Make Sure Your PPC Ads Are Profitable

The key to being successful with a PPC advertising campaign is to determine how much you can afford to spend on every click. This is called your "cost-per-click," or CPC. Once you know what you can spend on your CPC, you can run all of your PPC campaigns at a profit.

How much you can afford to spend on clicks depends on the value of each visitor to your site. For example, if you had 4,000 visitors last month and your net revenue from that month was $1,000, then you would find out your visitor value by dividing your net revenue by the number of visitors, like this:

[total net revenue] / [total unique visitors] = [value per visitor]
example: [$1,000 net revenue] / [4,000 unique visitors] = [$0.25 per visitor]

Using the example above, you now know that each visitor to your site last month was worth 25 cents. This means that you can afford to pay no more than 25 cents per visitor (or click) for your PPC bids. If you pay more than 25 cents, then you will lose money. If you pay less than 25 cents, then you will make a profit. And, if you pay exactly 25 cents, then you will break even.

Of course, it isn't quite as simple as that and there are other factors that will complicate your equation, such as how targeted your PPC campaign is and whether or not your keywords are good performers.

Also, when you first calculated the value of your visitors, you were using last month's data, and that could change from month to month. Those visitors might not be the same ones you can expect from your PPC campaign. The clickthroughs from the new PPC campaign might not be worth the same 25 cents.

You need to take all of these considerations in mind when you plan your PPC campaign. The only way you can find out for sure how your new campaign will perform is to test it.

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