How To Measure Ad Performance

Advertising is an important part of a business’ marketing strategy, and once you’ve invested in ads, it’s essential to measure how effectively your ads are working.

This comes down to the fact that measuring your ad performance helps you to determine what’s working well and what needs to be improved on.

There are many metrics you can use to measure your ad performance. These metrics include, but are not limited to:

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1. Click-through-rate (CTR)
2. Cost-per-acquisition
3. Conversion rate
4. Cost per thousand (CPM)
5. Cost-per-click (CPC)

1. Click-Through-Rate (CTR)

The first way you can measure your ad performance is through click-through rate. In short, click-through-rate is the ‘number of clicks advertisers receive on their ads per number of impressions’.

Generally speaking, a good click-through-rate is 5 to 20%. Both analysing and keeping track of your click-through-rate helps to give you a better idea of how well your ad is being received by your target audience. 

In the same breath, a low CTR could help you to establish whether you are attempting to target the wrong audience with your ad.

There are various ways to improve your click-through-rate, such as including a direct call to actions (CTA). Personal and clear CTAs help you to prompt your audience and carry out the desired action, thus helping to drive up your CTR. 

Measuring your click-through-rate, then, helps you to better understand your target audience and reveals what works when you’re trying to reach and resonate with your customers.

2. Cost-Per-Acquisition

Another useful metric that can be used to measure ad performance is cost-per-acquisition.

Cost-per-acquisition ‘measures the total cost to acquire one paying customer’, and the ideal CPA you should be aiming for as a business is around 3 times lower than Customer Lifetime Value.

In other words, CPA is the total marketing cost divided by the number of new customers. Bearing this in mind, if you spent £1000, and gained 100 customers, your cost-per-acquisition would be £10.

The main factors that impact your CPA are both your conversion rate and cost-per-click.

By measuring and monitoring your cost-per-acquisition, you can determine the effectiveness of your advertising efforts, how cost-effective your ads are, and what you can improve on in future campaigns.

3. Conversion Rate

The next metric you can use to measure your ad performance is conversion rate.

In short, the conversion rate 'the percentage of visitors to your website that complete a desired goal (a conversion) out of the total number of visitors'

It’s not enough to receive a high volume of traffic if the majority of that traffic is failing to convert. When you consider that ‘80.68% of retail shoppers abandon purchases after adding items to their cart’, it’s evident how important it is for businesses to find ways to drive conversions. 

Using Google Analytics to analyse and track your conversion rate as a business can help you to refine your marketing strategies, helping you to turn website traffic into paying customers.

Through these tools, you can highlight whether your ad is falling short in terms of driving results.

4. Cost Per Thousand (CPM)

You can also measure your ad performance through cost per thousand (CPM).

Cost per thousand, also known as cost per mille, is a marketing term ‘used to denote the price of 1,000 advertisement impressions on one web page’.

Cost per thousand relies on impressions, which is essentially the number of views or engagements with a specific ad, and is arguably the most popular method for ad pricing.

Say an advertising platform charges £10 CPM. As a result, you will have to pay £10 for every 1000 impressions that your ad receives.

CPM is important to be aware of because it will determine how much money you’ll need to pay for every 1000 impressions. That said, CPM can depend on the media channel that you’re advertising on. For instance, Facebook ‘tends to be higher’ than Instagram. 

By measuring CPM, you can use the results to determine the effectiveness of the various media channels you choose to advertise on, helping you to get the most out of your ad spend.

5. Cost-Per-Click (CPC)

Lastly, you can measure your ad performance through cost-per-click (CPC).

CPC is a metric that determines how much you’ll pay for your ads, based on the number of clicks an ad receives.

Advertising platforms generally require a minimum bid, also known as the minimum you are required to pay when someone comes across your ad from a keyword you're bidding on.

Advertisers bid on certain keywords they believe will drive customers to their ad.

What Is A Reasonable Cost-Per-Click?

This depends, as it is generally determined by your target ROI. That said, for the majority of businesses, a 20% cost-per-acquisition would be perceived as reasonable.

From here, you can calculate CPC by simply dividing the cost of an ad campaign by the number of clicks.

By measuring your CPC, you can establish how well an ad is performing and it can help guide you in choosing lucrative keywords for future ad campaigns.

We are Aura Ads, a unique performance creative agency designed for D2C eCommerce brands. We help clients sell more online and grow at scale with our bespoke video and static creative, delivered on a monthly basis. For more tips and tricks from our experts, head over to our blog page. Check out some marketing automation use cases.

Written by Jemima Thomas for Aura Ads.

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