What Does VfM Mean?
If you are unable to track conversions for your ad campaign, there is a simple way to combine both CPC and CTR into one easy to use metric. We at The Online Advertising Guide call this the Value for Money metric (or VfM) which is just CTR divided by CPC.
The point of this metric is to combine CTR and CPC, so by dividing CTR by CPC you come out with one single number – for which the higher the value the better. This is because:
- an increase in CTR will increase the VfM (it is the number being divided – 3 fruit split between 2 people is better than 1 fruit split between 2 people)
- a decrease in CPC will increase the VfM (it is the number being divided by – 3 fruit split between 2 people is better than 3 fruit split between 5 people).
What Is Your VfM?
Basically whatever your VfM comes out as is the amount of CTR each dollar (or pound or whatever currency) is buying you. So if you get a VfM of 1.5 then spending $1 will mean a 1.5% CTR.
This can be useful to work out where your money is best spent. Working to improve a VfM as opposed to a CTR, will mean that you get the highest click-through rate, for the lowest cost per click.
In most cases, however, it does not mean that increasing your CPC will actually increase your CTR. It is a useful measurement, not a setting!
VfM = CTR ÷ CPC
Advice for Ad Buyers
To optimise your campaign using this metric you simply need to run a report on all ads/keywords/sites (it can be used on any set) then divide your overall CTR by your overall CPC. Remove any results which have served less than 1,000 impressions (as that is our recommended minimum level of significance), and then switch off any ads/sites/keywords which have a VfM lower than the overall level.
As you may have realised, this will allow higher CPCs to continue running – but only if they are performing at a proportionally better rate than your average. For example, an average CTR of 0.1% and CPC of £0.20 comes to a VfM of 0.5, which would allow for a CPC of £0.40 and a CTR of 0.2%. Although the CPC is double what you are paying elsewhere, it is also providing clicks at double the rate and therefore strongly implies it is the better value.
You can add VfM as a metric to Google Ads so you can use it to directly optimise your Campaigns, Ad Groups, Ads, and Keywords. To do this:
- Go to any view where you can see results (apart from Overview), and click the Columns button on the right-hand side above the table of results.
- Click “Modify columns”:
- Choose “Customised Columns” and the bottom of the list and then choose “+New Column”
- Create the VfM column (or metric depending on how you look at it). Fill in the fields as follows and it should look like the image below:
- Name the metric (I call it VfM as it’s short and a long name will mess up your Google Ads view)
- Add a description – this is so that you can remember why you did this, so write a note for yourself
- Add the formula in. Google Ads will help you as it has built-in auto-completes. So if you start typing CTR then a small dropdown will appear with CTR as a choice.
- Change the “column format” to Percent (%). This is so that you can remember it is CTR you are affecting with your CPC.
- Click save
- Now it’s time to add VfM to a set of custom columns. To do this:
- Check the box next to “VfM”. This adds it the “Your Columns” list on the right-hand side (at the bottom of the list)
- You can drag and drop metrics into a new order in the “Your columns” list and this is the order they will appear in left-to-right on the page.
- OPTIONAL – I highly recommend saving your column set (with a name including your initials), so you can easily find it again.
Once you’ve done all this you will be able to see VfM on any metrics page.
Unfortunately, this measure only implies that results with higher VfMs are better – only conversion data can make that certain. However, a higher CTR will in most cases mean better-placed ads being shown more often (it does on Google Ads), which is a good thing anyway.
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