Google Ads ROI: How to Calculate and Optimize

What is Google Ads ROI?

Google Ads ROI, or Return on Investment, is a metric used to measure the profitability of advertising campaigns on the Google Ads platform. It calculates the revenue generated from ads as a percentage of the total cost of running those ads.

Understanding and monitoring your Google Ads ROI is crucial for businesses to evaluate the effectiveness of their PPC efforts and make informed decisions about where to allocate their marketing budget.

By analyzing the ROI of different campaigns, keywords, and ad groups, businesses can optimize their strategies to maximize their advertising dollars and drive more revenue.

In this article, we will explore what Google Ads ROI is, how to calculate it, and why it is essential for the success of your online advertising efforts.

The difference between ROAS and ROI

ROAS (Return on Advertising Spend) and ROI (Return on Investment) are two important metrics used to measure the effectiveness and profitability of Google Ads campaigns.

ROAS measures how much you earn compared to how much you spent on advertising. It focuses on the revenue generated from the advertising efforts and provides insight into the effectiveness of your ad spend in terms of generating sales.

On the other hand, ROI looks at the overall net profit after considering all expenses, including advertising costs. It takes into account the additional costs associated with generating revenue, providing a more comprehensive view of the profitability of the campaign.

The key factors that differentiate the two metrics are the focus on revenue for ROAS and the consideration of additional costs for ROI. While ROAS helps you understand the revenue generated from advertising efforts, ROI provides a more holistic view by taking into account marketing expenses.

Understanding both ROAS and ROI is crucial for accurately measuring the effectiveness and profitability of Google Ads campaigns. By analyzing both metrics, businesses can make informed decisions about their advertising strategies and optimize their campaigns for better results.

How To Calculate Google Ads ROI

How to calculate Google Ads ROI

It’s essential to know if your investment in Google Ads is providing a positive return on investment (ROI).

But how do you calculate the ROI of your Google Ads campaigns to ensure that your marketing efforts are yielding profitable results?

Let’s jump in:

Use conversions to measure ROI

To use conversions to measure ROI, start by implementing conversion tracking tools such as Google Tag Manager and Google Ads tracking code. These tools allow you to track valuable customer actions like purchases, sign-ups, and key web page visits. By tracking these conversions and assigning value to them, you can determine the profitability of specific keywords or ads.

Next, once you have the conversion value, you can use the ROI formula to calculate the return on investment. The formula for ROI is: (Revenue – Cost)/Cost.

Plug in the revenue generated from the conversions and the cost of advertising to calculate the ROI. This will give you a clear understanding of how effective your advertising efforts are in generating revenue.

By tracking conversions and using the ROI formula, you can make informed decisions on which keywords or ads are providing the best return on investment. This allows you to allocate your advertising budget more effectively and focus on strategies that are driving the most profitable results.

What are conversions in Google Ads?

Conversions in Google Ads refer to the desired actions or goals that users complete on a website after clicking on an ad. These can include a wide range of actions such as making a purchase, signing up for a newsletter, submitting a form, or making a phone call.

Conversions are significant for marketing campaigns as they indicate the effectiveness of search ads in driving valuable actions from potential customers. They help to directly attribute the return on investment (ROI) for advertising efforts and help businesses understand how well their ads are performing in terms of generating leads, sales, or other valuable actions.

Within Google Ads, different types of conversions can occur, including website visits, form submissions, phone calls, app downloads, and more. Each type of conversion represents a different level of engagement with the ad and provides valuable insights into user behavior.

These conversion metrics help marketers optimize their campaigns and allocate resources effectively.

Average ROI of Google Ads

Google estimates that the average ROI generated through it’s platform is 100%. So for every $1 invested, the average advertiser receives $2 back. 

That being said, based on what we see with our clients, this is on the lower end. 

So, What’s a Good ROI for Google Ads?

A good return on investment (ROI) for Google Ads is influenced by various factors such as industry competitiveness, ad campaign quality, target audience, and the product or service you’re advertising.

In highly competitive industries, such as finance or insurance, achieving a good ROI may be more challenging due to the higher cost per click and the need for a more sophisticated differentiation strategy.

The quality of the ad campaign, including the relevance of the ad copy, landing page, and keywords, also plays a significant role in determining the ROI. As these factors can impact quality score, and your cost per click.

Different industries have varying benchmarks for a good ROI, with some industries expecting a higher return due to larger profit margins or higher customer lifetime value. 

E-commerce companies often aim for ROIs exceeding 300%, while those in more competitive verticals might be happy with a 100% ROI. B2B deals typically take much longer to close, and ROI may take a lot longer to prove.

Five Ways To Improve Your Google Ads ROI

1. Keyword Optimization: Conduct thorough keyword research to identify high performing keywords that are relevant to your target audience. Make sure that the keywords you choose are high-intent, that is they are terms that people use when they are actively in-market vs. passively browsing.

2. Ad Quality and Extensions: Create compelling ad copy that includes targeted keywords in headlines to improve relevance and click-through rates. Use ad extensions like site links, callouts, and structured snippets to provide additional information and improve ad visibility by taking up more real estate on the SERPs.

3. Landing Page Optimization: Ensure that your landing pages are optimized for the targeted keywords with clear and relevant content. Include strong calls to action and clear value propositions to encourage conversions.

4. Bidding Strategies: Don’t fight automation. Implement automated bidding strategies like target CPA or target ROAS to maximize ROI. Regularly monitor, split-test and adjust bids to ensure that you are getting the most value for your ad spend.

5. Continuous Monitoring and Optimization: Analyze the performance of your ads, keywords, and landing pages regularly to identify opportunities for improvement. Make data-driven decisions to refine your campaigns and optimize your Google Ads ROI.

Other Key Google Ads Metrics

Other key metrics for calculating google ads roi

While ROI is the big daddy, when it comes to measuring the success of your Google Ads campaigns, there are a wide range of key metrics to consider. Below are some important KPIs to monitor:


CPA, or cost per action, is a metric used in marketing campaigns to determine the cost of someone completing a certain action (e.g. purchasing a product, requesting more info, or signing up for a newsletter etc.).

The formula for calculating CPA is simply dividing the total cost of the campaign by the number of actions completed. This can be represented as: CPA = Total Cost / Number of New Actions

In a Google Ads campaign, calculating CPA involves accessing the campaign’s data and dividing the total cost of the ads by the number of new actions generated by the ads. The Google Ads platform provides a straightforward way to track this data and calculate the CPA. Most marketers will use the Cost / Conv. (Cost per Conversion) column in Google Ads to monitor this. 

In summary, CPA calculation is a crucial component of evaluating the success and efficiency of marketing campaigns, and it provides valuable insights into the cost of acquiring new customers.


ROAS, or Return on Advertising Spend, measures the revenue generated for every dollar spent on advertising. The formula for calculating ROAS is: ROAS = Revenue / Advertising Cost. For example, if a company spends $100 on advertising and generates $500 in revenue, the ROAS would be 5 (or 500%).

ROAS differs from ROI (Return on Investment) in that ROI measures the overall profitability of an investment, while ROAS specifically focuses on the effectiveness of advertising spend.

Reaching a 300% ROAS indicates that for every dollar spent on advertising, the company is generating $3 in revenue. This is significant as it shows that the advertising efforts are effective and profitable.

There are several online ROAS calculators available for businesses to use, such as the one provided by Google Ads. Theis calculator can help businesses quickly and accurately determine their ROAS and make informed decisions about their advertising strategies.

Cost per conversion

To calculate the cost per conversion for a Google Ads campaign, simply divide the total cost of the campaign by the total number of conversions. For example, if the total cost of the campaign was $1000 and it resulted in 100 conversions, the cost per conversion would be $10.

If a business has recurring purchases, the initial cost to acquire a customer may be higher (customer acquisition cost or CAC), but the lifetime value of that customer, including the recurring purchases, may make the CPA more sustainable over time.

For example, a subscription-based business may have a higher cost per conversion due to the initial cost of acquiring a customer, but if the customer pays a monthly subscription, the cost per conversion may be lower over time as the initial cost is spread out over the recurring purchases.

In contrast, a one-time purchase business may have a lower CAC, but the cost per conversion may be higher as there are no recurring purchases to offset the initial cost of acquisition.

Understanding the cost per conversion is crucial for different types of businesses to evaluate the effectiveness of their advertising efforts and make informed decisions about their marketing strategies.


Click-through rate (CTR) is a crucial metric in digital marketing that measures the percentage of users who click on a specific link, ad, or call-to-action, relative to the number of total impressions.

CTR is calculated by dividing the number of clicks by the number of impressions and multiplying by 100. For example, if an ad receives 100 clicks and 10,000 impressions, the CTR would be 1%.

Different CTRs can significantly impact campaign effectiveness. A higher CTR typically indicates that an ad is engaging and relevant to the audience, while a lower CTR may point to ineffective messaging or targeting.

Optimizing CTR is crucial for improving campaign performance. This can be achieved by A/B testing ad creatives, refining targeting parameters, and utilizing compelling calls-to-action. A higher CTR not only increases the likelihood of conversions but also contributes to better ad placement and lower costs in digital marketing platforms.

For instance, a higher CTR can result in more qualified leads, increased website traffic, and improved return on investment (ROI). Conversely, a low CTR may result in wasted ad spend and underperformance. Therefore, optimizing CTR is essential for maximizing the impact of digital marketing efforts.

Conversion rate

To calculate and optimize your conversion rate through Google Ads, the first step is to define your conversion action. This could be a purchase, sign-up, or any other goal you have for your ads. Once you have defined your conversion action, it is important to set up conversion tracking in Google Ads to accurately measure the effectiveness of your campaigns.

After setting up conversion tracking, you can also calculate your conversion value by determining your average order value and conversion rate. For a B2B business, you can link your CRM to send offline sales data once a deal closes.

To optimize your conversion rate, use the data from your Google Ads campaigns to make informed, data-driven decisions. Test different variables and strategies to see how they impact your conversion rate, and make adjustments accordingly.


In conclusion, accurately calculating ROI for a Google ads campaign is crucial for understanding the effectiveness of marketing efforts. Incorrectly calculated ROI or misleading metrics can lead to misinformed decisions, wasted resources, and missed opportunities for improvement.

By accurately monitoring and analyzing ROI and campaign data, businesses can make informed adjustments to maximize the impact of their marketing efforts and drive sustainable growth.

Overall, prioritizing accurate ROI calculation and understanding campaign effectiveness are essential for successful marketing strategies and long-term business growth.