ROI Explained

Return On Investment (ROI) is term used to describe the calculation of how much profit you can make divided by the cost of the Pay Per Click campaign.

The simple fact is, if you want to make money from Pay Per Click advertising you need to know what it is going to cost you and how competitive the marketplace is.

“The most important aspect of Pay Per Click advertising is to understand what a click is actually costing you!”

Most campaigns are managed and run via Google AdWords, Yahoo Search Marketing and Microsoft (MSN) adCenter.


Pay Per Click terminology-

  • Conversion Ratio – The percentage of visitors who purchase from your PPC ad
  • Return On Investment – Gross Profit divided by the cost of all clicks
  • Breakeven Cost Per Click – Cost per Sale multiplied by the Conversion Ratio
  • Gross Profit – Sale price less the costs of the goods
  • Total Click Price – The sum spent on all clicks to generate thea sale
  • Off Channel Shoppers – Customers who research online but shop offline
  • Conversion– To change a persons state from a click to a purchase
  • Click Value– How much a click is worth to you (not what you are paying for it)

For more SEM and Search Marketing info visit our Search Engine Marketing page.

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