If you’re in digital advertising, or want to impress someone who loves digital advertising, or simply show those pesky digital marketers that you know how to read those reports too, you need to know the lingo.
Fortunately, we’re here to help.
This primer should be useful to anyone who wants to figure out a few metrics that matter most at the top, middle and bottom of the funnel.
There are dozens of other metrics we didn’t cover here, but we’ll save some of the fun for later.
Top of Funnel metrics
Impressions: The total number of times an ad is displayed to users. Impressions measure the reach of an ad campaign and can be a large number, but it says nothing about ad effectiveness. In general, higher is better. But you won’t wow anyone with just a high impressions number.
Cost Per Thousand Impressions (CPM): The cost of showing an ad 1,000 times. The ‘M’ stands for ‘mille’ (because digital advertisers love their Latin). CPM is commonly used in brand awareness campaigns to measure the cost-effectiveness of reaching audiences.
Clicks: The number of times your ad is clicked by users. No surprises there (we hope).
Click-Through Rate (CTR): The ratio of clicks to impressions, expressed as a percentage. CTR is a better measure of ad effectiveness. It measures how many people clicked on an ad after seeing it. High CTRs are almost always a good thing, but need to lead to conversions for them to deliver outcomes. It’s the digital equivalent of people walking into a shop – no use if they aren’t buying anything.
Cost Per Click (CPC): The amount an advertiser pays each time a user clicks on their ad. CPC helps advertisers understand the cost efficiency of their campaigns and oftentimes. Low CPCs are a thing of beauty for performance marketers, who often swoon with delight at reducing them.
Conversion Rate: The percentage of users who complete a desired action (such as making a purchase or filling out a form) after clicking on an ad. This metric helps assess what users do next after an ad has engaged them. High conversion rates are great. The watch-out here is quality of conversions – are you getting junk or valid conversions? Ain’t an MQL if it’s junk.
Middle Funnel Metrics
Total new users: The number of first-time visitors to a website or app within a specific time period. The higher this number, the better – more people want to see what all the fuss is about.
Unique users: The total number of distinct individuals who visit a website or use an app over a certain period. If unique users are far less than total users, it means you have a small number of people coming back over and over again. Something’s wrong with your campaign – back to the drawing board.
Bounce rate: The percentage of visitors who land on a website and leave without taking any further action, such as clicking on other pages, scrolling, or filling out a form. Or just instantly going back. That’s like someone turns up for your party, looks inside, says ‘Nope’ and leaves.
Cost per landing page visit: The cost incurred by an advertiser for each user who visits a specific landing page as a result of an ad campaign. Divide the total cost of the campaign by the number of landing page visits generated to get this.
Frequency: The average number of times a user is exposed to an ad over a given period. No one likes to see the same ad over and over again. It’s important to avoid both underexposure (no one is seeing/remembering your ad) and overexposure (ad fatigue). It’s like placing a stone on a floating leaf – just right.
Bottom Funnel Metrics
Cost Per Acquisition (CPA) and Cost Per Lead (CPL): The average cost of acquiring a customer or lead through a digital ad campaign. Calculated as the total amount spent on the campaign divided by the total number of conversions/leads. Lowering this number is another swoon-worthy goal for performance marketers.
Customer Lifetime Value (CLV): The total revenue a business can expect from a customer over the entire duration of their relationship. CLV helps advertisers understand the long-term value of acquiring customers through specific campaigns. If you’re at the point where you’re able to reliably measure CLV, you’ve nailed attribution, tracking and data analysis.
Return on Ad Spend (ROAS): A metric that calculates the revenue generated for every dollar spent on advertising. The higher your ROAS, the better your ad campaign’s performance. If you had to choose one metric to obsess over, it’s this.
Ensuring you’re measuring the right metric for the right purpose is a critical part of getting digital advertising right. The metrics that you need to focus on depends on the campaign, the data and an analysis of what’s working and what’s not.
