Google Ads Math for MSPs and Web Hosting

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Many MSPs and web hosting companies I talk to are intrigued by Google Ads. But they may have had a bad previous experience that left them feeling like their campaigns weren’t worthwhile — that Google took their money without giving much back. Which begs the question, how do you calculate the ROI of a Google Ads campaign for an IT service provider anyway? The basic math is pretty straightforward:

  1. Cost Per Click / Conversion Rate = Cost per Lead
  2. Cost Per Lead / Close Rate = Cost per Acquisition

Let’s look at each of these variables with estimates for what MSPs and web hosters may expect to see.

Cost Per Click

For Web Hosting, you can probably expect a CPC between $2-$4 from Google Ads campaigns. You may achieve a lower CPC for long tail keywords that incorporate keywords related to geography terms (i.e. “Vancouver dedicated servers”) or keywords related to technology supported (i.e. “windows VPS servers”). More generic search terms (i.e. “shared hosting” or “dedicated servers”) will be more expensive and may exceed $4 CPC.

For MSPs, you can expect a CPC of $10-$15. Similarly to web hosting, you can get a lower CPC by using long tail keywords incorporating geography terms and technology terms (i.e. “Vancouver managed IT” or “cloud backup services”). For MSPs, you can also incorporate industry-specific keywords (i.e. “it services accounting”).

You can help lower the cost per click by setting up your campaign in a nuanced manner such that the content of the ads pertains to the search terms being bid on. Also by having landing pages that are relevant to the search inquiry; so if you’re bidding on accounting related searches, try to send users to an accounting industry page. Or if you’re bidding on geography related searches, send users to a landing page that references the particular municipality. These tips will help improve the quality score which in turn lowers the cost per click.

Conversion Rate

Once someone has clicked your ads, the conversion rate is the % of the time that users visit your landing page and do what you want them to do.

For Web Hosting, you can expect a conversion rate of 2.0-3.0%.

For MSPs, you can expect a conversion rate of 2.5-5.0%.

Increase conversion rate by sending users to a landing page that is relevant to the search inquiry and is optimized for conversions. It should demonstrate credibility with testimonials or customer reviews (i.e. social proof). Ideally the landing page will be specific to the geography, technology, or industry of the search terms. It should be focused on a singular call-to-action, usually filling out a contact form for MSPs or IaaS, or clicking a buy now button for web hosting. Otherwise the landing page shouldn’t have external links or other distractions.

Close Rate

For most IT service providers, you can expect a close rate between 25-33%.

This means that 25-33% of leads generated will close for MSPs and IaaS. You can increase this % by responding quickly to leads and by having a polished sales process to nurture leads through the sales funnel.

For web hosting, around the same 25-33% who click buy now and enter your shopping cart will actually purchase. You can increase this % by making it easy to complete a purchase and remarketing to those who abandon cart.

Cost Per Acquisition

Based on the numbers we’ve identified in this blog, we can estimate the cost per acquisition. For MSPs, the most pessimistic estimate to acquire a new customer with Google Ads is: $15 per click / 2.5% conversion rate = $600 per lead / 25% close rate = $2400 per acquisition. While the most optimistic projection is $10 per click / 5% conversion rate = $200 per lead / 33% close rate = $600 per acquisition.

For web hosting, the pessimistic projection is $4 per click / 2% conversion rate = $200 per buy now initiated / 25% close rate = $1000 per acquisition. The optimistic projection is $2 per click / 3% conversion rate = $66.67 per buy now initiated / 33% conversion rate = $200 per acquisition.

This is a very large range. It highlights the importance of having a good website, good landing pages, and a polished sales process to get the numbers working in your favor. It also is important to consider the products being promoted and the expected value of a customer. For instance, for MSPs, paying $2400 to acquire a good longterm client is likely to have a positive ROI, but it wouldn’t be worthwhile for a break/fix project. And for web hosting, paying $1000 to acquire a long term customer with multiple dedicated servers may have a positive ROI, but it wouldn’t be worthwhile for shared or VPS hosting.

Interested in seeing if Google Ads is a good option to grow your MSP or web hosting company? Contact us today.

About the Author:

As eBridge’s VP of Operations, Devin Rose brings marketing expertise and an entrepreneurial knack to the eBridge team. Devin holds a Bachelor of Commerce Degree from Royal Roads University and a Marketing Management Diploma from the British Columbia Institute of Technology.

Posted November 21, 2023
Categories: Advertising and Marketing General