How to calculate the ROI of your online advertising channels

Interests around Web Analytics have been growing over the last years. One of the reasons is definitely the cost pressure and the need of evaluating the return of investment (ROI) of every single expense, especially when it comes to optimize advertising channels.

Why? Because, if setup correctly, web analytics allows you to evaluate whether your website is actually driving value to your business. “Doing web analytics” doesn’t mean reporting the standard “vanity metrics” (page views, users, bounce rate, etc.), but concretely tracking your business goals.

In this article I will show you how to measure the ROI in a concrete business case context by integrating financial insights to a very standard web analytics implementation.

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Let’s dive straight away into our business case.

The Business Case

Acme Inc. is a consulting company. Their main asset are their “people” as they don’t sell any product, but only services. Their main recruiting channel is their website, which has a “career” section that is always up-to-date with the latest open positions. A web form allows candidates to submit their contact details and attach their CV.

Acme Inc. advertises open positions through several channels: 2 job platforms, social media, Google- paid search (AdWords) and organic search.

Acme Inc. would like to evaluate their advertising channels to cut costs on the least performing ones.

Thanks to Web Analytics and a little walk to your Financial- and HR- departments you will be able to decide where your money is the most safely invested.

Financial Data

financial-data

Ask your finance department if they can provide the average revenue per employee, which, for a consulting company like Acme Inc., should not be so difficult to compute by knowing employee costs and generated income from their projects.

Let “R” be the average revenue generated by 1 employe over 1 year.

An employee of Acme Inc. generates on average 100’000 CHF.

HR Data

hr-data

Walk over to HR and ask them how many candidates were recruited via your website over the past year.

Let “C” be the number of candidates recruited via the website over 1 year.

Acme Inc. has recruited 10 employees last year.

Analytics Data

analytics-data

No matter what implementation you have chosen, for this you need to track a single KPI: the amount of form submissions.

In the most basic implementation of Google Analytics you would need to

  • Raise an event at every form submission
  • Create a Goal called “Job Application Submitted” which is based on the event raised by the form submission

Extract the number of forms that were submitted the past year.

Let “A” be the number of job applications submitted over 1 year.

Last year, Acme Inc. has received 1’000 job applications via their website.

Computing the value of a Job Application

You have everything to compute how much a form submission is worth!

The recruitement ratio (RR) is the amount of candidates that were recruited via your website (C) divided by the amount of form submissions (A).

RR = C / A = 10 recruited employees / 1’000 applications = 0.01 recruitments/application

The value of a single form submission (V) is the average revenue per emloyee (RE) multiplied by the recruitement ratio (RR).

V = RR * RE = 0.01 recruitments/application * 100’000 CHF/employee = 1’000 CHF/job application

The value of a click on the job application form is 1’000 CHF.

Guess what? In Google Analytics you can set this number as a goal value! Boom!

Computing the ROI

Computing your channel efficiency is a piece of cake, especially if your web analytics implementation supports goal value, because you just need to print the goal value by channel.

If you had to do it “by hand” you would have to multiply the amount of conversions of each channel by the value of a conversion (1’000 CHF).

Visualizing it

Given the data extracted from Finance, HR and Analytics:

 

google-spreadsheet-roi-data

Given that Acme Inc. knows how much they pay an agency to run their social media campaigns and how much AdWords and the 2 job platforms cost, they can just extract Goal Value and Conversion Rate from Google Analytics and build this table in Google Spreadsheets:

 

google-spreadsheet-roi-data-enriched

We can easily visualize the results by plotting costs, goal value and ROI:

google-spreadsheet-roi-visualization

 

Conclusion

The conclusion is pretty straightforward: Acme Inc. should stop investing money on Job Platform 1 as it has a negative ROI.

On the other hand the graph shows how successful their social media campaigns are and how SEO is helping them to convert their organic visitors without spending a single Swiss Franc!

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Andrea Rapanaro
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Andrea Rapanaro

Senior Business Analyst and Manager at Atos Consulting CH
Quick learner, customer focused and pragmatic business analyst specialized in Web Analytics and with strong technical knowledge coming from a developer background.

I have over 8 years of experience in consulting and hands-on experience in Web Analytics, especially with Google Analytics (10+ years), Google Tag Manager (3+ years), Google Data Studio (1+ years) and Microsoft Power BI (2+ years).

I am also a proud dad, a passionate football fan (AC Milan) and I like to spend all my free time writing on my food-blog (www.cucina.li). What can I cook for you? 🙂
Andrea Rapanaro
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Summary
How to calculate the ROI of your online advertising channels
Article Name
How to calculate the ROI of your online advertising channels
Description
Learn how to measure ROI in a concrete business case context by integrating financial insights to a very standard web analytics implementation.
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Atos Consulting CH
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