you’ve got is a tally of how many people visited/ web traffic to someone else’s website.
Having the right metrics is important, but if you’re going to meet your goals then your Good PPC agency needs to be adjusting your account settings regularly to refine your campaigns. At a minimum, that means accessing your account to regularly monitoring and fine-tune the settings at least once a week. Such regular check-ins allow your agency to quickly adjust your social media campaigns based on updates to the search engines algorithm, catch any conversion mistakes that could cost your company money, and even react to competitors campaigns.
Be sure that you not only ask your PPC agency how often they access and update your accounts, but that you’re also checking your accounts regularly for updates. The reality is that, although many companies run PPC campaigns, only 10% of AdWords accounts are updated weekly. If your PPC agency can’t meet that standard, ditch them for one that will stay on top of your campaigns.
Just as your PPC agency needs to be fine tuning your accounts regularly, they should also be reporting back on your campaigns at least monthly. While seeing week-to-week progress would be great, as with many kinds of growth, this can be hard to evaluate. Comprehensive, monthly reports, on the other hand, can help you see what your agency has been doing on your behalf, how your accounts are growing, and allow you to be an active participant in your Digital marketing strategy.
Never settle for a company that doesn’t offer substantive reporting. While great reports may offer added insights from your account manager or more labor intensive explanatory work, the majority of PPC reporting is automated – any company that doesn’t provide it is just lazy.
It’s unrealistic to expect that you’ll speak to the same person every time you contact your PPC agency; that doesn’t even happen at your bank or your doctor’s office. That being said, there should be one person who acts as the lead on your account because that allows them to master your brand’s voice, develop a big picture strategy, and generally build up a knowledge base around your brand’s needs and preferences. They might be busy or out of the office occasionally, but anyone whose experienced both approaches – a core account manager and a rotating cast of agents – can tell you that having a point person makes a difference.
If your PPC agency doesn’t have you working with a single, core agent, you may want to ask a few questions to get a better sense of what’s happening. Do they have an unusual in-house strategy, or are they having trouble with employee retention? Do they think it doesn’t make a difference? You can also request that they place you with a single representative, but if that’s not their standard practice already, you’re probably better off going elsewhere. It just doesn’t bode well.
Google AdWords isn’t a new program and there are plenty of other PPC programs out there, but if an agency is committed to this work, then they should have complete Google’s AdWords certification program. You can check on this by asking them to show you their Premier Partner page – it really is that simple. Not having one isn’t necessarily the worst offense a company can commit, but it’s a good indicator that you can do better and should commit your ads spend elsewhere.
Did you pick your PPC agency based on their portfolio of appealing PPC ads/ads or optimized images? That’s a great starting point – it certainly indicates that they can do high-quality work – but it’s not enough if they’re not actually showing you your brand’s own ads before they launch them. Obvious, right? It should be, but many entrepreneurs have been duped by PPC agencies who tell them that their ad is similar to another ad product, which is called ad copy; the client, not wanting to be pushy, walks away with their own notion of their brand’s ad, and meanwhile the agency may not have done any work at all.
Your PPC agency should be giving you the final say on all your paid ads, so if you’ve supposedly got a campaign running and you haven’t seen your ads, ask to see them right away. Odds are good that if your agency isn’t showing you your PPC ads before launching them that they either don’t exist or they’re extremely low quality for online visibility. Great PPC agencies are proud of their work and they want you to see it. Anything less should raise concerns.
Hiring an agency to manage your PPC campaigns will obviously cost more than just the fees for the campaign itself, but the costs involved in running ads with your agency shouldn’t be confusing. That’s because, ultimately, your money should only be going two different places – to the agency and to the ad platform – and everyone at the company should be clear on the split. So, when we say you should be wary about confusing fees, we’re not talking about total cost (that’s a matter for you and your budget), but rather about how the money is split up. For any payment there should be the fee to the agency and the ads spend and it should always be obvious what the division is there.
As popular as PPC marketing is with businesses today, many of the agencies that execute these campaigns don’t do a very good job. They’re wasting your ad spend and your time, and you deserve better. That’s why you should switch to PPC.co’s PPC Management Service.
At PPC.co, we’re committed to ensuring that your ads are reaching the right audience and we know that most agencies just don’t deliver that. Starting from our understanding that website conversions often top out at 2%, we emphasize PPC marketing that pairs first contacts with retargeting efforts to ensure that your brand remains a top-of-mind solution for past visitors. A non-converting visitor is often just someone who hasn’t seen the right content yet, and we want to help you make those connections.
What else makes our PPC Management program stand out? With dual Google Ads and Google Analytics certifications, we have a deep understanding of the systems & AdWords account that get your ads seen and can use tracking data to its fullest potential of web traffic. In fact, that’s why we start every client engagement with a full PPC audit, because even when we’re not leading the campaigns, our skilled professionals can quickly see what’s working and what’s falling short in your current campaigns. From the start, we put our expertise to work for you.
If your PPC agency has exhibited any of the above warning signs, you can’t afford to wait around for progress. It’s time for the protection of business and moves on – to PPC.co. Contact us today to learn more about our PPC Management Services and say goodbye to wasted ad spend and rock bottom conversions. Once you’ve seen the difference a top PPC agency can make in your campaigns, you’ll never believe you let anyone else handle your PPC needs.
