We've been asked by a few clients recently for a formula for calculating ROI for their pay per click marketing campaigns. 
I've always found that ROI is one of those terms that has been over-used and abused by so many people and as such, there is confusion on how best to calculate it.  Personally, I like to use the following formula when we are discussing the ROI for any PPC campaign:

    ROI = [Contribution] / [Cost]

So to calculate Contribution for a PPC campaign:

    ([Your average profit per sale] x [Estimated number of Conversions]) - [PPC Spend]

To demonstrate more fully, let's take the following example:

   Monthly PPC Spend:                    £1,500
   Average Profit per Sale:                 £50
   Number of Conversions (Sales) per Month:  75

and so the Contribution to Margin of the PPC campaign is:

   (£50 x 75) - £1500 = £2,250

and your ROI would be:

   £2,250 / £1500 = 150%

Phew!  But there is an easier way.   We have just created an ROI estimator / calculator spreadsheet that you can now download for free.  We hope that it will be a useful tool for you when reviewing your PPC campaigns.

If you are interested in downloading, please visit our new PPC ROI Estimator page now, download it, and let us know what you think.