5 Pay Per Click Metrics All PPC Managers Should Know

Calculate PPC Metrics

Calculate PPC Metrics

Dollars are shifting online at an aggressive rate and more and more advertisers are beginning to understand the value of advertising online for one reason – the completeness of data and ability to measure ROI down to the penny. Pay Per Click marketing specifically is one of the only advertising mediums that can give you a fairly accurate representation of how many eyeballs see your ad (via impressions), and it’s the only form of advertising that can regularly associate a user behavior with an advertising placement.
With all of that data and all of that analytic potential it can quickly become confusing when acronyms related to a specific calculation begin to be thrown around as commonplace. In addition to PPC For Hire’s newly added SEO and PPC glossary, here is a simple guide to the most common calculations:

Click-through Rate (CTR)

How to Calculate It: Clicks divided by impressions
What It Tells You: What percentage of the time an ad display leads a user to your site; which types of ads are most relevant and most stand out to searchers on a SERP
What It Doesn’t Tell You: Whether your ad enticed a user to click or not click through to your website; whether your clicks were the result of well-crafted ad language, or simply due to aggressive bidding
Best Used For Evaluating: Quality of your ad text
Who It’s Most Useful For: A new or re-focused website focused on bringing in new traffic; Sites primarily interested in branding or exposure

Cost Per Acquisition (CPA)

How to Calculate It: Total spend divided by total conversions
What It Tells You: Your average cost for each conversion; how much you are spending for each sale, lead, or site registration
What It Doesn’t Tell You: Depending on the conversion, whether the acquisitions are actually improving or can be expected to improve your bottom line; whether you’re bringing in new customers, or simply generating repeat conversions from site loyalists
Best Used For Evaluating: Effectiveness of your bidding strategies
Who It’s Most Useful For: Site owners operating on a limited budget, seeking to exploit only the most efficient of keywords

Conversion Rate (CVR)

How to Calculate It: Total conversions divided by total clicks
What It Tells You: The frequency with which ad clicks are leading to a desired user action such as a lead, page view or sale
What It Doesn’t Tell You: Whether mid-to-low ad position is effectively leaving your site under-exposed and as a result losing impressions
Best Used For Evaluating: Quality of your selected landing pages and purchase funnel
Who It’s Most Useful For: Business-to-business sites seeking to bring in a large number of prospective clients at the start of a long sales funnel

Average Sale (Avg. Sale)

How To Calculate It: Revenue divided by total sales
What It Tells You: Which keywords are bringing in the largest cart order sizes and which ad language is most conducive to bringing in high-spending customers
What It Doesn’t Tell You: Whether the high-ticket sales correspond to high profit-margin items; how much you’re spending for these high-revenue purchases
Best Used For Evaluating: Whether or not your ad text speaks to the potential large-revenue consumer
Who it’s Most Useful For: Experienced e-commerce site owners seeking to tweak ad language or landing page selection to drive campaigns to peak performance

Return on Investment (ROI)

How To Calculate It: Net revenue divided by net advertising spend
What It Tells You: How much benefit you are getting for the money you are spending; in theory, all you need to know
What It Doesn’t Tell You: Whether this ratio is the best way to evaluate your campaign’s success, or whether you are over-focusing on a ratio rather than on the bottom line
Best Used For Evaluating: The interaction between all elements of your online campaign
Who It’s Most Useful For: When calculated properly (taking into account every aspect of campaign revenue and potential revenue), ROI is relevant to all website owners
There are countless metrics with which you can analyze your paid search campaign’s success and many vary dramatically by industry. With a solid pay per click campaign and the utilization of these common metrics, however, you can start to see opportunities and successful campaign start to emerge.

What metrics have I missed? Are there other specific metrics you use when evaluating your campaigns?

Be sure to check out our additional free pay per click tools!


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