How to calculate if the Clicks were Profitable or Not?
You can understand whether a click is worth to you depending on your advertising goal or account/campaign objective. There are two types of account objectives I would consider here
For a Revenue Generating Campaign – Lead generation
Let’s take a look at this example to understand things better. You can learn all of these ROI related calculations in our AdWords Training in Hyderabad Program or enroll for our Digital Marketing Training in Hyderabad at Adonai.
Consider the following case for an AdWords account that has ROI as its Key Performance Indicator (KPI):
Total Spend: $1000
CPC (Cost per Click): $ 10
No. of Clicks : 100
No. Of Conversions : 5
Overall CPA (Cost per Conversion): $ 200
Let’s assume the Revenue/Conversion: $ 50 per conversion
Therefore, Total Revenue = Revenue/Conversion * Conversions
i.e. Total Revenue = No of Conversions * Conversion value
$ 50 * 5
= $ 250
Profit earned = Total Revenue – Total Spends
= $ 250 – $ 1000
= – $ 750
So in this scenario, we can see that total profit earned from AdWords campaign was not successful in we were driving ROI for the client. Since we were not able to make profit here, the total number of clicks that were recorded in the account can be deemed as not profitable.
Second scenario, let’s assume, if we had recorded conversions with conversion value say $ 500 per conversion, our total revenue would have been $ 2500 (i.e. 500 *5) which would lead to us recording a total profit of $ 1500 which will make each of the clicks worth much more for us as advertisers. Our paid interns on AdWords Campaign management work on these ROI related reporting, so they understand the issues that arise in real time AdWords account management. You can also enroll for the PPC Training in Hyderabad to learn to calculates the ROI of the campaigns.
Basically, the more profit we make out of an ROI based campaign the more the worth of the clicks received. It can be achieved with a higher conversion rate and so on.