When advertising campaigns on Google, it is essential to know their profitability to see if we are applying the appropriate techniques and strategies or if we must design new actions to improve our results.
To calculate the profitability of Google campaigns, it is necessary to follow the following steps:
1. Determine the campaign’s objectives: Before you can calculate the profitability, it is essential to establish the purposes of the advertising campaign. Goals can be sales, leads, app downloads, video views, etc.
2. Set campaign costs: You need to determine how much you have spent on the ad campaign, including cost per click, cost per impression, cost per conversion, and more.
3. Calculate the revenue generated: You must measure the advertising campaign’s performance by measuring the revenue generated. For example, you can count the number of sales, leads, downloads, video views, etc.
4. Calculate return on investment (ROI): ROI is a measure of the profitability of an investment. It is calculated by dividing the revenue generated by the costs of the advertising campaign. The formula for calculating ROI is as follows: ROI = (Generated Revenue – Campaign Costs) / Campaign Costs.
5. Analyze the results: Once the ROI has been calculated, the profitability of the advertising campaign can be analyzed. If the ROI is positive, the ad campaign has been profitable. If the ROI is negative, the advertising campaign could have been promising, and adjustments should be made to the marketing strategy to improve performance.
The advertising campaign’s profitability should be calculated periodically to ensure that you are getting the highest possible return on your advertising investment.
How to Measure the Profitability of Google Ads Campaigns?
To measure the profitability of an advertising campaign in Google Ads, we must know its most important metrics and how to consider them.
CPC
The cost per click indicates the amount paid for each click that the user executes on our ad. This is the bidding system used by Google ads.
Calculating the CPC helps us to improve the advertising campaign to make it as profitable as possible.
The simple formula to calculate CPC: Divide the total cost by the number of clicks
CTR
The click-through rate tells us how often people who see our ad click. In addition, the CTR can be used to calculate the ads’ performance and to know which keywords are successful and which ones we should improve in the Google Ads ads.