Maximizing PPC ROI Without Increasing
Or Adding To Expenses

Writing by Pay Per Click Journal on Tuesday, December 30, 2008 Comments Off

There are two ways to increase ROI. You can cut expenses or you can earn more profit. Ideally, you’ll do both, but what if you can only do one or the other? Most of us would focus on cutting expenses. But that may not always be the best way. If you can earn more income and spend the same amount of money, wouldn’t you rather do that?

That’s what the latest blog post at Efficient Frontier is about. I agree, it isn’t obvious, but this is what we’ve been saying at Pay Per Click Journal for over a year now.

While EF puts it in different terms than what we’re used to communicating, they’re essentially saying the same thing as “increase your ROI.” By bidding on your keywords in such a way that you focus on the CTR and expected conversions versus how much you are actually spending, you can control your earnings. You know how much each unit you sell costs and you know your profit margin on each unit sold. If you know that each position of your ad placement in the SERPs leads to a certain number of conversions then you can calculate expected ROI.

Let’s use an example: You sell widgets for $20 each. You know that at position 1 for your best keyword you will pay $1 per click and make a sale for every 15 clicks. Your expected ROI is $5. But if it costs you 75 cents per click at position 2 and you make a sale every 10 clicks then your expected ROI is $12.50. These figures show that you are better off at position 2 than at position 1.

It takes constant tweaking and experimenting to figure out which position is your optimal position, but when you find it then you will maximize your earnings over time. That’s how you stay profitable with pay per click advertising.

Comments Off                      Category: PPC Bidding Strategies                      

Read similar posts in PPC Bidding Strategies

• Is There A Trick To Keyword Bidding?
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• Why Conversions Are All That Matter
• Why CTR Is A Good Measure Of Ad Performance
• How To Test The PPC Waters Without Breaking The Piggy Bank

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