What is Paid Search?

The search engine results pages (SERPs) have changed of late, that’s not in doubt, but paid search is still ever present. Whenever you search for a product or service, you’ll find some pop up above organic search results, often labeled “sponsored” or “Ad”. That’s paid search in its true element.

How Does Paid Search Work?

Businesses bid on keywords related to what they sell. For example, if you run an online store selling running shoes, you’d bid on keywords like “best running shoes” or “cheap running shoes.” When someone searches for those terms, your ad could appear.

The beauty of paid search is that you only pay when someone clicks on the ad. That’s why it’s called pay-per-click (PPC) advertising. If 100 people see your ad but only five click, you only pay for those five clicks, not the 95 views.

Paid search has the potential to get you the results you’re after, but it’s not something to take lightly. The best approach is to engage an SEM marketing agency or any other search marketing professionals you know. These digital marketing pros know what it takes to milk ROI out of these campaigns and can help you get a bang for the buck.

Why Measure ROI in Paid Search?

Say you spent USD$500 on ads last month. Did you make back more than USD$500, or did you lose money? Without tracking ROI, you’ll never know if your campaigns are actually helping your business grow.

ROI stands for return on investment. It tells you how much profit you earn compared to how much you spend. To calculate ROI accurately, you need to track two things:

• How much revenue came directly from your ads.
• Exactly how much you spent on those ads.

Tools like Google Analytics and Google Ads can help you connect the dots between clicks, conversions, and sales in this digital marketing campaign.

How Do You Start Measuring Paid Search ROI?

Here are a few steps to get this digital advertising campaign kicked off:

Step 1: Track Conversions

Before you can measure campaign performance, you need to know what actions matter most to your business. These are called conversions. A conversion could be:

• Someone buying a product.
• Filling out a contact form.
• Signing up for a newsletter.
• Calling your business.

To track conversions, set them up in Google Ads or another platform. Most tools let you add tracking codes to your website. Once these codes are in place, the system starts counting every action that matches your definition of a conversion.

Step 2: Calculate Total Revenue

Suppose you ran a paid search campaign last month. During that time, 50 people bought products worth USD$40 each, 20 filled out a contact form, and each form is valued at USD$100.

Your total revenue would look like this:

Sales: 50 × USD$40 = USD$2,000 Leads: 20 × USD$100 = USD$2,000 Total Revenue: USD$2,000 + USD$2,000 = USD$4,000

Step 4: Determine Total Costs

Next, figure out how much you spent on your campaign.

The actual cost of clicks (CPC × number of clicks). Any fees for managing the campaign (if you hired an agency or consultant). Time spent creating ads or optimising landing pages (if applicable).

For example, if you paid USD$1 per click and got 500 clicks, your ad spend was USD$500. Add any other costs, like USD$100 for design work, and your total cost becomes USD$600.

Step 5: Analyze Performance Metrics on Your PPC Campaigns

These numbers tell you how well your ads are doing. Here are a few important ones:

• Click-Through Rate (CTR): CTR shows how often people click on your ad after seeing it.
• Impressions: If your ad got 100 impressions and 10 clicks, your CTR is 10%. Higher CTRs usually mean better ad copy or targeting.
• Cost Per Click (CPC): CPC focuses on the amount you pay per click. Lower CPCs mean you’re getting more bang for your buck.
• Conversion rate: Conversion rate measures how often clicks turn into conversions.
• Cost Per Acquisition (CPA): CPA shows how much you spend to get one conversion.
• Return on Ad Spend (ROAS): ROAS compares revenue to ad spend.

These metrics can show you how effective your paid ad campaign is and what you may need to tweak. You can use tools like Google Analytics, Google Ads, and custom dashboards to analyze these metrics. The results can then show you where to adjust to make sure your ads work for you.

Closing Thoughts

ROI is the heartbeat of your paid search campaign, and knowing how to measure it can go a long way. This guide has shown you a few ways to get these metrics right.

In case you need more help, do your research and go with an experienced agency that fits your needs and business budget. They could help you strike a balance between cost and effectiveness and get you the results you’re after.