Pay-Per-Click (PPC) Marketing Proposal LinkCaffeine

CARNOVA.COM
PPC PROPOSAL

Proprietary – Not for disclosure outside of LinkCaffeine © 2011 LinkCaffeine Intellectual Property. All rights reserved.
LinkCaffeine and the LinkCaffeine logo are trademarks of LinkCaffeine Intellectual Property.
Friday, April 15, 2011

INTRODUCTION:
Determining the Ideal PPC Budget
• Sales amount $15 per lead - Average number of
conversions 3 = $45

• Starting Average Cost Per Click (CPC) $1.44

• Starting Conversion Rate 2%

• Target Trafﬁc: 50,000 Clicks/Month Through 1st Year =
$72,000/Monthly Budget.*

*Budget Determined by Trafﬁc/CPC: 50,000 x $1.44 = $72,000

S TA RT I N G T H E C A M PA I G N

FORECAST FOR JUNE

Let’s Do the Math!

$72,000 (Budget) /$1.44 (CPC) x 2% (Conversion Rate) x $45 (Average Sale Amount) = $45,000 (Net Revenue)

Not bad for a 1st Month! But you need to factor your costs, including click costs ($72K), and LinkCaffeine’s set up and
cost to manage your campaign for the month ($1,999):

$45,000 (net revenue) – $72,000 (click charges) – $1,995 (management fees) = -$28,995 (immediate gross profit)

Oh no! After factoring in your costs, you’re in the negative. Of course, if you consider longer term effects such as likely
future repeat purchases by these new customers, not to mention synergies between PPC and other sources of traffic
(Social Media, SEO, ORM etc.), you’ll get a lot more than the immediate figures indicate. These results showing on
slides 3-5 are for months 1-3 and are numbers that are expected to happen as they are based upon top industry
competitive data, deep keyword research, trending bid prices and traffic. These results are the same thing you will see
from any highly respectable PPC search vendor. For more information check out this link from Trada's CEO about Sales
Cycles and CPA: http://www.trada.com/2011/02/buying_cycles-affect-ppc-cpa/

Now, Lets look at a prediction of July and see how things will improve through Data collection & Campaign
Optimization.



FORECAST FOR JULY

Decreased CPC + Higher Conversion Rate = Increased ROI
Let’s see what happens with a $1.10 CPC. We’ll factor more out of the overall budget for management costs, and
assume our firm has been able to at least keep conversion rates steady:

$72,000 (Budget) /$1.10 (CPC) x 2.5% (Conversion Rate) x $45 (Average Sale Amount) = $73,636 (Net Revenue)

$73,636 (net revenue) – $72,000 (click charges) – $7,500 (management fees) = -$5864 (immediate gross profit)
(-$34,859 Rolling Gross)

Being able to work a campaign and understand it better allows for a better ROI. Here we see a $23,131 increase from
June to July.



FORECAST FOR AUGUST

Example of Increased ROI

$72,000 (Budget) /$.90 (CPC) x 2.75% (Conversion Rate) x $45 (Average Sale Amount) = $99,000 (Net Revenue)

$99,000 (net revenue) – $72,000 (click charges) – $7,500 (management fees) = $19,500 (immediate gross profit)
(-$15,359 Rolling Gross)

Okay, so these have been significant improvements. You can see the trends upward each month, as the campaign is run
longer the CPC will continue to drop as Quality Scores increase with Google, Yahoo, Microsoft and their Search
Networks. Now take a look at a snap shot of what the campaign will look like in the mid-later part of the 2nd Quarter.



FORECAST FOR OCTOBER

Time + Better CPC + Better Conversion Rate= What We Are Looking For
Now this is looking a lot better! It’s not a huge immediate profit, but it goes to show how increasing scale can tip ROI in
your favor. Of course, if conversion rates are increased, ROI is boosted and more gross profit is ultimately generated. For
instance, in the below scenario, if conversion rates are brought up by just 0.35%, profits would increase significantly:


($34,859 Rolling Gross)

Being able to work a campaign and understand it better allows for a better ROI. Here we see a Huge increase from when
the campaign initially started.



FORECAST FOR DECEMBER

Increase the Budget, Increase the Returns
Here we are showing some variation with budgeting once we have the campaign in the green and under control to show
how to crank the most out of PPC:


($161,263 Rolling Gross)

By using formulas like these, and experimenting with different budgets, conversion rates, and CPC, it can take a lot of
the guesswork out of what to expect from your campaign. PPC is a bit unpredictable, so any estimates we make here
shouldn’t be read too literally, but formulas like this can definitely help to give direction as to how much of an
investment and what sorts of conversion rates will likely be needed to return positive ROI.



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