How to Calculate the ROI of Google Ads for Real Estate Agents
Updated: Oct 27, 2019
We’ve created a simple calculator with several input parameters that will allow you to quickly calculate your marginal return on investments for running Google Ads. This will help you as a realtor decide if running Google Ads should be part of your overall digital marketing plan!
Google Ads 101
Before starting and to make sure everyone is on the same page, let’s spend a little bit of time understanding Google Ads. Feel free to skip this section if you already know!
Google Ads are paid advertisements that appear at the top of Google’s SERP (search engine results page). If you’ve used Google before, you would have seen them before but may not have noticed the ad label.
The SERP is divided into paid advertisements, which are the top X links (e.g. top 4 links in the image above) and organic results which are the remainder of the results. You may have heard of SEO (Search Engine Optimization) before, which are techniques used to optimize your website such that Google presents your website closer to the top of the organic section.
Google Ads ranking on the other hand, though it has some influence from SEO optimizations, is predominantly dictated by money. You bid against other competitors for specific keywords and Google’s auction algorithm decides if your ad should surface to the top or your competitors. In this case, I’ve searched `11 Yorkville` which is a new pre-construction condo sale released in Toronto, Canada. You can see there are 4 paid advertisements at the top and organic links at the bottom. Advertisers will bid money against the keyword term `11 Yorkville` to surface their ads when someone searches for that keyword or close variations of it.
But Who Cares?
Who cares?!? You wouldn’t think that after seeing some of these statistics
The first ranking position in the search results receives 42.25% of all click-through traffic
The second position receives 11.94%
The third position on the first page obtains 8.47%
The fourth-placed position on page one receives 6.05%
The others on the first page are under 5% of click-through traffic
The first ten results (page one ) received 89.71% of all click-through traffic,
The next 10 results (normally listed on the second page of results) received 4.37%
The third page receives a total of 2.42 %
The fifth page receives a total of only 1.07%
All other pages of results received less than 1% of total search traffic clicks
This is extremely important because if you are able to get your website listed high on Google search, you will get much more traffic to your website. The downside is that it is very competitive to get to the top organically. With paid advertising, you have additional levers to work with. For example, if you have more budget, you have a better chance of getting to the top.
Should You Run Google Ads as a Realtor?
Here is the million-dollar question. Should you as a real estate agent run Google Ads as part of your digital marketing plan? The answer is it depends. There are many factors to consider before running Google Ads for your realty business because, at the end of the day, there is a cost associated with this (and it may not be cheap).
Generally, the first question you need to figure out is what your overall strategy and goals of running Google Ads are. Are you like some of the agents in my screenshot above that are looking to drive traffic to a landing page for new pre-construction to capture leads? Are you looking to drive traffic to your personal website to build brand awareness? Without a clear understanding of strategy and goal, it will be highly unlikely you can achieve positive ROI.
Is Your Website Optimized for Lead Capture?
If you think about it, there is really no point in spending any money on Google Ads if your website cannot convert visitors to leads because the ROI will just be negative. What is the point of driving 1M visitors to your site if you can’t capture any of their information to convert them to leads?
Therefore before running any Google Ads, you need a good assessment of whether your website has a good user experience design. What does that mean?
Does it do a good job guiding visitors through your value proposition/offering and ultimately entices them to complete a form to give you their personal information?
Does it do a good job illustrating your personal brand? A study shows that 88% of people will not return to a site if their first impression is bad. The last thing you want is to spend money to drive a million visitors to your website to ultimately give them all a bad impression.
ROI of Google Ads
We’ve created a simple calculator that projects the estimated ROI to help you decide if running Google Ads is a good fit for you. Simply leave a note below in our contact form and include `Google Ads Calculator` to get access!
ROI= Profit / Cost of Investment
Profit = Revenue (From Commission of Unit Sold) - Cost of Investment (Google Advertising Expense)
The revenue is standard; it’s your estimated unit cost sold x your commission percentages.
The cost of investment has more moving variables and really influences whether it’s worth it to run Google Ads. First of all, we need to understand how Google Ads charges you for your advertising.
It is on a cost per click (CPC) basis (X$ per click) and there are different factors that affect this cost, such as the competitiveness of the keyword you are bidding for. This cost is not fixed but you can use Google’s keyword planning tool to obtain an estimated avg. CPC.
Secondly, we need to take into account analytics from your realty business, whether it's estimated from prior knowledge/experience or through analytics tools.
Lead to Customer - The first number we need to determine is your lead to customer conversion rate. In other words, you need to know of the leads that you contact our reaches out to you, how many of them can you close. Why? This number will ultimately dictate how many leads you’ll need to drive from your advertisement.
Visitors to Lead - The second number will be from your website analytics tool. Of the visitors that visit your website, how many of them give you their personal information? Why? Because every visitor you get from Google Ads cost money. The lower your conversion rate here means the more you need to spend to get enough leads to make one sale which ultimately affects your overall ROI. For example, if your current conversion rate is 0%, even with an infinite amount of money won’t get you a lead.
These two levers dictate the ROI and need to be thoroughly understood before running any Google Ads. Though MUDAVEN can’t help you with lead to customer conversion rate (since it’s really your ability to close a deal), we can definitely help you increase visitor to lead conversion rate through thoughtful user experience design.
Get in touch below and put in the description `Google Ads Calculator` and we’ll share with you the calculator with adjustable parameters based on your personal profile.
At MUDAVEN we help our clients become successful through digital marketing, user experience design, and data analytics. We can help you further assess whether Google Ads make sense for you as well as do a full user experience audit of your website to identify improvement opportunities. Don’t hesitate to reach out today for a free assessment today!