How to Forecast PPC Costs and Revenue

I’m usually requested to challenge pay-per-click prices and income. The duty is difficult owing to variables akin to historic information, tendencies, opponents, and, critically, unexpected components.

Nonetheless, right here’s my strategy.

Historic Knowledge

Reviewing previous information is my first step in assembling projections. The static numbers are useful, however the true worth is the tendencies. Say I’m projecting prices and income for the primary six months of 2024. Listed here are the spend, income, and return on advert spend for the primary six months of the earlier three years.

  January February March April Might June
Spend: 2023 $40,000 $39,000 $42,000 $55,000 $59,000 $63,000
Spend: 2022 $37,000 $38,000 $40,000 $48,000 $52,000 $54,900
Spend: 2021 $38,000 $38,500 $39,000 $46,000 $48,000 $51,000
Income: 2023 $83,000 $79,500 $88,500 $135,000 $145,000 $156,000
Income: 2022 $74,000 $81,000 $81,000 $107,000 $122,000 $130,000
Income: 2021 $60,000 $63,500 $82,100 $101,000 $110,000 $115,000
ROAS: 2023 107.50% 103.85% 110.71% 145.45% 145.76% 147.62%
ROAS: 2022 100.00% 113.16% 102.50% 122.92% 134.62% 136.79%
ROAS: 2021 57.89% 64.94% 110.51% 119.57% 129.17% 125.49%

Be aware the tendencies:

  • Spend, income, and ROAS improve considerably from Q1 to Q2.
  • Spend and income have typically elevated every year.
  • Spend and income have a tendency to extend every month of Q2.

After reviewing these numbers, I’ll have a look at account exercise to place them into context. Rising prices make sense for extra campaigns and key phrases — further protection requires extra funds. Conversely, constant campaigns and key phrases might nonetheless end in increased prices per click on. Google confirmed throughout its current antitrust trial that it inflates CPCs.

Key phrase Planner

Google’s Key phrase Planner supplies search quantity and value by key phrase for the earlier 12 and 24 months. For instance, the key phrase “roof racks” averaged 27,100 month-to-month searches final 12 months. Searches slowed within the winter months, picked up in the summertime, decreased within the fall, and rose heading into the vacations.

Searches for the key phrase “roof racks” slowed within the winter months, picked up in the summertime, decreased within the fall, and rose heading into the vacations.

The software additionally estimates top-of-page bids, high and low. I look solely on the excessive vary since I presume prices will improve. For “roof racks,” the excessive top-of-page bid estimate is $3.22. Thus the month-to-month price for that key phrase is:

27,100 searches * $3.22 = $87,262

A month-to-month price of $87,262 might be a whole advert funds, not only a single key phrase! Fortunately, the quantity is a mirage. It doesn’t contemplate bid technique, conversion decisions, and adverse key phrases.

A extra correct projection is within the “Forecast” part, which incorporates bid technique and match kind however not, notably, ROAS or cost-per-acquisition targets. Thus a “maximize conversions” bid technique will present a better price with out these targets.

Google’s “Forecast” makes use of historic search information, bid competitors, site visitors, and advert interactions. Right here is the projection, beneath, for “roof racks” and associated key phrases with a maximize conversions bid technique over the subsequent 12 months.

Screenshot of projection showing conversions, CPA, clicks, impressions, cost, CTR, and average CPC.

Google’s “Forecast” makes use of historic search information, bid competitors, site visitors, and advert interactions. This instance is for the key phrase “roof racks.”

Once more, the numbers are estimates, an informed guess. The same software, “Efficiency Planner,” tasks present campaigns.

Closing Plans

Having reviewed historic and forecast information, I can create the projections. I usually present “gentle” and “aggressive” choices to assist shoppers visualize potential income from a better spend. I typically challenge in additional element, akin to by account or initiative.

I’ll begin with a conservative “gentle” plan and focus intently on targets whereas accounting for seemingly increased prices.

Right here’s an instance. The consumer goals to extend month-to-month income by 10% whereas retaining goal ROAS inside 5% of 2023 efficiency. The January 2023 metrics had been:

  • Spend: $40,000
  • Income: $83,000
  • ROAS: 107.50%

A ten% income improve could be $91,300, and the ROAS might be no decrease than 102.13% (5% lower than 2023). A spend of $45,000 will yield a 102.89% ROAS:

($91,300 – $45,000) / $45,000 = 102.89%

Including $5,000 to the January 2024 funds is a 12.5% improve over January 2023 — for a ten% income acquire and a 4.29% decrease ROAS. The projections presume CPC will increase with a minimal (5%) ROAS loss.

The “aggressive” plan usually focuses on buyer acquisition — further income from increased spend — not ROAS. I’ll seemingly use Google’s projections, that are aggressive by default, mixed with lifelike changes, akin to a consumer’s danger stage and max funds.

Persevering with the instance, Google’s projections present a $60,000 spend in January 2024, a 50% improve from final 12 months. Attaining a ROAS no less than 96.76% (10% lower than final 12 months’s) would end in a 42.2% improve in income, to $118,056.

($118,056 – $60,000) / $60,000 = 96.76%

Forecasting prices and income from Google Advertisements shouldn’t be a precise science contemplating all of the variables. Nevertheless it’s useful to set targets and expectations for advertisers.

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