“Listen… it’s not working.”
Those are the same words that thousands (millions?) of real estate investors have said to the person running their PPC ads.
“I’ve already spent $1,500 and I haven’t closed a single deal from those leads! If it hasn’t worked now, then it isn’t going to work.”
It’s difficult to believe differently than that. After spending thousands of dollars on a campaign which isn’t delivering the kind of results your business needs, quitting seems like the only logical option.
But let’s slow down for a moment.
Just because you’ve spent several thousand dollars on your PPC efforts without closing a deal does not mean you’re doing something wrong. In fact, it might mean you’re doing something right.
Let me explain.
What Is The Goal Of Your Real Estate PPC Campaign?
Is your real estate PPC campaign a success?
To answer that question, you first need to determine the goal of running ads.
If you’re simply trying to build brand awareness, then seeing a tangible return on your investment might be irrelevant. If you’re trying to generate leads for your email list which might turn into a closed deal down the road, then all that matters is getting new people on your email list. In those cases, use the metrics mentioned in this article to determine how successful your real estate PPC campaign is.
If more likely, you’re running a PPC campaign to find motivated sellers and close deals, having a strict, tangible, profitable ROI matters a lot more. The first thing you’ll need to do, then — before you even launch your campaign, ideally — is set a realistic and profitable budget for your ads.
Here’s how to do that.
What is a Realistic Budget and ROI For Your Real Estate PPC Campaign?
Earlier, I said, “Just because you’ve spent several thousand dollars on your PPC efforts without closing a deal does not mean you’re doing something wrong. In fact, it might mean you’re doing something right.”
And I meant it.
At Carrot, we know lots of real estate investors who have to spend between $1,000 and $5,000 to get a single deal. The reason for that has nothing to do with their ads being ineffective, but everything to do with thick market competition. The thicker the competition, the more investors have to spend on ads to close a single deal.
Here’s the kicker, though: those investors are still making between $10,000 and $50,000 in profit as wholesale fees. So while spending up to $5k on an ad campaign might seem crazy, it’s still very profitable.
Brian Rockwell is one such investor (and Carrot member!) who consistently pays several thousand dollars to close a single deal in his highly competitive market: Dallas, Texas.
Here’s what he has to say about it:
“Would you pay $3,000 to make $30,000? I don’t know about you, but I’d take that deal all day long.”
Okay. Great.
Spend money to make money. You get that.
But how much money is too much money? How much should you expect to spend on your PPC campaign before closing a deal? At what point should you throw in the towel?
To answer that question, check out our free-to-use ROI calculator for paid ad campaigns.
You’ll just need four pieces of information in hand:
- Typical profit per deal
- Typical # of leads to close 1 deal
- Cost per click
- Website conversion rate
Example:
Imagine that you can safely expect to make at least $15,000 in wholesale fees on a single deal. Let’s also imagine you’re in a competitive market and that it takes you 25 leads to close one deal. Your cost-per-click for your PPC campaign is $15 and your website conversion rate is 15% (typical for a Carrot site).
That means you should expect to spend at least $2,500 to close a single deal and no more than $3,250.
And while that might seem like a lot of money to spend, you’ll also notice that the ROI on your expenses will be between 362% and 500%…
As Brian Rockwell said, “I’d take that deal all day long.”
Formula For Calculating ROI
Of course, ad spend is likely not your only cost for generating leads and closing deals. You might also be paying people to run your ads for you, tackle due diligence on properties, meet with buyers, or create contracts.
Maybe you also want to include those costs in the overall ROI of your PPC campaigns…
It’s up to you… really, it depends on what you want to find out. If you want to strictly determine how effective your PPC campaign is and if you’re staying within budget, then you might want to leave other indirect costs out of the equation. If, on the other hand, you want to determine the profitability and ROI of your entire business, then you’ll certainly need to include all other costs.
Whatever the case, here’s the formula you can use for finding the ROI of any of your marketing efforts.
ROI = (Revenue – Cost) / Cost
How To Determine a PPC Campaign’s Effectiveness (The 4 Metrics That Matter Most)…
There’s no doubt about it: ROI is the king of determining the success of any PPC campaign.
If you’re not making more money than you’re spending — if your ads aren’t profitable for your business — then you need to press “Stop” and try something else.
Having said that, looking only at the ROI of your PPC campaign can blindside you to other important metrics. Because even if your ads are profitable, they still might not be as profitable as they could be.
The goal is to not only run profitable and realistic PPC campaigns but to also increase the effectiveness and profitability of those campaigns. To do that, you should keep a close eye on the below metrics, test new things, and make changes as needed.
1. Cost-Per-Click
You can find this metric reported directly in your Google Ad dashboard. It tells you the amount of money you’re spending for each click you receive. The more enticing and click-able your ad is to website browsers (i.e. the more people who click), the less money you’ll spend on each click. However, competitive markets will force a high cost-per-click regardless of how effective your ad is, simply because there are so many other bids.
2. Quality Score
The quality score of an ad campaign is a metric which attempts to show you, with a score between 1 and 10 (10 is best), how effective your ad campaign is. Using the number of clicks your ad is receiving when people see it, the quality score also influences how much Google is going to show your ad, your cost-per-click, and even your ad placement (at the top vs. at the bottom). Keep a close eye on this metric and tweak your ad if it has a low-quality score.
3. Impression Share
Impression share is the percentage of people who, when your ad was placed on the page they visited, actually scrolled and saw your ad. If you ad has a low-quality score and is sitting at the bottom of the results page, your impression score will be much lower than competitors with ads showing at the top. An impression score of 80% means that 80% of people saw your ad and 20% didn’t.
4. Website Conversion Rate
While this isn’t technically a PPC metric, the website conversion rate is absolutely vital to consider for any paid ads you’re running which drive traffic to your website. Since you’re paying to generate clicks and hopefully leads and closed deals, you need a website which consistently converts the traffic your hard-earned money is driving to it. What’s a good conversion rate? Find out over here. And if you don’t want to worry about optimizing your website for conversion, consider getting yourself a Carrot website. We’ve generated over one million leads for investors and agents all around the U.S. and we’d love to do the same for you (a typical Carrot website conversion rate is around 10%. A typical conversion rate for most other industries is around just 2%).
Conclusion
I understand.
It gets discouraging, running ads which aren’t pulling results for your business. After all, if your business is to survive, you can’t be dumping money into a useless ad campaign for much longer.
You need results.
But keep in mind that results often take time.
The best thing you can do, in fact, is set yourself up for success by determining a realistic budget for your PPC campaigns: how much should you expect to spend? And how much is too much?
With those numbers, you’ll be far more confident spending the money you’re spending… knowing when you should expect a closed deal and when you’ve spent too much.
Then, work to improve the ROI of your PPC ads by watching the 4 metrics mentioned in this article. Because even if your paid ads are profitable, you still might be able to make them more profitable. Which is always a good thing to do.
With that, you’re ready to run successful PPC campaigns. The rest is simply doing, testing, trying, and iterating. Off ya go!