What PPC ROI measures
Return on investment compares what your ads earn with what they cost. Three versions get used, and they give very different answers for the same account.
| Measure | Formula | Example: $2,000 ad spend, $8,000 revenue |
|---|---|---|
| ROAS | Revenue ÷ ad cost | 8,000 ÷ 2,000 = 400% |
| ROI | (Revenue − ad cost) ÷ ad cost | 6,000 ÷ 2,000 = 300% |
| Profit ROI | (Gross profit − ad cost) ÷ ad cost | At a 40% margin: 1,200 ÷ 2,000 = 60% |
ROAS and ROI are often mixed up. A 400% ROAS can still lose money when margins are thin, which is why profit ROI is the number that pays the bills.
For a business that sells through enquiries rather than a checkout, work it back from the job: cost per enquiry, how many enquiries become jobs, and what a job is worth. If an enquiry costs $40 and one in four becomes a job, each job costs $160 in ads. A job with $1,200 of gross profit returns $1,040 on that $160.
Where ROI is lost
Most accounts don't lose money on Google Ads as a whole. They lose it in pockets that the account totals hide.
- Averages: a campaign at a $40 cost per enquiry can hold one keyword at $15 and another at $120. The average looks fine while the $120 keyword eats the return.
- Stale bids: auction prices move through the day, so a bid set on Monday morning is wrong by Monday afternoon.
- Daily budget caps: a campaign that runs out of budget at 2pm misses the afternoon, and one that never runs out often overspends on weak hours.
- Uncounted phone calls: when calls aren't counted, the keywords that make the phone ring look worse than they are and get bid down.
- Hours that don't convert: paying full price at 2am for clicks that never become enquiries.
Optimise at the keyword level
The most a click is worth is what an enquiry is worth, multiplied by the chance that the click becomes one. So the most worth paying for a click is the value of an enquiry multiplied by the keyword's conversion rate.
| Keyword | Conversion rate | Enquiry worth | Most worth paying per click |
|---|---|---|---|
| emergency roof repair | 8% | $60 | $4.80 |
| roof repair | 5% | $60 | $3.00 |
| roof repair cost | 2% | $60 | $1.20 |
Same campaign, same budget, three different right answers. One campaign target can't price all three correctly. A bid per keyword can.
A PPC ROI checklist
- Count every enquiry, forms and phone calls included, matched back to the keyword that produced it
- Put a value on an enquiry, from your close rate and the gross profit on a typical job
- Price each keyword from its own conversion rate, not the campaign average
- Reprice through the day as auction prices and demand move
- Plan budget across the month, so strong days aren't starved by a daily cap
- Cut spend on keywords that take budget without producing enquiries
- Review search terms and add negative keywords every week
How Adlogic Engine does it
Adlogic Engine prices every keyword bid on your own Google Ads account every 15 minutes, 96 times a day, against what an enquiry from that keyword is worth. It plans budget across the month instead of a daily ceiling, and cuts spend on keywords that drain budget without producing enquiries. The Call Intelligence add-on brings phone calls into the price, and every bid breaks down into named numbers you can download.
Frequently asked questions
What is a good ROI for PPC?
It depends on your margin. To break even on ad spend, ROAS needs to be at least 1 divided by your gross margin: 250% at a 40% margin, 400% at a 25% margin. Anything above break-even is profit before overheads.
What is the difference between ROI and ROAS?
ROAS is revenue divided by ad cost. ROI takes the ad cost off first, and profit ROI uses gross profit instead of revenue. ROAS tells you how much revenue the ads bring in; profit ROI tells you whether they make money.
How often should Google Ads bids change?
As often as the auction does. Prices and demand move by hour, day of the week, device and season, so a bid set once a week is out of date most of the time. That is why Adlogic reprices every 15 minutes.