THE TRUTH ABOUT THE BRAND PPC ROI (cpa,ROAS)

There is a widespread misconception about what the ROI (or cpa) is for a brand PPC Campaign. The same goes for non brand campaign but the ROI is much less distorted than in the case of brand. Digital agencies and many others are actually misinforming clients for years. I am not sure if it’s done on purpose or because of the lack of knowledge of how digital marketing works. Either way the current way of measuring ROI benefits then, because the ROI is higher than it should be.

“Here I will explain how ROI is measured incorrectly and how it should be measured. Brand PPC is often used in the hotel industry as OTA’s bid on our hotel’s brand. I will focus on brand PPC campaigns in the example below.” 


It is important to know what happens when you run a Band PPC Campaign. When you start a brand campaign, a lot of brand traffic is transferred from organic channel to the paid channel. It is natural that that happens because people see your ads before your organic listing and click on your paid ads first. That causes a big shift in reporting (Google analytics), so you will often see organic traffic (and revenue!) in decline and paid on the increase. It makes understanding and reporting data between the 2 channels complicated and therefor it’s often ignored.

 

Here is an simple example how to look at this: You are a fisherman and you fish from one stream. You catch 100 fish (conversions) per day on that stream. Then, one day an investor comes to you and says: “Lets build a dam and re-route the stream in another direction. That way you will catch more fish.” So you make a dam and re-route the stream to a new one. Now you catch 120 fish per day. The dam and the new stream have a monthly maintenance cost (that is your PPC cost + campaign maintenance) that you pay regularly. In the end the investor says: “We achieved a great ROI, you must be pleased. The ROI is 120 fish divided by the dam maintenance cost (+some cost to build it).” Do you say: “That’s great, keep it up!”, or you stop and think about it, because you used to catch 100 fish a day without the dam… So basically you are paying an extra cost for only 20 fish a day (a 20% increase in your catch)! The real ROI is those 20 fish (conversions) divided by dam maintenance cost (your PPC cost + campaign maintenance). 20 is much different than having 120 in the equation, isn’t it? The same applies for brand PPC that you pay for. With your hotel PPC ads you get up to 10-20% more traffic, like in this example.

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