November 14

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Google Ads PPC Formulas

By Graham Hansell

November 14, 2021

Google Ads, Pay Per Click Formula

Google Ads is all about these critical elements:

  • Traffic
  • Bidding
  • Budgeting
  • Goal Conversions
  • Lead Generation
  • eCommerce Sales

So you have to know what is working out of these elements and what isn’t. To do this having some essential KPIs and calculated metrics to help understand your success. So below are some straightforward maths with examples to help assess what works 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

Shows which ad & keyword has high preference rate with the audience

Avg. Cost Per Click £/$/€

Advertising spend divided by clicks

$100 or £100 or €100 / 1,000 = $/£/€ 0.10 CPC

CPC = Cost Per Click

allows comparison between ads, keywords, ad Groups, campaigns & channels

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

shows how much of what you pay for (Clicks) arrives at your landing pages

Bidding

Search Impressions Share

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

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

SIS = Search Impression Share

shows the campaign actual performance against opportunity

Maximum Bid For Cost Per Action CPA Target

Target Cost Per Action (CPA) multiplied by your conversion rate (Conversion Rate)

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

Max CPC bid for CPA target

a guide cost per click for bidding

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

how much to change the bidding for mobile targdevice users

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 learn 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

CampaignRound 1Round 2Round 3
Test100%20%10%
Core80%90%
The different rounds of Optimization for PPC campaigns budgets

Goal Conversions

Cost Per Goal Conversion (CPA)

Advertising spend divided by the number of conversions

£$€ 5,000 / 200 = £$€ 250 CPA

Cost Per Goal Conversion

the acutal cost per conversion

Goal conversion rate %

Quantity of leads divided by clicks, times by 100

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

Goal Conversion Rate

how much traffic converts to goal completion

ROAS Return On Ad Spend %

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

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

Return On Advertising Spend

how much revenue you get back for each £$€ spent on advertising

Lead Generation

CPL Cost Per Lead

Advertising spend divided by the number of conversions

£$€ 10,000 ad spend / 30 leads

= £$€ 333.33

Cost Per Lead

the cost for each marketing qualified lead (MQL)

Lead Conversion Rate %

The number of leads divided by sessions, times by 100

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

Lead Conversion Rate

what percentage of traffic converst to Marketing qualified leads (MQL)

e-Commerce

£$€ Revenue per impressions

Total revenue divided by impressions

£$€ 10,000 / 1,500,000 * 100 = 0.666%

Revenue Per Impression

what percentage of advertising impressions GENERATEs ECOMMERCE REVENUE

£$€ Revenue per conversion

Total revenue divided by conversions

£$€ 10,000 / 500 = £$€ 20

Revenue per Conversion

average order value

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 %

what percentage of people engaged with a video advert

Avg. cost per view £$€

Advertising spend divided by total views

£$€ 2,500 / 10,000 views = £$€ 0.25

Average Cost £$€ Per View

how much a video view cost

I hope that helps explain some of the formulas used in Pay Per Click advertising to calculate critical metrics.

And now it’s your turn to run your own Pay Per Click performance metrics calculations.

I will send you a link to the Free Google Sheet with all these metrics to input and calculate your own campaign performance.

Graham Hansell

About the author

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