I work with small businesses for the most part, where owners, managers, and staff wear many hats. Simple reporting counts for a lot with such folks, because time is the limiting factor.

A simply calculated profit and loss statement when it comes to AdWords is an excellent piece of information for any business.

Sometimes the hardest part is making the first assumptions. Those assumptions, while necessary, can also be somewhat inaccurate. You have to start somewhere.

Defining a “conversion” can be its own exercise; but for this example a conversion is defined as an online sale. In this case each sale is worth an average of $50 retail. A cost factor might include cost of goods sold, labor, etc., figured as you will. In this case I am assuming a 50% cost factor.

It might look something like this in narrative form:

-Data shows 10 conversions for a particular time frame accredited to AdWords.

-Assuming the $50 average sale, retail sales accredited to AdWords should be $500. Apply a 50% cost factor for this generic example and you have $250 dollars.

-Data shows your AdWords ad buy for that same time frame was $100. Subtract the ad buy from the after cost factor ($250) and you now have $150.

-Next subtract any AdWords management fee (such as me!), or appropriate value of labor if your AdWords Management is done in house. Let’s say you paid $20 for AdWords management/labor during that period. Subtract that number from $150 for a total of $130. This will be your net “profit” within the current accuracy of our assumptions

These calculations can be represented easily in a spreadsheet. Call it ROI (Return on Investment), or ROAS (Return on Advertising Spend), or simply Red vs Black. A formula like this is as common in the world of larger corporations as it may be rare in the larger small business world.

When each of these calculations is tailored to the individual endeavor or client they create a big bang for the time it takes to take a look at the data. Also AdWords optimization efforts can then focus on profit as the primary metric and serve as a common language between parties.

I end where knowing the value of your AdWords buy begins. Use good metrics to do more measuring and less assuming. The rest is just doing a little math.

AdWords Value Formulas love AdWords Conversion Tracking and Google Analytics, especially Ecommerce!

-Tom Hale
AdWords Specialist
Thomas Creek Concepts

This is in response to comments in the thread by Todd Mintz and related article, also by Todd.

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Todd I couldn’t agree more that ideally you would have a unique landing page for each exact Keyword string. As behavioral targeting and the privacy wars heat up we may even be talking about a unique landing page path for each visitor, maybe even each visit.

But in my world of micro-business, service professionals, and e-cottage entrepreneurs that ideal is very much a pipe dream due to resources, i.e. time/money.

Also, as you note in your article, I have seem some real disasters from people that create landing pages designed to “force” visitors into taking particular actions by limiting the navigation choices. The results can be extraordinarily high bounce rates and a bad experience for the visitor, bad juju all the way around.

So for my client base I would temper the “PPC landing pages should be radically different from the rest of your site” to something a little more philosophical.

Like; If there isn’t a current website page that is acceptable as a beginning landing page, we have a real problem with the website and content in general. If we do have pages that “suffice”, then what are we doing, within the scope of resources, to move from suffice, to better than that, maybe good, even great

But overall Todd, you are as usual, right on the money. Be targeted, and be clever in navigation choices. Help the visitor as much as you can to stay focused on fulfilling whatever quest began with their Search Engine query.

That is worth saying again:

Help the visitor as much as you can to stay focused on fulfilling whatever quest began with their Search Engine query.

Without them feeling herded and bullied.

This is done with analysis, creativity, empathy, and time/money: not cookie-cutter dynamic insertion formulas, keyword overkill, or SEO tricks.

-T

Tom Hale
Internet Strategist – AdWords Specialist

http://ThomasCreekConcepts.com/

http://forum.sempdx.org/

PPC management/service/consulting business models vary, but seems to me they fall into variations of these three models.

Flat Fee
Per Hour
Performance

Here are basic pros/cons of these models from my perspective.

Flat Fee:
Pros – easy to understand, easy to administrate.
Cons – some clients subsidize others, each client situation can be drastically different even if ad buys are similar.

Per Hour:
Pros – the client gets what they pay for, the experts time. Time consuming clients aren’t subsidized by less time consuming clients.
Cons – billing can fluctuate, constant negotiation of current fee amount based on time allotment.

Performance:
Pros – All consumers like results based compensation. They pay only when they win.
Cons – In the Paid Search biz, so many factors, out of the control of the PPC manager, can affect results. Managers can burn a lot of time for which they are not reimbursed, due to factors out of their control.

I have always worked under a strict Per Hour model, time is money. With the estimated amount of fee/time required based on a percentage of ad buy.
But the administration of a strict Per Hour model is, to be brief, a big pain. All food for thought for anyone in this biz making some adjustments for ‘08.

The thoughts of any clients, prospects, collaborators, competitors, or just passers-by, would be appreciated.

Related Post:

AdWords Specialist?

Popular Posts:

Unintentional AdWords Evil
Strategic Truth

-T

Tom Hale
Internet Strategist – AdWords Specialist

http://ThomasCreekConcepts.com/

http://forum.sempdx.org/

And it just so happens, I recently addressed some of the features of my practice in a recent Client Newsletter. So here is that info, with a few revisions for blogability.

———————————

The question I want to address, is one that I am sure most, if not all of you (my clients), have asked at some time. What do I get from Tom Hale? What’s the value?

I think this is a different question than “what do I get from AdWords”. Related, but different nonetheless.

Ultimately both AdWords, and I, will be judged by your cost/profit calculations. As it should be; although I would like to point out that AdWords advertising alone doesn’t generate a lead or close a sale, a website or a person does that. Still, if you aren’t making money, or are not on the road to making money, accomplishing your goal, etc, – then what good is the advertising. So let’s state the obvious, the bottom line metric is always bucks in the bank.

How you measure value along the way can be trickier. It takes work, and smarts, to get those bucks in them there banks. No “get rich quick with AdWords” crap served up here thank you. The AdWords jungle is fiercely competitive.

Now with AdWords you also get a tangible of sorts, in that the traffic going to your website can be easily measured and verified. The Quality of the traffic, as we all know, is a little trickier. But still at the end of the day you paid for so many clicks/visits and it cost you so many dollars.

But what about me? What do you get from me? How do I help you not just survive, but hopefully thrive.

I’ll try and break it down a little;
Into three categories, plus.

Communication
I communicate with you, the vendor (Google), and your technical people. For those eager to learn – education, coaching, consulting, all fall in this category.

And as you know, part of my approach entails getting to know you and your business; because my work has a much better chance of success if we are on the same page as far as goals, message, target market, and the like. Also every client situation is unique, if for no other reason than each client has a different website. Therefore the traffic you are paying for may react differently when it lands on your website, than it will when landing on some different website

If the communication channels are open, so much the better for finding your “unique” key to success.

Hands on Management
This is the obvious one I guess: building ad groups and campaigns, wrangling keywords, budgets, and bids, etc. etc. I have a hunch this is what most of you would consider my job description.

Believe me though, the magic isn’t in the mechanics.

Expert Analysis and Strategy
This is the one that is hard for some clients to appreciate. It is far less tangible. I can spend a lot of time scratching my head and pulling my chin while pouring over data, analyzing the kw-ad-landing page-result matrix, just flat out attacking problems with my gray matter.

Some such sessions are more productive than others, but this is also where the breakthroughs come, the leaps forward. Analysis is the secret sauce that can make it all work, or makes it all work better.

Plus, like many professions, but probably even more intensely in this field, there is an incredible amount of continuing education that goes into staying ahead of the competition. My competition (others bidding on AdWords), is your competition. Your profit hinges on my expertise giving you the edge over others, whether they be professionals or do-it-yourself types like many of you once were.

You blink, and before you know it, the strategies and tools with which you once generated profit are obsolete. And I am talking just about the world of AdWords, let alone the broader fields of search and internet marketing.

I can’t bill clients individually for continuing education, but the time I spend reading, going to seminars, conferences, and such, does result in value for my clients nonetheless. It takes time and money to be an up-to-date expert. That has to be built into the value equation.

In fact, what all three of these things, plus, have in common is time, they all take time. So that is what you get: to twist an old maxim – your money buys my time.

So you say, “fine Hale, wrap it up will you. Who says you are an expert anyway?”.

Hard to answer, without sounding like a blow hard.
But I attempted to so, in a previous post. Follow the Love.

AdWords Link Love

Oh yeah, there is that Certification from Google thing also.
Qualified Google Advertising Professional

Tom Hale,  AdWords Specialist