Calculating ROI for Google Adsense Campaign

Calculating Return on Ad spend:

(Revenue - Cost
Investment ) X 100

Translation:

Money made per click in month MINUS cost per month = A
Divide A by cost = B
Multiply B by 100 = ROI%

Steps:

The first thing we need is the amount of "Money made per click in month".
This can be a little ambiguous.

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How much is a click worth?

Consider this senerio: A caller called Bob rings into your office enquiring about your product. Now Bob may not buy your product, but that phone call is worth something. If you have sales staff who do sales calls to pick up leads, then Bob's call saves your staff a phone call and a sales pitch as Bob is a "warm" lead.
Bob's call is worth something to your business.

A Click-through on a Google Ad is a call from Bob. Bob is interested enough to phone/click.

Now we must estimate what this is worth to you in monetary terms.

Option 1:
We could estimate what percentage of time your sales guy spends on making calls (including followup calls), apply this percentage to his wage, divide by 12 then divide again by his monthly call volume. Resulting in cost per call.

Option 2:
Estimate how much you would pay for one lead. Think in terms of your ad in the yellow pages. How many responses do you need from that ad to justify the cost? What would that cost you each lead? 0.50 cents? would you pay $1, $2, $20? What about if you are in an industry where you make 8 (large) sales a year. Maybe then this potential customer call could be worth $2000 or more.

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Once you have your figure per click (example 0.50 cents) then you can begin the calculation:


First calculate revenue per click for the month:

Revenue per click X amount of clicks for the month.



Secondly, you will notice in the top formula COST and INVESTMENT are listed. Cost is the cost of the campaign per month. Investment is used if you then need to Plus in extra costs on top on this COST figure (such as staff time for example). Most times there are no extra investment costs and these two words represent the same figure.

Then apply your figures to the formula as shown below.


Example
0.50cents X 48 Clicks = $24 Revenue

In my example Google Adwords cost me $29.32 for the month.

Then onto ROI calculation:

(24 - 29.32

29.32 ) X 100 = 18%