Are your paid advertising campaigns profitable?
Surprisingly, a lot of managers struggle with being able to answer this question. Being able to accurately report on the success and ROI of a paid advertising campaign is one of the most important pieces of running a paid advertising campaign. If you can't calculate your ROI, then you may be wasting your time, money or other resources.
That said, we know there's a ton of data being reported in your Google and social media ads accounts, so we're here to help you break through all of that extra noise and focus on the metrics that really matter, which will tell you right away if your paid advertising campaigns have been a success or not.
1. Quality Score
A Quality Score is just as it sounds: it's a score given to rate the quality of your ads. Coded on a 1 - 10 scale, it rates the quality of your ads and landing pages for each keyword in your account. There are a few factors that affect your Quality Score:
- The click-through rate (CTR) of the keyword and its ad;
- The relevance of the keyword to your ad
- The quality of your landing page
Having a high Quality Score is important, as it's what Google uses to determine not only how much you pay per click, but also what your ad rankings are.
If you're confident in your keywords and landing pages but your Quality Score is still coming in low, Google has some tips to help you improve your ad quality and make your ads more relevant.
2. Click-Through Rate
The click-through rate can be calculated by taking the total number of clicks, and divide that by total impressions, then multiply by 100 (CTR = (clicks/impressions)*100). Your CTR is a true indicator of how relevant your ad is to search queries, and is one of the factors Google takes into account when calculating your Quality Score.
If you have a low CTR on an ad, it may be a sign that your keyword, ad format, or ad creative (or a combo of all three!) may need some adjustments.
3. Cost Per Click
While budgets and bids are specified when setting up a PPC campaign, it's rarely ever that cut-and-dry. Due to the nature of the bid process, competing advertisers may cause your bid price to increase, thereby increasing the overall cost of putting up the ad, and the clicks that that ad generates.
The cost per click (CPC) calculation is simply the total cost of a campaign divided by the number of times an ad was clicked in that campaign.
4. Conversion Rate
The conversion rate is the the money metric, as this is the one that tells you how many people clicked your ad, and then went on to complete the action desired of your landing page -- which could be signing up for a free quote or free trial, completing a contact us form, or making a purchase.
The conversion rate is usually the metric that Marketing teams care about the most, because it's the ultimate truth teller of how well your ad and landing page work together to make a user complete an action.
5. Cost Per Conversion
A strong conversion rate means that the money you're spending on a paid advertising campaign is worth it, and that you're achieving a successful return on investment...as long as the cost per conversion (CPC) also makes sense. The ultimate defining factor of a successful or failed campaign is the CPC, which is calculated as the total spend of the campaign, divided by the total conversions (Total Spend/Total Conversions = CPC).
If this cost per conversion is higher than the money made off the actual conversion, then that means you're spending more on obtaining a customer than what the customer is actually worth... and that you're at a loss. If this is the case, then your campaign could be considered a failure, and a return on investment definitely not achieved.
You'll be able to find and track all of these metrics within your Google Adwords, Bing Ads, or social media advertising platforms, and they will be able to help you improve the success of future paid advertising campaigns.