by Abhik Shome
If you have ever tried your hand at running a digital marketing campaign, it is vital that you learn about the importance of advertising metrics. Whether you are planning social media posts, running display or search ads, or even blogging, understanding advertising metrics can help you improve your performance dramatically.
So What Are Advertising Metrics?
Advertising metrics measure the progress of your ad campaigns and give you a crystal clear picture of where you are succeeding and what needs to change. Think of them as a navigation system for your business. Based on your ad performance data, you can double down on your successful advertising strategies and steer away from the failed ones.
However, there is a lot of confusion in the industry about which advertising metrics to track, why they are important, and how to calculate them.
This ultimate guide on advertising metrics will give you a clear understanding of 21 of the most important advertising metrics, and even equip you with handy ad metric calculators that you can use anytime to measure your campaigns.
Why Are Advertising Metrics Important?
Advertising metrics give you a clear perspective of what works and what does not. Here are three ways advertising metrics can help any business in marketing their product or service.
- Ad metrics help you create better ads and posts. This is because ad metrics help you to ascertain what kind of content is working well and what isn’t. You can use these metrics to create better ads and posts and to navigate away from the ones that don’t work.
- Online advertising metrics give you something to aim for as you can use them to set up a benchmark of ideal results. By recording how your stats are doing today, you can work towards improving tomorrow. They help you to plan ahead and form a basis on which to monitor and optimize your campaigns accordingly.
- Last but not least, advertising metrics help you to improve your ROI by helping you to create high-converting ads at lower prices. When you know what empirically works for you on social media (for example) and what does not, you can use that knowledge to create more appealing ads which perform better. In other words, advertising metrics reveal the psychology of your audiences and tell you what they like and what they do not. By understanding your audience, you can make better ads that achieve better performance for less money.
Now that we have established why advertising metrics are important, let’s go over and understand the most important ad metrics out there.
21 Online Advertising Metrics to Optimize Your Business
Here’s a list of 21 top online advertising metrics that you need to focus on to optimize your business for growth.
1) Conversion Rate [CR]
In the world of online advertising, a conversion is when someone completes a desired activity such as signing up for your newsletter or making a purchase. A conversion can be any action in fact, and just simply means a goal that you have. Your Conversion Rate tells you how frequently a conversion happens out of all the times it could happen.
Why Is Conversion Rate Important?
Conversion Rate is one of the most important online advertising metrics as it tells you if your marketing is on the right track. It tells you how effective your content is in driving actions. The higher your Conversion Rate, the more likely people are to convert after seeing an ad or piece of your content.
On top of this, in most cases the better your Conversion Rate, the lower your acquisition cost is for getting customers. Efficient marketing saves you money.
Also, the higher the Conversion Rate of your website the more traffic you are likely to get from Google, and therefore the more conversions you will end up with. This is because when a visitor converts they are interacting with your content (and thus lowering your bounce rate) which likely means higher rankings for your site on Google (see below).
Finally, small changes in your Conversion Rate can make a big difference to your bottom line. By testing different elements of your ads, posts, and web pages to optimise your conversion rate you can boost your revenue without increasing your costs.
Top Tip: Use Google Optimise with Google Analytics (both of which are free) to A/B test content on your site.
How Is Conversion Rate Calculated?
Conversion Rate is calculated by dividing the number of visitors that convert by the total number of users who visited your site/landing page.
Here is the formula for calculating the Conversion Rate:
Click to enlargeConversion Rate = (Conversions ÷ Clicks or Visits) x 100
Calculator: Use our Conversion Rate Calculator to determine if your content is converting effectively or not.
Conversion Rate Example: If you get 100 conversions from 5,000 clicks on an ad, then your conversion rate is 2%.
2) Lifetime Value [LTV]
Lifetime Value (or Customer Lifetime Value) is an advertising metric that indicates the total amount of revenue a business can expect from an individual customer throughout the entirety of your relationship with them.
Why Is LTV Important?
Customer Lifetime Value is important as a higher LTV signals more profit for your business. This is not just because you earn more from each customer, but also because it means you can spend more on each customer.
Let me explain.
Businesses need to spend money to get customers and acquiring a new customer is many times more expensive than retaining existing customers. So, the higher the lifetime value of each customer, the more worthwhile each customer acquisition is. And the more profit you make from each customer acquisition, the more money it makes sense to spend to acquire each new customer. Having a higher marketing budget not only means you can get more customers, but also that you will likely retain more existing customers – it’s a sort of upwards spiral.
This is why a higher LTV means more profits for your business for more than one reason.
Top Tip: If you want to see how much profit you make per customer, simply subtract your CPA from your LTV.
How Do You Calculate LTV?
Customer Lifetime Value is calculated by the following simple formula:
Click to enlargeLTV = Average Revenue Per User x Average Length of Relationship (in years)
Calculator: Use our LTV Calculator to work out how much your customers are actually worth to you.
LTV Example: If each user of your website on average buys one $100 product each year for 5 years before moving on, then your LTV is $500.
3) Return on Investment [ROI]
ROI means the amount of profit you earn from the amount of money you spend on a particular investment (such as an ad campaign).
Why Is ROI Important?
As an advertising metric, ROI is an exceptionally useful litmus test that tells you if a particular activity in your business is profitable or not. In other words, ROI shows which business activities (and the expenditure connected with them) are creating profits and which ones are not.
ROI is especially useful for online advertising as it focuses on profit rather than just revenue. This is especially useful for planning marketing budgets.
Top Tip: It’s almost impossible to capture the full amount an ad campaign or piece of content costs (as the hours worked on something can be difficult to measure). Therefore the key is to use a consistent measure so that your ROI is comparable across activities.
How Do You Calculate ROI?
The ROI equation is:
Click to enlargeROI = (Amount Gained – Amount Spent) ÷ Amount Spent
Calculator: Use our ROI Calculator to determine if your investments are profitable or not.
ROI Example: If you earned £300 from an ad and spent £100 on that ad, then your ROI is 200%.
4) Return on Ad Spend [ROAS]
ROAS tells how much revenue you earn back from the amount of money you spend. It is like a focused version of ROI which helps you think about the efficacy of a single channel or ad rather than an ad campaign as a whole.
Why Is ROAS Important?
The higher the ROAS, the better your advertising strategy is.
ROAS is important because it helps you evaluate and measure the performance of each part of an ad campaign and see which of them are giving the best returns on ad expenditure.
It is useful in a different way to ROI, as sometimes expenditures are associated with lots of different activities – meaning you should use ROAS instead of ROI. For example, if you are running a Facebook Ads campaign through an agency, the agency management fees would be factored into the campaign as a whole for the ROI of the campaign. However, to get the most out of individual ads and ad sets within the campaign, you could optimise ROAS to maximise the revenue within the campaign.
Top Tip: In Google Ads, ROAS is called Conv. Value / Cost.
How Do You Calculate ROAS?
To work out ROAS, use the following equation:
Click to enlargeROAS = Amount Gained From Ads ÷ Amount Spent On Ads
Calculator: Check out our free ROAS calculator that lets you quickly assess your return on ad spends.
ROAS Example: If you earned £300 from an ad and spent £100 on that ad, then your ROAS is 300%.
5) Bounce Rate [BR]
Bounce Rate is defined as the percentage of site visitors that leave your website without going to another page or performing a single action. Here an ‘action’ can refer to activities like clicking a link on the website, filling a form on the site, making a purchase etc.
Why Is Bounce Rate Important?
Bounce Rate lets you know how interesting your content is – it’s a sort of engagement rate for a webpage. The higher the bounce rate, the fewer people who find your page interesting. This is because if people leave a page without doing anything after it loads then it’s likely not engaging enough to drive them to go further into your site.
Bounce Rate is also important because it is a good indicator of one of the most important metrics used by RankBrain (a core component of Google’s algorithm). The main purpose of RankBrain is to better understand the search intent of users, so they can deliver better search results. So, if a user lands on your site from Google and goes back to the SERP immediately (AKA bounces from your site), it tells RankBrain that your site is not relevant enough. This can result in the demotion of your sites’ rankings on SERPs. Therefore a lower bounce rate (can) mean a higher ranking in Google search, and therefore bring more traffic to your site.
While RankBrain doesn’t use your bounce rate directly, your Bounce Rate is a good way of guessing what RankBrain thinks about how relevant your content is.
Top Tip: Some types of pages (such as contact us pages) only serve to provide information quickly, so a high bounce rate on these pages isn’t important. Sometimes the purpose of a webpage is simply to provide information and let someone leave again.
How is Bounce Rate calculated?
Bounce rate is calculated by dividing the total number of zero-interaction sessions by the total number of sessions to a website.
Here’s the formula for calculating Bounce Rate:
Click to enlargeBounce Rate = (Single Page Visits ÷ Total Visits) x 100
Bounce Rate Example: If 200 people enter a webpage, and 100 people leave without doing anything then you have a Bounce Rate of 50%.
6) Engagement Rate [ER]
Engagement Rate in online media generally means the percentage of times a piece of content was interacted with out of all the times it was seen. Here an engagement or interaction typically means clicking, commenting, expanding, liking, and sharing a piece of content or advertisement.
Why Is Engagement Rate Important?
Engagement Rate is a useful online advertising metric that shows you how well your audience is connecting with your brand and resonating with your content’s message.
It’s an important metric because simply cutting through the noise of all the content which people see on the internet is a big deal in and of itself. An engagement – any engagement – means that your content was at least seen and acknowledged (which a lot of content isn’t). More engagements mean more people are noticing what you are saying, and a higher engagement rate means that your content is hitting the right spots and creating interactions.
Top Tip: Engagement Rate is not measured the same way across different platforms. If you want to compare platforms, you should calculate and use this general form of Engagement Rate for all of them. We delve into the main other versions of Engagement Rate below.
How is Engagement Rate Calculated?
Engagement rate is calculated by taking the no. of engagements out of no. of impressions and then multiplying it by 100.
The engagement rate equation is:
Click to enlargeEngagement Rate = Engagements x 100 ÷ Impressions
Calculator: Use our free Engagement Rate Calculator to determine if your social campaigns are forging a relationship with your audiences.
Engagement Rate Example: If your blog post has 1,000 visitors and 250 of them then you have an engagement rate is 25%.
7) Facebook Engagement Rate
Facebook Engagement Rate is a social media metric that shows the rate at which your audience interacts with your Facebook content. Now, the engagement rate which Facebook uses is a little bit more nuanced than how other platforms calculate engagement rates.
Most platforms calculate engagement rate as the number of engagements divided by the number of times a particular content was seen.
Facebook takes a different approach from other platforms as it measures engagement rate by dividing the number of people who engaged with the content by the number of people who saw that content (multiplied by 100 to get a percentage).
Why Is Facebook Engagement Rate Important?
Facebook has become one of the biggest platforms for marketers (both for organic and paid social), and it uses Engagement Rate to help it decide how often to show posts. Therefore understanding how Facebook’s unique Engagement Rate works can make a big difference to your marketing efforts.
The Facebook engagement rate tells you how well your content is connecting with your target audience. Other engagement rates show how interesting content is, while Facebook’s version shows how many people are interested in your content. It shows the volume of people connecting with your brand as a high Facebook Engagement Rate translates to more people interacting with your Facebook content.
A great Facebook engagement rate tells you that your content is creating a high level of interaction with your audience. It indicates that your content is on the right path as audiences find it interesting.
Top Tip: Facebook has made it difficult to find your Engagement Rate. Use our Facebook Engagement Rate guide to add it to reports you can download from them.
How Is Facebook Engagement Rate Calculated?
The Facebook Engagement Rate equation is:
Click to enlargeFacebook Engagement Rate = (Engaged Users x 100) ÷ Total Reach
Calculator: Use our free Facebook Engagement Rate Calculator to quickly determine the engagement rate of your Facebook Posts.
Facebook Engagement Rate Example: If your Facebook post received likes from 25 people, was shared by 15, and was seen by 400 people, then your Facebook Engagement Rate is 10%.
8) Instagram Engagement Rate
Instagram Engagement Rate is an unofficial social media metric that calculates the percentage of likes and comments an Instagram account gets on its posts compared to the number of followers the account has.
Since this metric looks at how engaged *all followers* of a particular Instagram account are, it is actually factoring in the algorithm of the platform (which no other form of Engagement Rate does). This is because the Instagram algorithm will (generally) not show every post from an account to everyone who follows that account, so by including *all followers* the effect of the algorithm is factored in.
Why Is Instagram Engagement Rate Important?
Instagram Engagement Rate is used to see the efficacy of Instagram influencers while embarking on an influencer marketing campaign.
Instagram Engagement Rate tells you how much the audience of a particular account cares about the posts from that account. It is a great litmus test to see how invested the followers of a particular account are. This data helps you in selecting the right influencers for your brand.
Top Tip: Choose a limited time to calculate this form of engagement rate. This is because the number of followers an account has changes over time. So if you judge an account’s old posts for engagement rate, it would naturally be low due to the account having fewer followers at that time. This would not fetch an accurate engagement rate for the account. A better practice will be to pick the past 7 days to judge the engagement rate.
How Do You Calculate Instagram Engagement Rate?
There is no ‘official’ engagement rate measure on Instagram. There are three possible ways that they measure it – find more about each one and when to use it by looking here.
For this ultimate guide to advertising metrics we are talking about the one which agencies use to judge Influencers here – Method 1:
Click to enlargeInstagram Engagement Rate = (Likes + Comments ÷ Total followers) x 100
Calculator: Use our Instagram Engagement Rate Calculator to quickly determine how your Instagram accounts are performing.
Instagram Engagement Rate Example: If you have 10,000 followers, and your posts over the past 7 days on average had 450 likes & comments (combined) then your Instagram Engagement Rate would be 4.5%.
9) Twitter Engagement Rate
Twitter Engagement Rate is a social media metric that measures the number of people who engaged with a tweet (liked, retweeted, replied, or clicked on it for any reason) out of the total number of times the tweet was loaded on a Twitter feed.
In other words, the Twitter engagement rate measures your tweet’s engagement divided by the number of impressions that tweet has received.
Why is Twitter Engagement Rate Important?
Twitter Engagement Rate is an important advertising metric as it showcases the level at which your content is connecting with your audiences. Twitter is more about the straightforward testing of messages than other social media platforms, so the Twitter Engagement Rate is especially useful to improve your community and brand-building efforts.
In other words, It shows how well your content can create a relationship with your audiences and drive reactions from them.
You can study the engagement rate of your various tweets and sift the best-performing ones to see what aspects of it are working for your brand. Next, you can simply double down on these aspects and create higher engagement for your brand.
Twitter engagement rate can be a useful metric to calculate engagement for a single tweet or for a whole account. This kind of metric is useful when crafting ads and even for general tweets, as it tells you what kind of tweet works well with the audiences.
Top Tip: Twitter engagements include clicks anywhere – including on hashtags. Don’t include too many in your tweets!
How Do You Calculate Twitter Engagement Rate?
The Twitter Engagement Rate equation is:
Click to enlargeTwitter Engagement Rate = (Engagements ÷ Impressions) x 100
Calculator: Use our Twitter Engagement Rate Calculator to determine how much your Twitter communication is in alignment with your audience’s needs and wants.
Twitter Engagement Rate Example: If your Tweet has 20 likes, 15 retweets, and 400 impressions then your Twitter Engagement Rate for the Tweet is 8.75%.
10) LinkedIn Engagement Rate
LinkedIn Engagement Rate measures the number of people who interacted with a LinkedIn update (through commenting, sharing, clicking, or following your page through it) divided by the total impressions that LinkedIn update received.
In simple terms, LinkedIn engagement rate is a social media metric that measures the number of people who engaged with a LinkedIn update from the number of times that LinkedIn post was seen on a LinkedIn feed.
Why Is LinkedIn Engagement Rate Important?
Similar to Facebook and Twitter, LinkedIn engagement rate is a great metric to understand if your content is aligning with the interests of your customer. The big difference is that LinkedIn is much more important for B2B businesses. LinkedIn engagement rate tells you if your content is driving or motivating interactions from your target audience.
LinkedIn’s engagement rate is also more accurate than that of Twitter or Facebook, as impressions are only counted when a post is actually on-screen. This means that only when someone has a chance to engage with an update is that chance actually recorded.
You can use this metric to measure the performance of your various LinkedIn updates. The ones with a higher LinkedIn engagement rate will be the kind of content that resonates more with your audience. Use this metric to double down on such content pieces and boost your reach on LinkedIn.
Top Tip: LinkedIn recommends tagging people in your posts to increase your engagement… but don’t do this as it’s just incredibly annoying.
How Do You Calculate LinkedIn Engagement Rate?
The LinkedIn Engagement Rate equation is:
Click to enlargeLinkedIn Engagement Rate = Engagements x 100 ÷ Impressions
Calculator: Use our LinkedIn Engagement Rate Calculator to determine the rate at which your content is appealing to the interests of your target audience.
LinkedIn Engagement Rate Example: If your update has 14 link clicks, 6 shares, and 800 impressions, then the engagement rate is 2.5%
11) Open Rate [OR]
Open Rate is the percentage of people who opened an email out of all those who received it.
Why Is Open Rate Important?
Open Rate is an important email marketing metric as getting people to open your emails is the first level of engagement for email marketing.
More than this, emails have the advantage over other digital media of getting someone’s full attention once they are opened. While an ad on social media (for example) is competing with everything else on the screen, once someone has opened an email your message is all they can see. This is one of the reasons why email is still one of the most powerful forms of digital marketing, and why improving your open rate can have a huge effect on your conversion rate.
Top Tip: Open Rate isn’t to do with the content of the email. You can optimise it by changing the time you send your email, and by optimising the subject line, preview snippet and even by the frequency of your emails.
How Is Open Rate Calculated?
To work out your Open Rate, you can use this equation:
Click to enlargeOpen Rate = (Opened x 100) ÷ Delivered
Calculator: Use our Open Rate calculator to see how convincing you are at getting your emails read in the first place.
Open Rate Example: If you successfully send an email to 1,000 people and 400 of them open it, then that email has an open rate of 40%.
12) Cost Per Acquisition [CPA]
Cost Per Acquisition (or Cost Per Action) and is an advertising metric that measures the cost of getting a conversion from an ad. It can also be used as an ad pricing model where you only pay when a conversion occurs.
Why Is CPA Important?
Cost Per Acquisition is an important advertising metric as it determines how much it costs your business to acquire a sale, and thus gives you a clear financial perspective about the efficacy of your current strategy.
At the end of the day, every business has to care about the bottom line. CPA is one of the most critical advertising metrics as it shows if your current strategy is effectively working to improve your profits by showing you how much each sale is costing you. By reducing your CPA you increase your profits. It is a very simple, yet effective advertising metric.
Top Tip: To plan the budget for a Facebook ad campaign you’ve never run before, use 50% of your target CPA per day (so if it’s running for 10 days and the CPA is £10 then budget £50). This is a good way to test what Cost Per Result you are likely to get on Facebook.
How Do You Calculate CPA?
The equation to work out your CPA ads is as follows:
Click to enlargeCPA = Ad Spend ÷ Conversions
Calculator: Use our CPA Calculator to assess the amount of money you have to spend to get a conversion or sale.
CPA Example: If you spend $500 on an ad campaign and it gets 100 conversions, then your CPA is $5.
13) Facebook Cost Per Result
Facebook’s Cost Per Result is an online advertising metric that shows how cost-efficiently you achieved the results you set for during your ad campaign. It is Facebook’s version of CPA, but covers a much broader set of goals than CPA as it can include anything your advertising is aiming for (such as video plays, or brand uplift).
In other words, Facebook’s Cost Per Result shows the amount it cost you to get a unit of your desired result via your ad campaign.
Why Is The Facebook Cost Per Result Metric important?
Facebook’s Cost Per Result is useful to quickly see how cost-efficiently you reached your objectives via your ad campaign. You can use Facebook’s Cost Per Result metric to compare various campaigns and see which one performed better in terms of lower costs to achieve various results.
This advertising metric can help you determine a bid for future ad sets. It is also very convenient simply because it allows you to see and compare all of your results within a single column in Facebook Ad Manager.
Top Tip: While it is convenient to have all these metrics in one column, they are generally not directly comparable. The cost of a click is always going to be less than the cost of a purchase.
How Do You Calculate Facebook Cost Per Result?
The Facebook Cost Per Result equation is:
Click to enlargeFacebook Cost Per Result = Results ÷ Total Amount Spent
Calculator: Use our Facebook Cost Per Result Calculator to quickly get a better understanding of how your Facebook campaigns are doing.
Facebook Cost Per Result Example: If your Facebook Ads campaign costs you £1,000 and gets you 250 leads, then your Facebook Cost Per Result would b £4.
14) Cost Per Click [CPC]
CPC is an online advertising metric that measures the amount of money each ad click costs.
If you are using the CPC (or PPC) ad pricing model, then you will spend money every time your ad is clicked on. While you can set the CPC price, it is usually determined by real-time bidding algorithms – which is a type of auction for ads. This means that your ad is chosen based on its Quality Score (see below) combined with the amount it’s willing to pay, and your ad then pays the minimum CPC possible based on this combination.
Why Is CPC Important?
CPC advertising can be a good starting point when launching your first ad as it is so easy to understand – you pay for each click. There is no attribution model behind it, and no quibbling about results – you pay for each click.
Running ads on a CPC basis can also be a good testing ground for an ad’s effectiveness to see if users are compelled enough by your message to click. Once your ad passes the CPC test, you can shift to a CPM model.
Also when considering your digital marketing as a whole, your ROI will (at its most basic level) depend on how much you are paying for clicks, and what kind of quality you are getting for that investment.
Top Tip: CPC is used interchangeably with PPC (Pay Per Click). There is no difference between the two phrases.
How To Calculate CPC?
The Cost Per Click equation is:
Click to enlargeCPC = Cost ÷ Clicks
Calculator – Use our CPC calculator to assess how your CPC campaigns are performing, as well as how much you have to pay for clicks.
CPC Example: If you buy 350 clicks for $175 then your CPC is $0.50.
15) Cost Per Thousand [CPM]
CPM is a widely used online advertising metric that stands for the cost for mille (mille is Latin for 1,000) and is the amount you spend on each set of 1,000 impressions.
What Is An Impression In CPM?
There are many types of impression. An impression in CPM is registered every time an ad or post is loaded. For example, every time an ad on a webpage loads, it is counted as 1 ad impression.
In other words, CPM is the cost per 1,000 views of a particular ad. This is completely different from pay per performance-based models where one pays based on a particular action like clicks, sign-ups. With CPM advertising you are simply paying for ad space, and the level of performance has no effect on the cost.
Why Is CPM Important?
CPM is a great indicator of the cost-effectiveness of different campaigns where the goal is to reach as many people as possible. The campaign with the lowest CPM is the most efficient as it requires less money to reach 1000 people.
Top Tip: CPM advertising is mostly useful for branding campaigns. For campaigns with a more tangible goal, use CPA advertising.
How Do You Calculate CPM?
To work out the CPM for an ad campaign, use the following equation:
Click to enlargeCPM = (Ad Spend ÷ Ad Impressions) x 1000
Note: When calculating the CPM for a campaign that did not use CPM as it’s ad pricing model, it is technically called an eCPM, but it is calculated in exactly the same was as CPM.
Calculator: Use our CPM calculator to determine how your CPM campaigns are doing, or to compare the cost of impressions for different advertising models.
CPM Example: If you buy 50,000 ad impressions for £300 then the CPM you paid is £6.
16) Click-Through Tate [CTR]
CTR is an online advertising metric that measures the number of clicks that something receives out of the number of impressions it had.
Simply put, the click-through rate is the percentage of users who see a particular ad or piece of content and click on it.
Why Is Click-Through Rate Important?
Click-through rate is important as it is effectively the most simple form of engagement rate, with the only engagement counted being the one that matters the most – link clicks. It can show you if your content is interesting enough to both get people’s attention and get them to click on it.
In Google Ads, it also relates to your Quality Score (see below). Since users are clicking on the ad, it demonstrates to Google that it is relevant to them. This increases your Quality Score, and a better Quality Score means your ads are shown more and will have a lower cost per click (and therefore also a lower cost per conversion).
CTR is also very important in Google Search. While CTR itself is not a ranking factor, having your search results clicked on will indicate to Google that they are relevant to a specific search. And so CTR is, therefore, a reasonable way for you to measure how well your search results are performing, but more importantly to measure the effect of any improvements you make to your meta title and meta description.
Top Tip: CTR is a great measure… if you don’t have better measures available. If your goal is conversions, focus on your Conversion Rate instead.
How Is CTR Calculated?
The CTR equation is:
Click to enlargeCTR = (Clicks x 100) ÷ Ad impressions
Calculator: Use the CTR Calculator to determine how interesting your ads are.
CTR Example: If your ads get loaded 60,000, and results in 1,500 clicks then your CTR is 2.5%
17) Quality Score [QS]
Quality score is a Google Ads metric that rates your keywords and ads based on their relevance to the end-user.
Why Is Quality Score Important In Advertising?
Quality Score is combined with CPC to decide how often your ad is shown in Google Ads. An ad that is high in quality and relevant for the end-user, gets a higher Quality Score – which essentially means that Google thinks that people are likely to click on it.
Google Ads algorithm is intended to make Google the most money possible, and so by combining Quality Score and your CPC bid, it works out which ads to show.
For example, a poor ad that has a very high CPC bid may get shown a lot as even though people are unlikely to click on it as when a click does occur it earns Google a lot of money. Similarly, a great ad with a low CPC bid may get shown a lot as it will get clicked frequently and so earn a lot of money overall despite the low revenue per click.
This makes improving your Quality Score a vital factor in saving yourself money when running Google Ads.
How Is Quality Score Calculated?
As Quality Score is calculated internally by Google, no one knows the exact weightage of factors that determine it. We do know however that Quality Score depends on multiple elements, which are:
- The click-through rate of your ad is considered by far to be the biggest factor in determining your ad’s quality score. This is because, when a higher rate of people see your ad and click it, it tells Google that your ad content is relevant to the end-user.
- The relevance of keywords to your ads.
- The relevance of keywords to your landing page.
- The relevance of your ads to your landing page.
- Your previous Google Ads performance.
Top Tip: Quality Score does not appear as a metric you can actually view in Google Ads. Facebook’s version (Quality Ranking) however is available as a column.
18) Cost Per View [CPV]
CPV is an advertising metric focused on video-based advertising. which shows you how much each video view costs you. It is also an ad pricing model where a payout is initiated every time the ad has a view.
Why Is CPV Important In Advertising?
With the rise of videos on social media platforms, video ads are one of the most effective way to communicate your brand message to consumers.
CPV is one of the most critical metrics in video advertising, as it tells you how much each view is costing you in your marketing campaign. With videos having such a strong branding effect, simply getting people to watch your video (instead of skipping) is often a big win for advertisers.
Top Tip: As a view is only counted after a minimum amount of a video is watched, this makes CPV closer to a CPC measure than CPM as you are only paying for actual results.
How Is CPV Calculated?
The equation to work out Cost Per View couldn’t be simpler:
Click to enlargeCPV = Cost ÷ Views
Note: For a view to be triggered in skippable ads platforms like YouTube, a video has to be watched for a minimum of 30 seconds.
Calculator: Use our CPV calculator to plan and optimize the cost of your next video ad campaign.
Cost Per View Example: If you pay €700 for your video to be watched 21,000 times then you are paying a CPV of €0.03.
19) Cost Per Lead [CPL]
CPL is an advertising metric used for lead generation to work out how much each lead costs you. It is also an ad pricing model where you payout each time your ad generates a lead. It is essentially a focused version of the CPA metric.
For example, in Facebook Ads, you can have an ad that when clicked opens a form that gathers someone’s contact details. This person has indicated that they are a “lead” – as in someone who is a potential customer, and the CPL price is what you have paid to get their contact information.
Why Is CPL Important?
CPL informs you whether your ad campaign is cost-effective or not when it comes to generating leads for your business.
CPL as a metric tells you how much budget should be allocated to spend on acquiring a set number of leads for your business. It assists in giving your campaign a financial perspective and direction to work on. For many businesses, leads are the starting point of all sales, so benchmarking and improving your CPL is vital to improving your bottom line.
Top Tip: As only a percentage of leads turn into sales, this needs to be taken into account when working out a target CPL.
How Do You Calculate CPL?
The CPL equation is:
Click to enlargeCPL = Cost ÷ Leads
Calculator: Use our CPL Calculator to work out and improve the cost-effectiveness of leads for your business.
CPL Example: If you get 300 leads from an ad campaign that costs €600 then your CPL is €2.
20) Cost Per Engagement [CPE]
CPE is an advertising metric that helps you understand how much each engagement has cost you. It is also an ad pricing model where the payout is initiated when a user/audience engages with an ad. Here an engagement is counted when an interaction with your ad takes place. An engagement usually includes actions such as clicking, liking, sharing, or expanding content.
Why Is CPE Important?
Engagement is becoming one of the core metrics when measuring the success of social media ad campaigns. Paying for engagements can be a great way to initially find an audience receptive to your message (ie in the Awareness stage of advertising).
Optimizing for CPE makes your ad creatives better. This is because a better engagement experience calls for better creatives.
So when you focus on improving your CPE, you are forced to rethink your creative and rearrange the copy and visuals for better engagement. This in turn can lead to an overall improvement in brand messaging.
Also, optimizing for CPE improves your brand’s recall value as audiences recall ads that they have engaged with.
Top Tip: If you are buying CPE advertising make sure you know what counts as a click before you get started. Some platforms count anything as an engagement, including muting a video or closing an ad.
How Do You Calculate CPE?
The equation for Cost Per Engagement is:
Click to enlargeCost Per Engagement = Amount Spent ÷ Engagements
Calculator: Use our CPE Calculator to understand how much each interaction by users is actually costing you.
Cost Per Engagement Example: If you spend $750 boosting a post and it received 15,000 engagements then your CPE would be $0.05.
21) Page RPM
Page RPM is the amount of money a website makes per 1,000 page views from advertising. RPM stands for Revenue Per Mille (with mille being Latin for 1,000).
Why Is Page RPM Important?
As is shown from all the metrics above, advertising payment models come in all shapes and sizes. Therefore it is vital to cut through the noise and be able to see exactly how much money you are earning from running ads on your site. RPM is different from CPM in that between an advertiser paying and a website being paid all sorts of services need to take their cut.
Top Tip: Knowing how much advertisers are paying for your site is interesting, but knowing how much you will actually be paid is actually useful.
How Do You Calculate Page RPM?
This is the RPM equation you can use:
Click to enlargeRPM = (Ad Revenue x 1000) ÷ Impressions
Calculator: Use our Page RPM Calculator to understand how much money your website can earn you.
Page RPM Example: If you earned £800 from 50,000 page views then your Page RPM would be £16.
22) Bonus Advertising Metric – Value for Money [VfM]
Value for Money is an online advertising metric developed here at The Online Advertising Guide that solves the problem of having to optimise towards both CPC and CTR simultaneously by combing them into a single metric. It is a handy metric that measures how much CTR you will get per $1 you spend on clicks.
Improving your VfM has a twin-pronged effect of improving both the CTR and CPC. By optimising towards it you will get the most high quality clicks possible for the least money.
Why Is The Value for Money Metric Important?
The Value for Money metric reveals the campaigns that will give you maximum returns. Focusing on VFM instead of CTR will mean you get the highest click-through rate, for the lowest CPC, as VfM is calculated using both these metrics.
Top Tip: You can add VfM directly into Google Ads by clicking on Modify Columns, then going down to the Custom columns section.
How Do You Calculate VfM?
The Value for Money metric can be calculated by the following simple formula:
Click to enlargeVfM = CTR ÷ CPC
Calculator: Use our Value for money calculator to optimise your Google Ads.
VfM Example: If you have a CTR of 5% and CPC of $9 then you have a VfM of 0.56%. This means that if you had a CPC of $1 then your CTR would be 0.56%.
The Next Step
I hope you liked our list of the most important advertising metrics. Tweet us at @AdGuider anytime to share your key takeaways. We would love to know which ad metric is the most important according to you.
Also, if you want to assess and calculate different advertising metrics, you can simply use any of our free advertising calculators here. Use these tools to assess your marketing campaigns, and make more profitable decisions for your business.
About the Author – Abhik Shome
Abhik Shome is an award-winning B2B Content Marketer and SEO specialist. He uses cutting-edge conversion tactics, proven advertising strategies, and forward-thinking SEO to make beginner blogs become thought leaders in their niche. He is the founder of The Starting Idea, a marketing magazine that ranks for over 2100 keywords on Google worldwide. His content has been seen in mainstream publications like Inc. Magazine, Business Insider, and YourStory, among others, garnering over 1 million views worldwide. He is recognized in the industry for his in-depth guides, nuanced SEO tactics, and usage of the latest marketing technology to create industry-leading blogs that generate thousands of leads. If you have questions regarding content marketing or need help scaling your product, simply DM him on LinkedIn here.