If you find yourself in the PPC world then you will often hear about Key Performance Indicators. These metrics measure your campaign’s performance against your business objectives and are very important in order to fully understand the level of effectiveness of your marketing efforts.
There are different levels of KPI’s and it all depends on your business goals and the possibility of actually providing the business information needed in order to calculate certain metrics, mostly when it comes to ROI.
Impressions represent the number of times your ad has been displayed on a web page.
Clicks are the number of times someone clicked on your ad. Most online advertising campaigns are considered pay-per-click, which means you only pay when someone clicks on your ad. The click is counted and charged regardless of the functionality of your landing page.
CTR represents the percentage of clicks divided by impressions. For example if you have 5 clicks and 100 impressions your CTR would be 5%. There’s no ideal CTR as it is influenced by market trends, quality score and budget, however the strive is to get the highest possible CTR for your market.
Cost shows the total amount of your budget spent by your PPC campaigns during a specific period of time ( hour, days, weeks, months, years)
Average CPC is the average amount that you have been charged for a click on your ads. The formula for the avg. CPC is total cost of clicks divided by total number of clicks. The avg. CPC benchmark depends on your industry.
Average Position shows how your ad ranks against other ads participating in the same auction and it appears in between two whole numbers. For example if your average position is 1.5 that means that your ad is ranked on the first page of Google in the 5th position.
Conversions represent the total number of desired actions performed by a user on your website coming from an ad. Conversions are tracked based on your business goal and it includes everything from an app download, a quote request, an email signup, a phone call, an online sale, a view of a key website page and any other action that you might consider valuable.
Click Conversion Rate tracks how many of your ad clicks turned into a conversion. This metric sometimes help advertisers understand if the landing pages are use friendly and fast.
Cost/Conversion is also known as CPA. In the case of e-commerce websites on which we can determine if a user has purchase a product/service we refer to this metric as cost-per-acquisition. In all other cases when it cannot be realistically valued it represents the cost-per-action.
Total Conversion Value is the sum of all conversions value for all conversions. This metric is very helpful when assigning a monetary value to each conversion. In the situation when you have an e-commerce website and each product/service is valued differently then total conversion value can easily help you determine your total online revenue coming exclusively from ads.
ROAS(%) or return on ad spend measures how many dollars you will receive for every dollar you spend on your advertising campaigns. It might appear as a percentage or whole number depending on your report. The formula of calculating ROAS is ( revenue – cost/cost).
Return on Investment calculates the actual return on your investment is possibly one of the most important metrics both marketers and business owners should explore. When calculating this metric one should look at several business data such as revenue and cost of goods sold.
The online marketing world is very fortunate to be able to have free access to important data that helps both marketers and business owners get to know their audience and identify new improvement opportunities. Hopefully, you can now understand better the importance of the metrics and why it’s vital to include them in reporting as much as possible.