When setting up any type of online marketing campaign, you have to have a clear understanding of how your ads are performing beyond simply keeping tracking of impressions, clicks, and conversions.

We’ll take a look at a few key pieces to understanding the math behind pay-per-click advertising. This will help determine the success of each campaign, ad set, and ad. Using this data-driven approach will allow you to optimize your ad spend over time.

Ad Spend:

125 Clicks x 2.40 per click = $300 Ad Spend

Conversion Volume:

125 Clicks x 4% Conversion = 5 Memberships

Revenue Generated:

5 Memberships X $600 lifetime-value = $3,000

Return on Investment:

$3000 in sales – $300 in ad spend = $ 2,700 Return

Cost Per Acquisition:

$300 in Ad Costs/ 5 purchases = $ 60.00 CPA

In this current scenario for every $ 10.00 spent you make $100 ($90 profit).

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Although this is just the basics of how to calculate performance in determining which ads are winning and which ones to pause or improve, it is essential that you have conversion tracking setup to tie these numbers together.