Pay Per Lead vs Pay Per Click: Which Costs Less Per Job?

With pay per click, you bid in an ad auction and pay when someone clicks. Google puts it simply: cost per click bidding “means that you pay for each click on your ads” (Google Ads cost per click definition). The click only gets someone to your landing page. From there, your page has to turn the visit into a call or form, and your team has to turn that lead into a booked job.

That makes pay per click a two stage cost. Your cost per lead equals your average cost per click divided by your landing page conversion rate, and your cost per booked job divides that again by your booking rate. You control both stages, which means the risk and the room to improve both sit with you.

With pay per lead, a vendor runs the ads, websites or directories and bills you when an inquiry reaches you. The price may be fixed by the vendor, chosen by you or set by an auction. Google Local Services Ads work this way inside Google: you're “charged for each valid lead you receive through your Local Services ad” (How leads work), and a bid there is “the most you'd pay for a lead” (How bidding works for Local Services Ads).

The vendor absorbs the cost of clicks and visits that never become inquiries, and it has to cover that cost and its own profit from the price you pay. What you get for that price depends on the vendor's lead definition, which might be a form fill, an answered call over a set length, a booking request, or a lead that's also sold to other contractors, so two vendors charging the same price can deliver very different leads.

Say you have $5,000 a month to spend. For pay per click, say your average click costs $25 and 25% of the leads your page produces turn into booked jobs. For pay per lead, say each lead costs $125. Every number here is an assumption to show the math, and each row changes one assumption at a time.

At $25 a click, your landing page has to turn 20% of clicks into leads to match a $125 lead on price per lead. The pay per lead option loses its edge when the booking rate falls from 20% to 10%, which can happen when a vendor's definition lets in price shoppers or leads shared with other companies. Add any ad management fee to your pay per click spend before you divide, and add any setup fee or monthly minimum to your pay per lead spend. For the full contact, appointment and close rate chain and a plan for testing a vendor, see whether roofing leads are worth it.

Google says that when it determines clicks are invalid, it tries to filter them from your reports and payments so you aren't charged for them (Invalid clicks: Definition). A real homeowner who clicks, reads your page and leaves is a genuine click, so you pay for it. With pay per click, your budget buys visits and your page and phones carry the conversion risk.

A pay per lead deal has two prices: the one on the invoice and the one you pay after bad leads are counted. The definition of a billable lead and the rules for getting credit on bad ones decide the second number. Google's Local Services Ads rules make a useful example because they're public.

• Leads Google judges invalid or low quality aren't charged, and charged leads get reassessed over time and may be credited automatically, with credits applied within 30 days in most cases (About Automated Local Services Ads lead credits).
• Google “no longer supports credits for ‘job type not serviced’ and ‘geo not serviced’ leads,” so a lead for work you don't do can stay on your bill.
• Google's examples of leads that won't be credited include a valid lead received outside your business hours and a customer who was researching potential projects or prices.

Other vendors write their own rules. Before you buy, ask what counts as a lead, whether calls need a minimum length, how long you have to request a credit, what proof you need, and who decides disputed leads. The guide to lead refund terms and qualification rules has a fuller list of questions.

Google defines conversion rate as “the average number of conversions per ad interaction, shown as a percentage,” and gives the example that 50 conversions from 1,000 interactions is a 5% conversion rate (Conversion rate: Definition). For a contractor, the conversions that matter are calls and form submissions from real prospects.

Because cost per lead equals cost per click divided by conversion rate, your page affects cost per lead as much as your bids do. Say your clicks average $25. At a 5% conversion rate each lead costs $500, at 10% it costs $250, and at 20% it costs $125. Doubling your conversion rate halves your cost per lead at the same click price, while a vendor's lead price stays where it is no matter how good your website gets.

Start with the basics for a service business page: a headline that matches the search, a phone number that's easy to tap, a short form, and proof such as reviews and photos of real jobs. The paid search landing page brief covers what to plan before design starts. Count only real calls and forms as conversions, and bring booked jobs back into Google Ads with offline conversion tracking so your reports show which clicks became jobs.

Local Services Ads are pay per lead inside Google. Google's list of valid leads includes a text message or email from the customer, a voicemail, a phone call you answer and a booking request, all coming through the ad. There's no landing page stage, so your cost per booked job is the lead price divided by your booking rate, the same as any other pay per lead source.

The price comes from bidding. Google's bidding help page says that when similar local businesses bid on the same lead, “those bids determine how much the lead is worth,” and you can let Google get the most leads for your budget, set a target cost per lead, or set a maximum per lead. With a target, Google notes that “some conversions may cost more than your target and some may cost less” (About Target CPL bidding), so judge the average over a month of leads. For what moves that price, see Google Local Services Ads cost per lead.

• Start with pay per lead or Local Services Ads if you need calls soon and your website doesn't convert well yet. Answer every lead quickly, since a slow callback wastes a lead you've already paid for.
• Start with pay per click if you have a page that converts and call tracking in place, and you can give the account time to show which keywords turn into booked jobs. If you already run Google Ads and the cost per booked job looks high, a PPC audit can show whether the problem sits in the clicks or on the page.
• Run both if you can track each source separately, then shift budget toward the lower cost per booked job each month.

Before you pick one, put your revenue per booked job, job costs, qualification rate and close rate into the free lead cost calculator and compare its break even cost per lead with a vendor's price and with your cost per click divided by your conversion rate.