The digital landscape is always changing. In the last two decades, we've seen a massive shift from traditional advertising like billboards, radio, and TV to dynamic online campaigns. With this shift comes a bunch of new metrics to understand.
New to digital advertising? Start here!
This guide is for anyone new to digital marketing. Here, we break down the ten digital advertising metrics that all marketers have to know.
1. Reach, Impressions, & Frequency
Definition
Yes. I know that we’re cheating by including three terms in the first bullet. These terms are important and they all work together. Reach is the total number of unique users that have seen your advertisement. Impressions are the total number of times your advertisement has been seen in general. Frequency is the number of times a user has seen your ad on average. We determine the frequency by dividing total impressions by total reach. Clicks and engagements don’t have any effect on these metrics.
Why it matters:
These three metrics give you a picture of the visibility of your campaign. We use these metrics to decide if we should change targeting based on campaign performance.
2. Clicks
Definition
The number of times a user clicks on your advertisement.
Why it matters:
Clicks are a direct measure of the initial engagement and interest in your advertisement. It’s an indication that the viewer wants to know more.
3. Click-Through Rate (CTR)
Definition
The percentage of impressions that result in a click. It's calculated as (Clicks ÷ Impressions) x 100.
Why it matters:
CTR helps to gauge the effectiveness of your ad. A higher CTR often indicates a more relevant or compelling ad.
4. Conversion
Definition
When a user takes a desired action after clicking on your advertisement. This could be making a purchase, signing up for a newsletter, downloading an app, etc.
Why it matters:
Conversions are the end goal for most campaigns. They indicate that your ad not only attracted attention but also drove the user to act.
5. Conversion Rate (CVR)
Definition
The percentage of clicks that result in a conversion. Calculated as (Conversions ÷ Clicks) x 100.
Why it matters:
CVR measures the performance of your website or landing page after a user has clicked. A higher CVR signifies that your ad is targeting the correct users, and sending them to a page with a good user experience.
6. Cost Per Click (CPC)
Definition
The average amount you pay each time a user clicks on your advertisement.
Why it matters:
CPC helps advertisers understand the cost-effectiveness of their campaigns. It's crucial for budgeting and optimizing ad spend.
7. Cost Per Thousand Impressions (CPM)
Definition
The cost of 1,000 impressions. It's a measure of how much you're paying to display your 1,000 times.
Why it matters:
CPM gives insight into the cost-efficiency of your campaign's reach, as well as the competitive landscape. It's especially relevant for brand awareness campaigns where impressions are a primary goal.
8. Return on Ad Spend (ROAS)
Definition
A measure of the revenue generated for every dollar spent on advertising. Calculated as (Revenue from Ad Campaign ÷ Cost of Ad Campaign).
Why it matters:
ROAS helps determine the profitability of an ad campaign. A ROAS greater than 1 indicates that your campaign is generating more revenue than it is costing the business.
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9. Cost per Aquisition (CPA)
Definition
The CPA outlines how much it costs (in ad dollars) to acquire one transaction through your store. Calculated as (Cost of Ad Campaign ÷ Number of Conversions).
Why it matters:
You need to make sure you are at least spending enough to drive conversions. At a minimum, we recommend spending at least 2x your CPA each day.
10. Average Order Value (AOV)
Definition
Your AOV tells you how much the average purchasing user is spending in each transaction. Calculated as (Revenue from Ad Campaign ÷ Number of Conversions).
Why it matters:
The AOV helps you understand where your CPA needs to be as a media buyer. The higher your AOV, the more you can afford to spend to acquire that purchase!
Understand Your Metrics
These digital advertising metrics are key to assessing the success of your campaigns. You have to regularly monitor and analyze these numbers. You'll need to adjust your strategies as necessary to maximize your advertising ROI.
Remember, while these metrics are essential, the most effective campaigns resonate with the audience on a deeper level. Always strive for genuine connection, relevancy, and value in every advertising campaign you create.