How to Determine If Your PPC Campaigns Are Losing Money

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Do you know if your PPC campaigns are actually profitable for your company? Do you want to know? Well this post is a tool you can use to ask the right questions to determine just that!

Whether you are utilizing a company outside of your own to manage your PPC campaigns or you do it in house, you will be able to determine if those campaigns are profitable by the end of this article.

PPC is expensive & should always be quantified by return on investment. You should also always quantify the amount of actual leads that you are generating from those paid advertising efforts, or you’ll most likely be leaving money on the table

…or worse, you could be losing money.

I have seen so many companies be in the position where they are just helpless in regard to PPC because they know they need to be doing it, or at least they think they do, but they don’t know how to correctly measure it’s effectiveness.

It’s a tough place to be.

Let that sink in for a minute…just think about it for a minute or two.

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… I know it’s painful to even consider that you could be losing money.

Ok now we can move on from the discomfort to a glimmer of hope!

If you don’t know how much money each lead costs you, and how many PPC leads you need to close a sale, there is no real way to see if your efforts are making money.

Today, you’re going to learn how to ask the right questions to determine whether or not your PPC advertising efforts are actually making you money or losing you money.

If you can’t see that, you are risking spending money on efforts that may be futile, and no one likes to throw away money, right?

Here’s what you’ll learn:

• The questions to ask about your campaigns that will show you clearly if you are getting a return on your investment.
• How to determine whether a PPC campaign is profitable or losing you money.
• The next steps you need to take if you don’t have the answers to the questions we’ll be asking about your current campaigns.
• The next steps to take once you determine your campaign is losing you money.

**The purpose of this post is to help you determine whether or not your PPC efforts are generating profit for your business, not how to fix the problem or to make your campaigns profitable.

I will dive into that in another post. But rest assured, the first step to success in your PPC campaigns is knowing how to determine the profitability of those campaigns.  Then you have a great starting point to determine what to do next.

So…Let’s get started!

Here are some questions that you can ask about your current PPC campaign/s and the company that is managing your PPC campaigns that will help you to determine if those efforts are profitable or not.

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Q: Do I have access to my own adwords account?

Many companies that manage PPC campaigns for companies do so in a way that takes all the transparency and access away from their clients. There are many reasons for this, and not all of them are for the client’s benefit.

What happens a lot of the time with many companies that manage PPC services is they run their campaigns (maybe yours) through their own Google Adwords account that you don’t have access to.

Then, they give you access to a dashboard that they created that shows you the data they want to show you. 

…They point the ads they are managing for you to a webpage on their own domain, not yours.

…They use a separate Google Analytics account as well.  This Google Analytics account they use is not yours and you will, most likely, not have access to it.

Then you pay them one payment each month that contains both the management fee, and the Advertising budget, which they run through their own platform or their own Google Adwords account.

What all this means is that you have no access to anything that you would really need to quantify the profitability of your PPC campaigns, and they are in control of everything including the information you see.

In addition to that, if and when you leave, you won’t get to see or take the data from you campaign with you.

You won’t have access to it.

Most of all, you won’t be able to use it to make better business decisions moving forward.

This is a pretty big problem since the only way to effectively improve your campaigns is to use the data from your previous campaigns to make strategic changes and improvements.

A dangerous place to be to say the least.

This scenario may sound familiar.

If you have used any of the bigger nationwide agencies (I won’t name names, but one of them rhymes with “beach vocal”). You sign up with them and they tell you what it’s going to cost per month.

You are going to pay them both the management fee for their services and the budget for the ad campaigns they will be running together in one payment, which means they will be in total control of everything including what you see.

They don’t tell you that almost 40%-50% of the money you send each month is going to their fees, and not your Adwords advertising budget.

Then they take your website and make a copy of it on their server and domain (yoursiteaddress.beachvocal.com), which means that they will not be sending that PPC traffic to your site at all. They’re sending it to their domain with a copy of your website on it.

The question is…Why would they do that?

The first reason is that they want to show you only what they want to show you. Meaning…they want to control the information that you have access to.

This puts your company in a position where you don’t have access to the raw analytics data for that campaign. All you have access to is their dashboard where you can see only the metrics and data that they want you to see. Then they start showing you how your clickthrough rate (CTR) is getting better and your cost per click (CPC) is going down.

Yippee!!!!! Right?????

Wrong. While clickthrough rate and cost per click are important, they don’t show you if people are actually converting into leads and clients/customers for your business.

And…. Since none of the traffic is coming to your site, you can’t see anything except what they want you to see.

[icon_list][icon_list_item type=”chevron-circle-right”]You can’t see if and how many of your PPC visitors are submitting your forms.[/icon_list_item][icon_list_item type=”chevron-circle-right”]You can’t see any of the metrics that show you how your PPC visitors are behaving on your website. Which pages they are visiting after they get there. Which pages they spend more time on. The buttons the click. Anything.[/icon_list_item][icon_list_item type=”chevron-circle-right”]You can’t see which landing pages are converting better than the others. You don’t even know where they are pointing your traffic.[/icon_list_item][/icon_list]

You can’t see anything….except what they want you to see, and the metrics that they show you create the perception that there are profitable results coming out of these campaigns, but really, that isn’t what you’re seeing at all.

All you are seeing is activity.

And as we all know, activity doesn’t at all equate to profitability, now does it?

The second reason is that they want to harvest the campaign analytics data for themselves.  This data is extremely valuable to them and you.

This data can be used to continuously improve and optimize PPC campaign results improving the profitability of the campaign and its ability to generate revenue.  But…you only have access to part of it because they own the campaign soup to nuts.

When you leave, you will also leave that data behind as well, which means you will have to start from square one if you plan to do PPC without them.

On top of all that, they will use your data to improve the results of your competitor if they use their services as well.

This is just one of many scenarios, but it’s a good illustration of what many companies (maybe yours) are going through right now in their pursuit of profitable PPC advertising.

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Q: Is the agency I’m working with to manage my PPC showing me everything? Is there anything they aren’t showing/telling me?

My number one recommendation to any company either paying for or considering paying for ppc would be to only work with companies that are not afraid to show you everything, and be completely transparent.

It is common practice in the PPC management world to focus on cost per click (CPC) and clickthrough rate (CTR) as the primary metrics that are used to show the success of a campaign.

The problem is that neither CPC or CTR actually equate to revenue earned from your PPC efforts.

These metrics simply show how much each click is costing your company (CPC) and how effective your ad is at getting someone to click it (CTR).

What you don’t see from these metrics is what happens after someone clicks the ad and they are taken to your website? They also don’t tell you if someone converted into a lead or customer.

If all you do is pay attention to CTR and CPC, then you could be missing the boat entirely.

What if your ad is showing for the wrong search and people are clicking it, but then they get to your site and bounce, or immediately leave because it was not even close to what they were looking for.

In this scenario:

[icon_list][icon_list_item type=”chevron-circle-right”]The ad could be compelling and have a high clickthrough rate.[/icon_list_item][icon_list_item type=”chevron-circle-right”]Your cost per click could be low as well.[/icon_list_item][icon_list_item type=”chevron-circle-right”]You get a ton of clicks, and your PPC manager is blowing up your inbox with yippees! and whoop whoops![/icon_list_item][/icon_list]

Congratulations, you just burned a trash can full of money with nothing to show for but a high clickthrough rate and a low cost per click! No conversions that you can speak of. No phone calls. Just a slightly higher CTR and slightly lower CPC.

By the way, this happens more than you might think.

It all comes down to knowing exactly how much revenue each click is producing.

No revenue = PPC should be sliced out of your marketing strategy.

But… you need to know if you are profitable before you can make that determination, right?

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Q: Can I see my paid traffic in my Google Analytics account?

Often, when a PPC management company starts managing a PPC account for a client, all they will be concerned with is managing the PPC account.

[icon_list][icon_list_item type=”chevron-circle-right”]Not setting up the account to accurately track conversions.[/icon_list_item][icon_list_item type=”chevron-circle-right”]Not connecting Google Analytics to Google Adwords so you can see your paid traffic in your Google Analytics reports (which is super easy to do and takes about 5 minutes, by the way).[/icon_list_item][icon_list_item type=”chevron-circle-right”]Not doing anything that could show you whether or not your campaigns are actually profitable for you or not.[/icon_list_item][/icon_list]

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Q: Is conversion tracking setup for each one of my PPC campaigns, and are those conversion setup properly and reporting accurate data?

According to Wordstream, Less than half of small business landing pages have conversion tracking installed.

It honestly blows my mind that so many companies & PPC management agencies don’t even pay attention to this.  They just run the campaigns without any real conversion tracking in place to see whether or not the efforts and money they are putting forth are actually getting results.

Conversion tracking can be setup through Google Analytics or Google Adwords at the most basic level, and it’s easy.

Your reports should show how many conversions  you are getting from the money you are spending on PPC.  If they don’t, you should be suspicious and dig further to find out why conversion tracking hasn’t been setup.

This is the most important metric you can track in your PPC campaigns no matter what the platform.

[alert type=”info”](Note: I’ve prepared a bonus resource at the end of this post that shows you how to see if conversion tracking is setup in your Google analytics account among other things.  Make sure you check it out.)[/alert]

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Q: How many actual leads/sales (form submissions, sales, phone calls) are coming from each PPC advertising campaign per month?

This is easily trackable through Google Adwords, so it should be. If there isn’t an answer to this question, either the campaign wasn’t setup properly to show the actual return on investment your efforts are producing either on purpose or by negligence.

Again, if your reports are only showing cost per click (CPC) or clickthrough rate (CTR), you are not seeing how much money that campaign is making or losing your company, and that is what it is all about.

You need to be able to see how many actual sales or leads your efforts are generating from your pay per click advertising efforts.

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Q: How much does it cost to obtain each lead we get through our PPC campaigns?

This number is calculated simply by dividing the total cost of each campaign by the number of actual leads that campaign generated. Then you can compare the total cost of all your leads generated from that campaign to the total amount of revenue you make from all of the leads generated from that specific PPC campaign.

This will help you see if your efforts are worthwhile.

[alert type=”info”]Reminder:  I’ve put together a checklist with these questions and some extra ones to help you dig a little deeper[/alert]

Here is an example of cost per lead:

Formula:  Total cost of that PPC campaign / # of leads generated = Cost per lead

So…

$5000 / 300 leads generated = $16.67 per lead

Then you can determine the net revenue from your PPC Campaign:

Formula: Total Revenue Generated by that PPC campaign – Total cost of PPC Campaign = Net Revenue

So…

$4,000 – $5,000 = – $1,000 (this campaign is a loss)

**Notice that there is nothing in the above examples that talks about clickthrough rate or cost per click.** 

That’s because, at the end of the day, all that matters is that the amount money that the PPC campaign generates is more than it costs to run the campaign.

So what about if my PPC traffic is being sent to a page to signup for my email list? How do I know if my campaign is profitable then?

Great question!

You can measure how many email signups you get from your PPC efforts as a conversion instead. That will at least give you a legitimate measurement instead of just hoping that a higher clickthrough rate translates to more email signups.

The next step for you if this was your situation would be to setup tracking so you could guage how profitable that email list was in terms of revenue. More on that in another post.

Again, you just need to make sure that you can see what you’re getting out of your PPC campaigns.

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Here is a summary of the questions we’ve talked about in this post

[icon_list][icon_list_item type=”question-circle”]Do I have access to my own adwords account?[/icon_list_item][icon_list_item type=”question-circle”]Is the agency I’m working with to manage my PPC showing me everything?  Is there anything they aren’t telling me? [/icon_list_item][icon_list_item type=”question-circle”]Can I see my paid traffic in my Google Analytics account? [/icon_list_item][icon_list_item type=”question-circle”]Is conversion tracking setup for each one of my PPC campaigns, and are those conversion setup properly and reporting accurate data?  [/icon_list_item][icon_list_item type=”question-circle”]How many actual leads/sales (form submissions, sales, phone calls) are coming from each PPC advertising campaign per month? [/icon_list_item][icon_list_item type=”question-circle”]How much does it cost to obtain each lead we get through our PPC campaigns?[/icon_list_item][icon_list_item type=”question-circle”]Is the cost of a sale for PPC traffic higher than the amount we make off of that sale? [/icon_list_item][/icon_list]

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 Next Steps

This may seem a bit cheeky, but…just ask the questions.  You have nothing to lose and everything to gain.  You’re pay per click campaigns can and will be profitable if you know the right questions to ask.

If you find that the answer to any of the above questions is “No”, then the next question you should ask is “why?”.

Why don’t I have access to the Google Analytics account that are collecting data on my PPC campaigns?  Why am I not able to see conversion data for my PPC campaigns?  Why don’t I know what my cost per lead is?

Just start digging a little deeper.

If an agency or 3rd party is managing your pay per click campaigns, here is where to start.

If they can’t answer simple questions like how many conversions you are getting from you PPC efforts, then ask them why they can’t show you that data.

There are only two possible answers.  Either they aren’t collecting that data, or they are collecting it, and they don’t want to show you.  That gives you a place to start to move forward in the right direction.

If they aren’t collecting that data, then you should request that they set things up to be able to get that data.  If they can’t, then take steps in the direction of finding someone who can.  Conversion tracking is vital and you can’t determine if your campaigns are profitable without it. 

If they won’t show you, then you should look for another company to manage your campaigns.

Transparency is key when it comes to getting the best results from your campaigns.  And any company that wants to hide numbers directly correlated to the profitability of your campaign is no company I would want to do business with.  Just my two cents.

If you are managing your PPC campaigns internally, here is what you can do next.

Ask the questions to get a baseline of where you are.  Once you have those answers, again, you now know what you need to do to move forward.

Many times, these steps are just not taken out of a lack of a full understanding  of what is needed to be successful in running a successful campaign.

If your staff members who are running your campaigns are not capable of setting things up so you can get yes’s as answers to all of these questions, then you may want to consider looking to an expert to fix the problems so you can.

Your revenue is worth the investment, and if you fix these problems now, then you will have profitability for the rest of the time that you run your PPC campaigns.  And that could make a huge impact on your business for years to come.

Come to think of it, if you don’t ask these questions, the loss could be just as significant.