1 Simple Every-Business Rule for Determining Your Online Advertising Spend and Return
One of the most difficult business aspects of online marketing is determining cost effectiveness. For two tiny little words, you actually need quite a lot of information to do this properly - you’ll need to know exactly what your online advertising spend is, and you’ll need to know how much it is returning you. Today we are looking at simple methods that every business can use to determine their online advertising spend, and either estimate their return in advance, or track return retrospectively.
Calculating online advertising spend
Most companies have sophisticated, detailed cost-tracking systems in place to account for expenses and analyze what money is going out. If you have access to this information, this is the preferred and most comprehensive way to get an idea of your online advertising costs, as it will include employee hours, incidentals, etc.
To estimate your online advertising spend in terms of PPC ads, though, there is a simple trick you can use with Google AdWords.
* In the AdWords Keyword Tool, select ‘Display estimated cost per click’.
* Select ‘exact match’ from the drop down menu to get a precise estimate of traffic levels.
* Multiply the search volume by ten percent to get your estimated number of clicks
* Multiply this number by the estimated cost per click to get a reasonable idea of your PPC online advertising spend
Calculating online advertising return
You can use the same information from Google AdWords Keyword Tool to estimate how much cash placing a top-spot bid for a certain keyword will return the company. You’ll need to know previous traffic statistics and conversion rates. Look at the past six months if figures, and get an average of how many people ‘converted’ on your site, compared to how many visited. You should have an idea of the value of a conversion to the company, so simply:
* Multiply your estimated number of clicks from step one, by your conversion rate (which can be obtained by dividing the number of conversions by overall traffic figures). This tells you around how many conversions you can expect from a top-spot ranking on Google’s paid listings.
* Multiply this number by the average value of conversion to your company, and you have an estimated return on your online advertising investment!
