# Comparing Return on Investment (ROI) for paid traffic (PPC) vs. blog and organic traffic

## Posted on April 11th 2012

How do you decide whether blogging or paying for traffic (PPC) brings a greater return on investment (ROI) for your business? There are pros and cons to both methods of driving traffic.

Everyone insists that "content is king" and that a blog is essential for all startups, entrepreneurs and businesses. PPC ads require a cash outlay, making them risky for cash-strapped small business and entrepreneurs. But is that the end of the story?

This article will show you how to calculate the return on investment for both methods, and help you to decide which method (or combination of methods) will drive the most traffic at the highest rate of conversion for your blog, brand or business.

### Calculating ROI for Pay Per Click (PPC) ads

In order to understand the return from PPC ad campaigns, you need to turn know:

1. Value of a conversion
2. Conversion rate
3. Number of clicks
4. Average cost per click

Knowing these four variables allows you to calculate the ROI of the ad campaign as a percentage of the overall ad campaign spend.

For our example, let's assume you spend \$1 per click, and that a conversion is worth \$45. You convert at 3%, and obtain 1000 clicks over a given period. Your calculation is then:

PPC ROI = ((Total revenue - Total cost) / Total cost) x 100

= (((Value of a conversion x Conversion rate x Number of clicks) - (Average cost per click x Number of clicks)) / Total cost) x 100

= (((45 x 0.03 x 1000) - (1 x 1000))/ (1 x 1000)) x 100

= (1350 - 1000)/1000 x 100

= \$350 or 35%

It's worth bearing in mind that the \$45 used in this calculation is the profit on the product or service sold. Not the list price. There are usually other costs involved in fulfilling an order, so we can only use the profit from the conversion in this calculation.

In addition, it is likely that creating the PPC ad campaign also inflicted costs in terms of time and labor, which have not been included here. The real cost of running an ad campaign is greater than the ad spend amount because there is quite a bit of work involved in getting a good PPC ad campaign working right.

#### Use the online ROI calculator app

If you'd like to have a quick ROI calculator do most of your work for you, check out this page entitled Return on Investment (ROI) calculator for blog and business content.

### Calculating ROI for blogging & organic search

The ROI for blogging and other web and business content is a bit harder to quantify because content can be online for years and years, driving a steady stream of traffic (even if it's only a trickle).

For the sake of our calculations, we'll try to make reasonable assumptions as to the overall ROI for content.

Using the same values for the value of a conversion, \$45, and a slightly lower conversion rate of 0.5% because organic traffic is not as focused as a well honed PPC ad campaign.

Instead of direct ad costs, the costs associated with blogging and content for organic search arise from the time and effort associated with researching, writing, and promoting the content.

Let's say that on average, a blog post takes up 4 hours of time - including research, writing, socializing and promotion (non-paid). If you have a full time job, work out your hourly rate and use it to get the total cost of creating a blog post. For argument's sake I have used \$35 per hour:

Blog post cost = Number of hours x hourly rate

= 4 x \$35

= \$140

Now we need to work out how many page views the post will get over its lifetime, and apply our conversion values and rates to this number. For the sake of argument, assuming you aren't a blogging superstar, let's put the number of page views at 1000.

Now we are ready to calculate our return on investment, as follows:

Blog/Organic search ROI = (((45 x 0.005 x 1000) - 140) / 140) x 100

= \$85 or approx 60%

#### Use the online ROI calculator app

If you'd like to have a quick ROI calculator do most of your work for you, check out this page entitled Return on Investment (ROI) calculator for blog and business content.

### PPC vs. Organic search content smackdown

While the numbers in the above calculations suggest that blogging was more successful (having a higher relative ROI), there are several important things to note:

1. The PPC ad campaign risked \$1000 in cash whereas the blog post had no cash risk
2. The PPC ad ROI calculation did not take into account the cost due to labor
3. The blog content ROI calculation gave a lifetime ROI, the ad ROI calculation gave the immediate ROI

Again, it's important to realize that the numbers associated with your particular business or blog could be wildly different. You can get a far better picture by substituting in your own values using the Return on Investment (ROI) calculator for blog and business content.

Take a moment to do the calculations and share your results with us. Does PPC offer a better ROI than organic search content for you?

Photo: SimonCPhoto/Shutterstock

# David Mercer

## Founder, WSM4B

"Best selling author of books about the Web, eCommerce and marketing" - Wikipedia

David provides innovative technical and strategic advice and services for online business - via his business website, WSM4B. Clients include large and small companies from diverse industries such as online games, digital signage, real-time location tracking, sports management, and more.

I know you mentioned it, sort of, but the simple fact that you OWN your blog posts is a really big deal.

PPC is "rental" ROI. Quit paying rent and you quit getting results. Once you have your blog posts, you can repurpose them, rewrite them, update them and continue enjoying their benefits.

Lack of ideas should not be a bar to blogging. If it's ideas you need, just use our outlining exercise at www.shortcutblogging.com and you'll have 64 new post ideas within the hour. Really. (no charge)

If lack of time, lack of writing skills or lack of confidence are holding you back, we can help out as well.