The ROI of Google Ads

Growing businesses are continually seeking effective ways to boost their online visibility and drive revenue. Among a wide range of tools available, Google Ads stands out as a powerhouse in helping companies reach their target audience.

In this post, we’ll explore the benefits of investing in this advertising platform, how to measure ROI effectively, and what a “good” ROI is for Google Ads.

Benefits of Investing In Google Ads

Investing in Google Ads can offer numerous benefits for businesses seeking to enhance their online visibility, drive traffic, and increase conversions. Below are ten key advantages of using Google Ads.

1. Increased Visibility

Google Ads appear at the top of relevant search engine results pages (SERPs), which can boost the visibility of your brand, content, products, or services to potential customers. It’s important to note that this position is achieved through a pay-per-click (PPC) model. You bid on specific keywords, and your ad appears when users search for those terms. 

Even if users don’t click on your ads, consistent appearance in search results can increase brand recognition and credibility. You can measure an increase in brand awareness through impressions.

2. Competitive Advantage

By appearing at the top of search results, Google Ads can provide an edge over competitors and organic search results, especially for valuable keywords or during seasonal trends.

For example, say you sell Christmas sweaters and notice your main competitor, uglychristmassweater.com, is relying on organic Google Shopping results. In that case, you can create an ad campaign for the keyword “Christmas sweater” so that your product appears higher in the search results. More customers may click on your ad and buy your product as a result. 

3. Targeted Reach

Google Ads offers different ways of targeting your ads so you can reach the right audience at the right time. This can help boost conversions. The two primary ways are audience and content targeting. 

• Audience targeting: You can add audience segments to ad groups and reach people based on who they are, their interests and habits, what they’re actively researching, or how they’ve interacted with your business. 
• Content targeting: There are multiple content targeting methods, including topics, placement, and content keywords. For example, as mentioned above, your business sells Christmas sweaters. In that case, you could add the Display/Video keyword “buy Christmas sweaters” and target your image ad at iPhones specifically. That way, people can view your image ad when they use their iPhones to visit sites on the Display Network that have information about buying Christmas sweaters.

4. Control over Budget and Budget

With Google Ads, you have full control over your budget, allowing you to set daily caps or a shared budget for a campaign and adjust spending as needed. You can also set bid adjustments to increase or decrease your bids when your ad is competing to appear on mobile devices, in specific locations, and at particular days and times. 

This flexibility ensures that you can manage costs according to your business’s financial capacity and better control when and where your ads appear. 

5. Measurable Results

Google Ads provide comprehensive analytics and tracking tools, allowing you to measure the performance of your campaigns accurately. You can monitor metrics like clicks, impressions, conversions, and ROI, gaining valuable insights for optimization.

For example, Google offers a free Conversion Tracking tool to track what happens after customers interact with your ads. For example, they may purchase your product, call your business, or download your app. With this tool, you can see which keywords, ads, ad groups, and campaigns are best at driving valuable customer activity and adjust your spending accordingly. 

6. Mobile Optimization

As mobile usage continues to grow, Google Ads cater to mobile devices, ensuring that your ads reach users on smartphones and tablets, tapping into a vast mobile audience.

There are also ways you can optimize your ads for mobile, including:

• Add links to specific pages of your website, like your store hours or a featured product. 
• Show your ads with a map, your address, or the distance to your business. 
• Add a phone number to your ad.
• Use ad variants with different headlines or description text in an ad group so Google Ads will automatically start showing the better-performing ones by default.

7. Remarketing and Prospecting Opportunities

Google Ads also supports remarketing campaigns. Through these types of campaigns, you can target users who have previously interacted with your website or used your mobile app with ads.

Google Ads also supports dynamic remarketing, which allows you to show previous visitors ads that contain products and services they viewed on your site.

You can even add dynamic prospecting to these types of campaigns. Dynamic prospecting uses machine learning to get an idea of what potential buyers are looking for. It then uses demographics-based information such as age, gender, and household income as well as information about the performance and relevance of products or services in your feed to match the user with one of your products or services that is most likely to catch the user’s attention and lead to conversions.

In conclusion, investing in Google Ads can significantly impact your business’s online presence, providing a potent tool to target the right audience, measure results accurately, and achieve marketing goals efficiently.

How To Calculate ROI on Google Ads

To calculate ROI on Google Ads, follow the steps below.

1. Determine Total Revenue Generated

Calculate the revenue directly attributed to the Google Ads campaign. This includes conversions. Conversion tracking measures how clicks on your ads and free product listings lead to meaningful actions, such as someone purchasing a product, signing up for a newsletter, or downloading a piece of content. To track conversions, you can use the free tool in your account or Google Analytics.

2. Calculate the Cost of Google Ads Campaign

Next, add up all costs associated with running the campaign, including ad spend, management fees, and any additional expenses. If the ad is for a physical product, then your costs also include what you spend to manufacture the product. 

3. Use the ROI Formula

Use the following formula to calculate ROI: ROI Formula: ROI = [(Revenue – Cost) / Cost] x 100%

Plug in the values obtained in steps 1 and 2 in the formula. Let’s use an example of a SaaS company. Say your ad campaign generated $10,000 in revenue and the total cost of the campaign was $3,000. Then the calculation would be: [(10,000 – 3,000) / 3,000] x 100% = 233%

4. Interpretation

A positive ROI indicates that the campaign generated more revenue than the cost, while a negative ROI means the campaign incurred more costs than the revenue it generated.

ROI is typically the most important metric for retailers because it directly shows how your ads and listings are contributing to the success of your business. However, ROI is just one metric, and other key performance indicators such as conversion rate, click-through rate (CTR), cost per acquisition (CPA), and customer lifetime value (CLV) should also be considered to gain a comprehensive understanding of your Google Ads campaigns’ success.

What is a Good ROI for Google Ads?

Determining what constitutes a “good” Return on Investment (ROI) for Google Ads can vary significantly based on various factors such as industry, business goals, advertising objectives, and campaign strategies. However, the benchmark set by Google is 100%, which means for every dollar spent on advertising, the business receives two dollars in return.

It’s essential to understand that ROI can fluctuate and is not a static figure. Factors influencing ROI include the industry’s competitiveness, the quality of the ad campaign, the target audience, and the advertised product or service. Moreover, different industries have different benchmarks for a good ROI. For instance, highly competitive industries may require a higher ROI (up to 400%) to justify advertising expenses due to increased costs per click or acquisition.

Ultimately, what constitutes a “good” ROI for Google Ads depends on your business’s objectives, profitability goals, and industry standards. Regular monitoring, optimizing, and aligning the campaign with business objectives are crucial for achieving and maintaining a desirable ROI.

How to Improve the ROI of Google Ads

Below are several effective ways to boost the ROI of your Google Ads campaigns.

1. Keyword Optimization

Google is designed to provide users with the most relevant information that matches their search queries. This is true of organic results as well as paid ones. So optimizing your ads for relevant keywords is critical for improving your overall ROI.

Here are some tips for keyword optimization:

• Regularly review and refine your keyword list, particularly when there are major changes to your products/services or target audience. 
• Focus on high-converting keywords.
• Eliminate any irrelevant keywords that may be hurting your clickthrough rate or other key metrics.
• Utilize different match types (broad match, phrase match, exact match) to control the relevancy of your ads and minimize wasted spend on irrelevant clicks.
• Use negative keywords to prevent ads from showing for irrelevant searches.

2. A/B Testing

Continuously test different ad variations to identify what resonates best with your audience in terms of messaging, visuals, and CTAs. You may also test different ad delivery times and days to discover peak times or days when your audience is most active and likely to convert.

For Search and Display Ads, you can run custom experiments to test Smart Bidding, keyword match types, landing pages, audiences, and ad groups. 

3. Continuous Optimization

Regularly monitor and analyze campaign performance metrics to identify areas for improvement and take immediate action. 

Pay close attention to your Quality Score and Ad Rank. 

• Quality Score: Ranging from 1 to 10, this score is an estimate of the quality of your ads and landing pages triggered by a keyword. A 9 or 10 means that Google Ads thinks your ad and landing page are relevant and useful to someone looking at your ad. A low score indicates low quality and may result in your ads appearing in a low position, or not appearing on a search engine results page, regardless of your bid. 
• Ad Rank: Ad Rank is calculated using your bid amount, your auction-time ad quality, the Ad Rank thresholds, the competitiveness of an auction, the context of the person’s search (like the person’s location), and the expected impact of assets and other ad formats. This value is used to determine your ad position or whether your ads will show at all.