HVAC Demand Trends: November 2024 PPC Performance
NEW DATA SET CONTINUED
👋 Hey, Jon here! This week, we will analyze November 2024 PPC performance (Google and Microsoft Ads/Bing) month over month and year over year with a new, larger data set!
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As a refresher, here’s the final PPC performance data for October (updated with data from a larger sample size) with a +34% YoY change in spend:
Unique Leads: +49% (YoY)
Paying Customers: +35% (YoY)
Customer Acquisition Cost: $495.16 (-0.7% YoY)
Total Revenue Opportunity: +48% (YoY)
Closed Revenue: +56% (YoY)
ROAS Potential: 13.3x (+10% YoY)
ROAS Closed: 5.3x (+16.5% YoY)
Closed Revenue per Brand: $199,943
Average Spend per Brand: $37,925
This new and larger sample of brands continued its pattern of spending more on PPC in October 2024 compared to 2023, and it paid off, bringing in $3.53 million of additional closed revenue on ~$470,000 more in spend.
With that, let’s dive into November's performance! These are primarily HVAC companies, but some also offer plumbing / electrical services. This data includes all business units.
**PPC spend decreased 5.4% month-over-month, but increased 28% YoY. The businesses in this sample spent an average of $34,693 on PPC in November 2024 vs. $25,293 in November 2023.*
Unique Lead Volume Decreased by 7% Month-Over-Month But Increased by 23% Year-Over-Year
Note: There is some sample bias because all of these accounts use Searchlight’s attribution platform and have for over a year. The ability to dial in performance (operations and marketing strategy) with frequent accountability usually leads to more confidence in spending higher amounts when ROAS and other key metrics are quantifiable, known and trended.
With the new and expanded data set, we’ve seen a trend that these businesses have spent quite a bit more on PPC in 2024 than in 2023.
Each business spent an average $9,400 more in November alone, to be specific.
This sample is a diverse group of businesses managed by many different agencies, but a few companies in the sample spent as little as $500 in November (and got 10x+ ROAS, just low volume).
So, five figures of spend is not a requirement on PPC, but with high average spend, is PPC just getting more expensive and out of reach?
First, we can see that with a slight reduction in month-over-month spend (-5.4%), lead volume also decreased by 7%, and closed revenue decreased 5.5% month-over-month.
Unique leads, however, increased 23% year-over-year with a 28% spending increase.
And the following metrics are pretty astonishing when considering the additional cost:
+32% Booked Customer YoY
+22% Run Jobs YoY
+30% Paying Customers YoY
This doesn’t mean you have to spend more, but when measuring the impact of spending on key performance metrics (regardless of channel), you can adjust or shift budgets based on your business goals.
Let’s analyze how the increase in paid customers affected revenue performance 👇
Paying Customers From PPC Increased 8% Month-Over-Month and Increased 30% Year-Over-Year
The 30% YoY increase in paying customers resulted in over 900 additional paying customers, who spent an average of $2,876.
That’s nearly $2.6 million in additional revenue (sold AND closed)—$53,000 per brand—with a 5.6x return on investment for that additional spending.
So yes, while spend did increase, it doesn’t necessarily mean PPC was more expensive because more volume of revenue was generated and it was generated profitably at 5.6x ROAS.
We recommended aiming for at least a 4.5x ROAS because a 25% EBITDA business would need at least a 4x return to break-even and the extra 0.5x ROAS leaves room for some profit :)
Customer Acquisition Cost Decreased 13% Month-over-Month and Decreased 1% Year-Over-Year
In November 2024, it cost $429.77 to acquire a paying customer from PPC, down just 1% from the prior year.
It also cost $115 per unique lead this November versus $111 in November 2023, so there was a little more expense there.
Note: In this case, a unique lead is defined as a unique individual who contacted the business. These are not “qualified” outside of standard settings of 60-second or longer calls. The philosophy here is that you paid for that click, so even if it’s a junk lead, it is still factored into your cost.
On average, though, paying customers spent $140 more per ticket in November 2024 than in 2023, more than making up for the uptick in cost per unique lead.
When evaluating whether PPC is too expensive (or, again, any marketing channel), it’s essential to assess multiple KPIs because you can spot patterns your competition doesn’t.
Suppose someone else considers increasing customer acquisition costs or cost per lead but doesn’t consider that paying customers and average tickets rose more than making up for the increased cost.
In that case, that business might decrease spending on the channel.
But if you closely monitor your metrics and see that despite surface-level cost increases, the channels have been more efficient, you can gain a competitive edge by doubling down on a channel or strategy that’s being overlooked or scaring people off in your market.
Total PPC Revenue Opportunity Decreased 15% Month-Over-Month But Increased 14% Year-Over-Year
Month-over-month, there was a more significant drop off in Total Revenue Opportunity generated by PPC, with $4.44 million less in revenue opportunity compared to October (~$90,000 per business).
However, there was $2.5 million in additional revenue opportunity year-over-year, or ~$51,000 per brand.
ROAS Potential (the sum of open estimates, one per customer, sold revenue, and closed revenue divided by spend) ended at 11.9x in November.
For every $1 spent on PPC in November among these businesses, $11.90 of revenue opportunity was generated.
That’s down from $13.30 in October, but should rebound as the cold weather picks up.
Closed Revenue Decreased 5.5% Month-Over-Month But Increased 31% Year-Over-Year
PPC generated a 5.3x Return on Ad Spend (closed revenue only) for the businesses in this sample with over $43,000 more closed revenue generated than the prior year.
That’s $5.30 for every $1 spent, with $182,697 in closed revenue volume generated per business (vs. $139,586 in 2023).
53% of that closed revenue was from new customers.
Sold revenue was also up YoY to $49,484 vs. $30,694 in 2023, indicating a better start for December (let’s hope for some cold weather!).
Whether or not PPC is too expensive / getting expensive is up to you, your goals, and the metrics you are about. The same goes for other channels. Blanket statements (even from me) aren’t going to give you that competitive edge.
Being able to see the trends that others don’t in your market usually means going against consensus, so just keep that in mind, and I hope this data helps you do that.
To that point, one final note on Bing / Microsoft ads, since it doesn’t get much love or discussion:
In November, Bing generated 7% of closed revenue and 5% of the spending - this is worth monitoring for your business. Bing ebbs and flows, and typically generates 1/10th of the revenue volume as Google, but it does punch above its weight and some markets are much less competitive than others.
Keep an eye on Bing organic performance as a litmus test . . . if some revenue is coming in there, it may be worth a little spend on the paid side to see what happens.
Until next time . . .
-Jon