What is ROI, and why is it important to track?

by Sarah C. Ward, MarketRuler

Tracking ROI, or Return On Investment is the best way to guarantee a successful advertising campaign. By tracking your ROI, you will be able to calculate the success of your marketing ventures, and set your budget accordingly. This article explores the differences between independent ROI tracking companies, and the tracking services that search engines are beginning to provide.

ROI, or Return-On-Investment allows you to determine whether or not marketing/advertising campaigns are successful. The idea is to have a higher return than investment, i.e. to take in more money than you put out.

As online marketing ventures continue to grow, more advertisers are utilizing search engines to aid in the promotion of their businesses. Programs such as Google Adwords and Yahoo Search Marketing work directly with the search engines to create pay-per-click ads that are designed to lead potential customers to a site and generate business.

Companies spend a LOT of money on pay-per-click and related advertising campaigns. It is essential to track the success of said campaigns, and to track the ROI. Promoting PPC campaigns without tracking the ROI is a waste of time and money, because you cannot know how successful your campaigns are. You may be able to spend less, but don't know it. The only way to track this information and capitalize on profitability is to track ROI.

Tracking the ROI of your advertising campaigns is a wise business practice to employ. It allows you to identify both the most successful and unsuccessful campaigns, and terminate those that are performing poorly. Analysis frequently uncovers weak points in your web sites and advertising campaigns. ROI tracking also allows you to study your site visitors in order to convert mere visits and hits into sales and dollars. With all of this information, creating reports, and reviewing marketing tactics and strategy are simple, efficient tasks.

There are two options for ROI tracking. The first is to utilize search engine-provided tracking tools. These tools come standard with Google Adwords, Yahoo Search Marketing, and MSN. The second option is to use a third party ROI tracking service.

Search Engine ROI Tracking

Search engine PPC advertising services are now offering ROI tracking tools. These tools are included in your membership to the search engines, and are easy to use. To set up, you must choose the type of information you'd like to track — sales, landings, newsletter signup's— and copy/paste that specific code snippet onto your web pages. Once the necessary code snippets are in place, the search engines will track the specified information. The ROI reports will become a part of your standard PPC reports, allowing you to track the success of your keywords, campaign, and overall success in one place.

The downside to PPC-managed ROI tracking lies in the fact that it is limited. Google will only track Google clickthroughs, and the same is true of Yahoo and MSN. If you have search engine snippets from three different search engines on your web pages, you will need to look at reports from each of those search engines in order to track your success. At no time will you be able to look at a report and compare data from Google, Yahoo, and MSN campaigns.

Independent ROI Tracking Companies

Third-party ROI tracking companies are another ROI tracking option. They work in much the same way as PPC ROI tracking services, in that once you sign up, you copy/paste code snippets to your web pages. The specified information is recorded and tracked; detailed reports are available. The benefits of using a third-party ROI tracking company are mainly seen in the reports.

With a third party, you can see data from any number of search engine PPC campaigns in one neat report. This feature allows you to compare and contrast campaigns, and more effectively determine how successful each campaign is. Many ROI tracking companies will even manage your campaigns for you, and will provide objective data that is not skewed toward one PPC campaign or another.

The downside to independent ROI tracking companies is the cost. While search engine ROI tracking campaigns are typically free along with your subscription, independent ROI tracking companies charge a monthly fee, with a certain number of clickthroughs included. Additional clickthroughs are an additional charge.

The Verdict

Having reviewed the two primary options, we have determined that combining them creates the most satisfactory results.

It is necessary to have to most complete reports and data records, and this is why we suggest utilizing the search engine ROI tracking tools as well as those of a third party vendor. Utilizing search engine tools makes sense — they're essentially free, and while they are skewed toward each individual search engine, the data will be complete.

Utilizing a third party will allow you to compare PPC campaigns and determine the overall effectiveness of each. While third parties are an additional charge, they will frequently manage campaigns for you, and provide detailed reports.

One of the most note-worthy benefits of a third party is the customized level of service they frequently provide. Products such as Conversion Ruler will customize snippets and install them for you, essentially eliminating all of the work that goes into ROI tracking; All that remains is report analysis. Third party ROI tracking companies are also available for technical support and to answer general questions, which cannot be said of the major search engines.

Make sure that whatever option you choose is the best fit for your company. The data companies track is totally unique to each business, and so the tracking method is as well, but it must be as complete as possible in order to be totally effective.

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