Key Metrics and Performance Index
Updated: Mar 29, 2019
To reap most of the benefits of the digital marketing it is very important to understand the dimensions and metrics properly. In our previous article we discussed in length various digital marketing strategies that can be applied to your business for lead and revenue generation. But if you don't know how their performance is measured and tracked, how would you analyse their results? This is precisely what we will discuss in this article.
An impression is counted as one when an ad is visible on a website. Now there are three stages on measuring a valid impression.
1. Served impression: When an ad is sent to a publisher by an SSP, but the ad is not yet rendered or downloaded on the user's device, it is called served impression.
2. Downloaded impression: When the publisher initiates an ad retrieval, the ad starts getting downloaded on the user's device, and the ad is available on the website.
3. Viewable impression: It must be noted that the ad can appear in any part of the website, which means if it appears to the portion of the website but is not seen by the user, it is a non viewable impression. Nowadays, advertisers are giving lot of importance to calculating the viewable impressions because that's what matters the most.. You spend money to show ads to the audiences, but if they are not able to see it, it is a wasted investment. When it comes to display ads, your ad should be at least 50% viewable for 1 sec and for a video ad, it should be at least 50% for 2 sec. Anything lesser than that is considered a bad quality impression. To see how viewablity is measured in any website click here.
Another simple but key measurement is the number clicks generated by an ad. When an ad is being created during the testing phase, make sure that your tag is clickable. All the areas of it should be clicking through and taking you to the destination url. The destination url or the landing page is the part of the website you want your users to go to after seeing the ad. So, whenever an ad is trafficked, all ads should always have a click url/destination url/landing page.
A video ad performance can be tracker by the number of views of certain portion of the video. Now there are various types of video ads which we will cover in the next article. If you are calculating view of an open exchange video, then viewing a complete video will be considered a full view, but when you are calculating view in a true view ad, viewing 30% of the video will be counted as a view.
Conversions are the measure to evaluate your ultimate goal you want to achieve from your website. This of course differs from business to business. If you are an automobile company, your conversion would be to calculate number of people who desire to do test drives in your designated showrooms. If you are selling products online, your conversion would be the number of sales you generate when a consumer buys a product. If you are a credit card or insurance company, your conversion might be number of user clicks on "Learn More" button and number of email addresses entered in the "Contact Us" form. When you set your conversion goal, you can calculate your KPI.
Cost or Spend
The amount of money you are willing to spend to run a campaign is called the ad budget. Once the budget of the campaign is decided, the amount you spend daily on it is called spend. It is important that you keep track of your spend to understand how much more or less are you willing to spend everyday. Is your money being spent in the right areas? Are you reaching the relevant audiences? Is you money being spent to the best performing attributes of the campaign? These are some of the important questions you need to ask yourself while running a campaign.
The amount of money you get through a sale of your product or services while running the campaign is called revenue. It is important you keep a track of the revenue to know how many transactions have happened and how much.
KPI - Key Performance Index (aka performance goals or benchmarks)
Key performance index is a scale to measure the performance of your campaign. As a marketer you might have more than one performance goals and you can prioritize these based on what you want the most. Getting to know the right KPI is very important because you will measure your campaign success based on these goals. Ideally CPA shoulb be your primary KPI and CTR can be the secondary. Also KPI goal differs by industry, by devices and types of ads used. CTR for native ads run at 0.5% to 2%, while CTR of standard banner runs at 0.08%. CTR on mobile is generally at 0.12% while it is 0.04% for desktop. CPA of a jewellery store can be as high as $50, while CPA of a consumer goods should be somewhere at $5. To know the different types of KPI goals read below:
CTR (Click through rate)
It is not enough to just know how many clicks and impressions are there. It is important to understand how many clicks upon the impressions are there. This is called CTR. Now let's say you achieved 10 clicks on 10,000,000 impressions, your CTR would be 0.0010% which is not really a great performance. But if you achieve 10 clicks on 1000 impressions, your CTR would be 1% which is really good.
CTR = (Click/Impressions)%
CPA (Cost per Acquisition)
Seeing your campaign bring in sales is a joyful sight, but just like clicks, it is important you tie it up with the spend. If you are spending too much money and getting only few conversions, it not something that will give you profit in the long run. CPA value should always be lower because higher the conversions lower the CPA. So if you set your CPA to be $50, and you have achieved $30 while spending a considerable amount of your spend, this means that you are doing good in terms of acquiring conversions.
CPA = Spend/Conversion, Unit- Dollars or rupees (based on the currency of the advertiser)
ROAS(Return on Ad Spend)
ROAS is the amount of revenue you start generating from your campaign. It is a ratio of revenue and spend, and is expressed either in ratio metric like 5:2, or decimal as in 2.5x. Meaning your revenue is 2.5x of spend.
ROAS = Revenue/Spend
ROI(Return on investment)
ROI is similar to ROAS, only the calculation is different.
ROI = Profit/Spend. Profit = Revenue - Spend
CPV or CPCV(Cost per view or Cost per completed view)
If you are running a video campaign, your KPI goal will be VTR or CPV. As mentioned earlier, calculating views is different for two type of video formats. If you are calculating cost per view of open exchange ad, then CPCV is what you should be looking at. If you are calculating cost per view of trueview, you should be looking at CPV.
CPCV= Spend/Completed views
VTR or VCR(View through rate or video completion rate)
VTR is for trueview and VCR is for open exchange ads. This metrics tells us how many people are completing the video view soon after the ad is downlaoded on their website.
VTR =( View/Impressions)%
VCR =(Completed view/Impression)
CPM(Cost per thousand impressions)
Let's discuss how every ad slot bidding needs to be done. You put some money on the ad slot (this money is inclusive to the budget of your campaign) to compete with the other advertisers out there to win the ad slot. Now if you bid the highest, you get to show your ad on the ad slot. If the ad exchange where you are showing your ads follows first price auction, you pay for the bid that you won for. Let's say your bidding price was $5 and you won the ad slot, you pay $5 to show your ads there. If your ad exchange follow second price auction, you pay the second highest bidding price. Say your competitor ABC had set a bidding price of $4 , you pay at least $4.01 to win the slot. Why do you need to know all of this? Because when you are running the campaign and you see that your ecpm is lower than the bid you have set in your campaign, you might be losing potential inventory slots to your competitors. You need to be certain whether your exchange is running on second price auction or first price auction. Lot of Ad exchanges are adopting first price auction since publishers prefer that because it is helpful for them to improve their revenue. It might be a bit expensive to the advertiser, but it worth every penny, as you show ads to the quality websites.
ecpm can also be part of KPI to understand how much an advertiser is paying per thousand impression. If it is too high, you should decrease the bids in your campaign settings.
CPM = (Spend/Impressions)*1000
CPC(Cost per click)
Cost per click is again a measure of how much you are paying for every click. You can reduce or increase accordingly.
CPC = Spend / Clicks
Let us know if this makes sense and if you need a helping hand with your campaign at our contact us page