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Put
simply, your Return On Investment (ROI) is the
change in sales profits resulting from ads, minus
your advertising expenses (for those ads in particular).
In terms of pay per click search engine advertising,
your return on investment would be the profit
made on sales resulting from a ppc campaign, taking
away the amount you spent on pay per click search
engine advertising.
For
example, let's say you run a website that sells
shoes (an ecommerce store) and decide to launch
a $50 pay per click advertising campaign on Overture.
From the $50 you spend on Overture
you get 500 clicks and five sales (at roughly
$50 per sale). From the $50 you spent on a pay
per click advertising campaign at Overture
you earned $250 in sales. That is a 500% return
on investment (or $200 in revenue).
This
is a very simplistic example, but you get the
idea. A return on investment of 500% is very good
(obviously). Assuming the return on investment
stays at 500% the ecommerce shoe store can continue
their pay per click advertising campaign on Overture
and continue to bring in profits from their sales.
Having
said that, it isn't always that easy. Spending
money on pay per click advertising doesn't always
mean you will get a good Return On Investment
(ROI). There may not be much demand for buying
shoes online (using our above example), your title
and descrition may not be accurate and limiting
your potential Return On Investment (ROI) etc.
Also, as with newspapers, different pay per click
search engines have different demographics (quality
of "searchers"). More clicks may convert
to sales on particular pay per click search engines.
Similarly,
different pay per click search engines reach different
amounts of users. Overture
reaches alot more potential users than LookQuick
does, for example. This doesn't neccessarily mean
that advertising on Overture
is a better option as it is more expensive (per
click).
This
is why it is important to do some research on
various pay per click search engines before you
decide pay per click search engines you want to
advertise on.
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