Google Ads PPC budget formulas

By Graham Hansell | SEM

Mar 10

Google Ads is all about these key elements:

  1. Traffic
  2. Bidding
  3. Budgeting
  4. Goal Conversions
  5. Lead Generation
  6. eCommerce Sales
  7. Video Impacts

So you have to know what is working out of these elements and what isn’t. To do this having some basic KPIs and calculated metrics to help understand your success. So below is some straight forward maths with examples to help assess what is work in your Ad campaigns. At the bottom is a free spreadsheet to handle your calculations.

Traffic

Click Through Rate %

Clicks divided by impressions, times by 100

10 clicks / 100 impressions x 100 = 10% CTR

CTR = Click Through Rate

Avg. Cost Per Click £/$/€

Ad spend divided by clicks

$100/£100/€100 / 1000 = $/£/€ 0.10 Cost per Click

CPC = Cost Per Click

Click To Session Ratio

Click to session ratio – sessions divided by clicks times 100

950 session / 1,000 clicks * 100 = 95%

Clicks to Sessions Ratio

Bidding

Search Impressions Share

The number of impressions received divided by the number of impressions you’re eligible to receive as a percentage

5,000 impressions / 10,000 impression * 100 = 50%

SIS = Search Impression Share

Maximum Bid For CPA Target

Target CPA times by your conversion rate

Target CPA = £/$/€ 50 * 3% = £/$/€ 1.50

Max CPC bid for CPA target

Mobile Bid Modifier %

Mobile conversion rate divided by your overall conversion rate, take away 1 and then times by 100

1% (.01) / 3% (.03) – 1 * 100 = 33.333%

Mobile Bid Modifier To Hit Target

Budgeting

You need to split your budget between campaigns, so therefore what is the best method?

Simplest tends to be best to start with, so split your budget into 33% or 25% segments as you are learning which campaign, AdGroup, Audiences and Keywords convert.

Then once the campaign data starts to flow adjust in Optimization steps:

  • 1st round of Optimization split 66%/33%
  • 2nd round of Optimization split 80%/20%
  • 3rd round of Optimization split 90%/10% – that way you always have a test budget available

Budgeting Steps Table

CampaignStart1st Round2nd Round3rd Round
Core33%66%80%90%
Test33%33%20%10%
Test33%

Goal Conversions

Cost Per Goal Conversion (CPA)

£/$/€ = ad spend divided by the number of conversions

£/$/€5,000 / 200 = £/$/€250

Cost Per Goal Conversion

Goal conversion rate %

Number of lead divided by clicks, times by 100

200 Goals / 20,000 sessions * 100 = 1%

Goal Conversion %

ROAS Return On Ad Spend %

Total revenue take away ad spend, divided by ad spend, times by 100

£/$/€10,000 – £/$/€3,000 / £/$/€3,000 = 2.33

ROAS

Lead Generation

CPL Cost Per Lead

Ad spend divided by the number of conversions

£/$/€10,000 / 30 = £/$/€333.33

Cost Per Lead

Lead Conversion Rate %

Number of lead divided by sessions, times by 100

30 Leads / 1,000 sessions * 100 =3%

Lead Conversion Rate

e-Commerce

Revenue per impressions £/$/€

Total revenue divided by impressions

£/$/€10,000 / 1,500,000 * 100 = 0.666%

Revenue Per Impression

Revenue per conversion £/$/€

Total revenue divided by conversions

£/$/€10,000 / 500 = £/$/€20

Revenue per Conversion

Video Metrics

Video view rate %

Total views divided by impressions, times by 100

10,0000 total views / 1,000,000 impressions x 100 = 10%

Video View Rate %

Avg. cost per view £/$/€

Ad spend divided by total views

£/$/€ 2,500 / 10,000 views = £/$/€0.25

Average Cost Per View £/$/€

I hope that helps expand how some of the formulas used in Pay Per Click advertising to calculate key metrics.

To help you I have put together a Spreadsheet that covers all of these, so you can put in your own figures.

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About the Author

Founder of both SiteLynx and SLX marketing. Leading web marketing planner and trainer.

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