Return on investment (ROI)
How much profit you've made from your ads compared to how much you've spent on those ads. Return on investment (known as ROI) measures the ratio of your profits to your advertising costs.
Let's say that you have a product that costs $100 to produce, and sells for $200. You sell 6 of these products as a result of advertising them on AdWords. Your total sales are $1200, and your AdWords costs are $200. Your ROI is ($1200-($600+$200))/($600+$200), or 50%.
- ROI is typically the most important measurement for advertisers because it shows the real effect that AdWords has on your business. While it's helpful to know the number of clicks and impressions that you get, it's even better to know how your ads are contributing to the success of your business.
- To help measure your AdWords ROI, you'll need to track conversions, actions that you want your customers to take on your website after clicking your ad such as a purchase, sign-up or download. Try Conversion Tracking or Google Analytics, free tools to help you track conversions in your account.
- Here's one way to estimate the ROI of your campaign: take the revenue that resulted from your ads, subtract your overall costs and then divide by your overall costs.
ROI = (Revenue – Cost of goods sold) / Cost of goods sold