The Pay-Per-Click Winning Formula

I though that I'd use today's post to add a quick primer about how to use Pay-Per-Click (or PPC) at a profit.

PPC is represented by services such as Google Adwords, where you pay an amount every time someone clicks on the advert and follows the link to your site.

When I started using PPC I found it very hard to balance the books, that is, to make sure that my profit was more than my outgoing spend.

Google Adwords Logo

Constructing sensible Google AdWords ads is worthy a manual in itself (and many have been written), but there is a simple process which can be used to check that ads are effective and profitable.

  1. Set up an ad with a small budget (say $10 or $20)
  2. Run the ad and record how much money for you make from the conversions.
  3. If unprofitable, drop the ad.
  4. If profitable, increase the budget and keep running.

Well, the real thing has more variables, especially as ad prices and profitable can change over time, but that gives you a flavour.

So, what's the formula I mentioned?

You need to work out the maximum you can spend to receive for a click, and still be in profit.

Or, to put that in the form of simple maths:

Google Adwords Formula

Hope that doesn't lose anyone.

Basically, work out how much a click costs, and how much the same click is worth. That will tell you if your campaign is profitable.

If not, you can tweak the ad, the pricing, or move onto another ad.

Want to add some of your own hints for AdWords and PPC? Go ahead. Join the discussion below.

6 replies on “The Pay-Per-Click Winning Formula”

I think it's great that Google has begun sending out coupons for those who have never tried Adsense. Most of them offer at least a $75 credit! I used mine up as soon as I got it. However, since I'm not too skilled at PPC, I didn't stick with it.

The key as you mention is to work out how much a click actual costs you. I could get 100 clicks for perhaps $20 and get one sale, however if my product only sels for $17 then im in for a loss.
The key is to make PPC profitable by knowing how much you are willing to spend to earn a sale. Set a limit and stick to it. In the above example i could set a limit of $12 and still earn $5 if I made a sale. If I did not manage to earn a sale with $12 spent then I have to relook at my strategy and either rething my keywords or consider not using PPC.
Know your numbers and don't work at a loss.

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