We frequently get asked by prospective clients about how much does paid search advertising cost. Google Adwords and Bing are very popular and effective ways to find and engage with potential customers. When we answer the question on cost with the phrase 'it depends' we have to put this into context.
Effective (profitable) paid search campaigns have to deliver more in profit that the campaign costs. Therefore how much someone is prepared to bid on a term is directly related to the amount of profit they can make from a click. The maths isn't hard. You take your lifetime customer value, multiply by profit margin to get a lifetime customer profit value. The you need to multiple by your website conversion rate, again as a percentage. This then gives you a profit per visitor approximation. For example if your lifetime customer revenue is £2000 and your profit margin 25%, conversion rate is 10% then your average profit per visitor is £2000x25%x10% = £50.
This is very simplified and different traffic will have different conversion rates, even within campaigns different keywords will perform better. However you can work out the same calculation for the value per keyword if you have the data (which isn't that hard to get!). In our example we would be prepared to pay up to £50 per click for the keyword that delivered those metrics.
This therefore puts into context the bids per keyword that the graphic to the right shows. With bids on the increase after the change in the Google SERPS page it makes sense to review your bids and your PPC campaign performance to ensure that you are still profitable. After all you don't need to be bidding £148 per click to be over-paying on your Adwords campaign.
If you are unsure whether your Adwords campaigns are profitable or not, why not get in touch today and we can have a chat about how we might be able to help you.
*Note thanks to SEMRush (one of the data tools we use in our work), Empirical Research and Chris Lake for compiling this research and the interesting insights.