Google’s little secret is out: Yes it’s the Golden ratio that businesses and marketers who are selling Google ads can implement and reap benefits.
The ratio is simple. It entails an Average click cost/ Daily advertising budget. To understand its significance, let us first delve deeper into understanding the insights of Google ads and the importance of Cost per Click in search advertising.
What Does CPC mean for PPC?
Cost-Per-Click (CPC) refers to the actual price you pay for each click in your pay-per-click (PPC) marketing campaigns. A click on your PPC(pay-per-click) ads or display banner ads represents a visit to your company’s page or service offering. Every click in a PPC campaign represents that a person who is searching for a product/service that you offered has noticed you. As an advertiser, this is the attention that you are paying for.
CTR determines your ad rank and your cost per click. A higher CTR in Google Ads means that you rank better in Google searches and your costs are lower. N the other hand, a Click-through rate is the percentage of total ad views that result in clicks, and this again determines Google’s Quality Score formula.
Importance of cost-per-click in search advertising
Cost-per-click determines how much your Adwords will cost you and also your profits in the ad campaigns. Ultimately, the ROI is measured by how much you are paying for the clicks to the quality of traffic they are bringing in. You do not want any kind of traffic, the traffic should bring value to your business.
The average cost per click varies, depending upon the business and industry that you are associated with, and what networks you’re advertising on. Industries that have a higher level of competition or expensive conversions (such as enterprise software, or services in the law and financial industries) tend to have more expensive costs per click.
Are these leads effective, and by what percentage are they converting?
As a marketer, you must analyze this question. Further, what percentage of leads are converting? More importantly, is your ad spending justified? There are two main goals for any advertiser:
- Increasing conversions
- Reducing costs per conversion
And if these conditions are not met, the entire purpose of an Ad campaign gets defeated. Reverse engineering is a great method to reimagine your ad campaign. Start from the leads and head backward to ascertain the costs involved and the marketing efforts that you have made. This is where the Golden Rule comes in. The Golden Rule can prove pivotal in making your Google ads profitable.
The Golden Ratio for Google Ads
Ed Stapelton, a co-founder at Clicksgeek, a Google Premier Partner Agency, has designed the Golden ratio. The Golden ratio that should be followed by marketers is → Average Click Cost: Daily Budget.
The higher the ratio, i.e above 1:4, 1: 5,1: 7, and so on, it is healthy and profitable for companies. Say, if you have a $10 click cost and you have a $50 daily budget. This is a reasonable ratio of 1:5. If you manage to get a higher ratio, your leads will convert smoothly and quickly towards conversions. More clicks in your ads budget open the avenues for better leads that will covert.
Following the Golden ratio can reduce futile ad spend, maximize reach and bidding, drive greater leads, maximize conversion rates to reach your goals. The higher the ratio, the better the conversion. For lower ratios, you might get there, just that it will be a bumpy and herculean ride towards getting towards your goal. This Golden Ratio helps you estimate your conversion rate and work backward to discover new ways to produce leads.