Just like the world of digital advertising channels, the array of metrics available for analyzing performance is convoluted and abbreviation-heavy. In this blog, we will attempt to mimic the recently provided overview of digital advertising channels and provide an entire list of digital KPIs relevant to their usage by platform, and campaign type or medium, whilst endeavoring to ensure you understand which metrics are priority and which are secondary to evaluating the ROI of your digital advertising spend. Let's jump right in with the priority metrics!
Action-Based Metrics
Cost Per Click (CPC) - High Priority
CPC is a very important metric for Search Ads because it is literally what you are paying the platform (Google or Microsoft) for each click you attain in a given time period. Naturally, the lower you can attain a CPC, the lower the potential cost per sale or cost per conversion, which are two of the most important campaign metrics across the advertising platforms. CPC is a vital metric when managing your Search Ad budget effectively and ensuring you're not overspending on any keywords. Click for an Overview of Search Ads.
CPC can also be reviewed on other platforms like Meta Ads or Video Ads but carries much less importance as the payment criteria are based on impressions, not clicks, i.e. how many times your ad was served rather than how many clicks your ad garnered.
Cost Per Conversion or Cost Per Acquisition - High Priority
Cost per conversion informs us of how much each conversion cost by dividing the total ad spend of your campaign by the number of conversions it generated. A conversion here is subjective to your business; if you are an e-commerce brand, this could be cost per sale, and if you are not e-commerce, this could be any desired action that you want the user to take after clicking your ad, e.g. a form fill on your website or signing up for a newsletter. This can also be referred to as cost per acquisition or even cost per sale (in e-commerce only, where revenue can be easily attributed to campaigns).
Cost per conversion is the most important metric to gauge regardless of platform or campaign type, i.e. whether you are reviewing Search Ads on Microsoft, a retargeting dynamic ad on Meta, a promotional banner ad on Display, or a video ad on YouTube, your most evidenced metric for evaluation is cost per conversion. This metric pales in weight when reviewing branded or top of funnel campaigns where your goals are more impression and engagement related however the bulk of your advertising appraisal will boil down to cost per conversion.
Work tirelessly with your marketing team to ensure that the conversions being tracked, across your digital marketing campaigns, are the most relevant ones available and then ensure you are receiving breakdown reports by channel and campaign of ad spend and cost per conversion. If your advertising partner is struggling to identify, implement, and report on custom conversions, you will struggle to ever truly improve your advertising efforts. |
Return on Ad Spend (ROAS) - High Priority
For e-commerce brands, ROAS measures the gross revenue generated for every dollar spent on advertising. You can calculate it by dividing the revenue attributable to ads by the cost of those ads. ROAS is a direct measurement of the effectiveness of your ad campaigns in generating dollars - not just clicks or conversions. Coupled with cost per conversion, ROAS gives you a clear view of your ad spend profitability. A positive ROAS indicates that your ad investments are paying off, while a negative ROAS might require you to rethink your strategy.
Customer Acquisition Cost (CAC) - High Priority
CAC determines the total average cost to acquire a new customer, including all aspects of marketing and sales. It's a vital health check metric for the sustainability of your business model. To calculate CAC, sum up the costs of your marketing and sales efforts over a given period, then divide by the number of new customers acquired in that period.
Keeping CAC in check is crucial - you don't want the cost to obtain a customer to eclipse the customer's lifetime value (CLV).
Customer Lifetime Value (CLV) - High Priority
In juxtaposition to CAC lies the CLV, an estimate of the total value your business derives from a single customer. It forecasts how valuable a customer is to your company over the entire duration of their relationship with you, not just the first purchase. Why does this matter? If you know your CLV, you can determine how much you should be willing to spend on acquiring customers (CAC) and maintain profitability.
Shopping Cart Abandonment Rate - High Priority
Shopping Cart Abandonment Rate is a crucial e-commerce metric that measures the percentage of online shoppers who add products to their shopping cart but leave the website without completing the purchase. Reducing shopping cart abandonment often involves optimizing the checkout process, providing transparent information about costs, offering guest checkout options, and implementing remarketing strategies to re-engage users who abandoned their carts. How to Experiment with your E-Commerce Website to Increase Sales.
Awareness & Engagement Based Metrics
Beyond the more immediate, conversion-focused metrics, your assessment of campaign performance will often require understanding broader metrics of brand awareness and engagement. Keep in mind that Display Ads and Video Ads both offer low click-through-rates but still leave a marked impression on the user, prompting action but not in the immediate. Think about when you last, if ever, clicked a Display Ad or Video Ad online? This doesn't mean they lack value, it is a derivative of the platforms they exist on and the intent of the user at that time. If you have a strong marketing setup, you may be able to track the performance of these campaign types with view-through metrics like view-through-cost-per-conversion but ultimately you will still have insights across your digital marketing by understanding the following metrics.
Impressions, Ad Reach & Frequency (Med Priority)
Impressions count the the times your ads served in a specified time period while ad reach denotes the unique viewers. These metrics offer little value regardless of platform or campaign type but can be calculated to define frequency. Ad Frequency serves as a measure of the consistency of your ad's appearance to each unique viewer. The balance here is important; too infrequent, and your brand fails to make a lasting impression, too frequent and the viewer might tire, experiencing 'ad fatigue'. This is a very important consideration for remarketing where your audience pool will often be markedly lower than prospecting pools. Learn everything you need to know about remarketing with our in-depth article.
Engagement Rate - Low Priority
Engagement Rate is a metric used to measure the level of interaction and involvement that users have with a particular piece of content or a digital marketing campaign. It is often expressed as a percentage and is calculated by taking the total number of interactions (likes, comments, shares, clicks, etc.) on a piece of content and dividing it by the total reach or impressions, then multiplying by 100 to get a percentage. A higher engagement rate is generally considered positive, as it signifies that the content is resonating well with the audience and generating meaningful interactions. Learn More About Creating Video Ads for Higher Engagement Rates.
Video View Rate (VVR) - Med Priority
The Video View Rate (VVR) is a metric that measures the percentage of users who watched a video compared to the total number of impressions (what is counted as a view is subjective to the advertising platform, e.g. Meta Ads counts 3 seconds of viewing as a view while YouTube Ads requires 30 seconds). This metric provides insights into the video's ability to capture attention, as a higher VVR indicates that a significant portion of the audience chose to view the video after being exposed to it.
Video Completion Rate (VCR) - High Priority
Given different view methodologies on different platforms, Video Completion Rate (VCR) is a more unified metric that gauges the percentage of viewers who watched a video to its completion. This metric is crucial for assessing the video's ability to retain audience interest until the end. A high VCR suggests that the content is engaging and compelling, encouraging users to watch the entire video. Here are some tips on creating engaging video content.
Average Video Watch Time - High Priority
Despite your best efforts, don't expect to see exceptionally high VCRs. Hence, the start of your video is always the most important sequence to make an impression. Average Video Watch Time is an important metric for video as it measures the average duration viewers spend watching a video. It helps assess the content's overall engagement level and viewer interest. Longer watch times often indicate that the video resonates with the audience, holding their attention throughout the duration. Also, understanding where the sharpest drop off is allows you to potentially optimize the video itself. Keep in mind that most of the drop off should occur once the user is given the option to skip the video ad, on YouTube, but utilize exit data patterns aside from this for better understanding of what video enhancements could exist.
Cost Per Mille (CPM) - Med Priority
CPM stands for "Cost Per Mille" or "Cost Per Thousand," where "Mille" is the Latin word for one thousand. CPM is a common pricing model used in digital advertising, particularly for Display and Video Ads. It represents the cost an advertiser incurs for their ad to be displayed one thousand times to users. Advertisers typically use CPM to compare the relative costs of advertising on different platforms or with different targeting options. It's important to note that CPM doesn't guarantee user interaction with the ad; it simply represents the cost of reaching a thousand potential viewers.
Viewable Impression Rate - Med Priority
Viewable Impression Rate measures the percentage of ad impressions that are considered "viewable" to users and is of most importance with Display Advertising. An impression is counted when an ad is loaded and appears on a user's screen, regardless of whether the user actually sees or interacts with it. The industry standard for a viewable impression is often defined as an ad that is at least 50% visible on the screen for a minimum of one second. However, these standards can vary, and advertisers may use different criteria based on their goals. Monitoring the Viewable Impression Rate is crucial for advertisers who want to ensure that their ads are being seen by their target audience. Low viewability rates may indicate issues with ad placement, creative elements, or the overall user experience on the website.
In the fast-paced realm of digital advertising, understanding your marketing's key performance metrics is important. Even if you rely on the expertise of an outsourced agency or have an internal marketing team, as a business owner, you still need to have ownership of your marketing. However, truly deciphering the metrics and leveraging them effectively requires expertise. That's where Seamount Marketing comes in. We offer a thorough digital advertising audit that takes a deep dive into your advertising performance. Our audit will provide you with a comprehensive understanding of the metrics, insights on your advertising campaign's performance, and actionable recommendations to enhance your ROI. So, why wait? Book your digital advertising audit with Seamount Marketing today and embark on a journey to success in the digital advertising landscape.
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