Complete Guide About Advertising Metrics

Created:
September 21, 2020

Advertising metrics represent the Bible of online advertising. You need to know them extremely well and to track them.

If you don't know them, it is like driving blind. You can make an accident or even worse.

Complete guide about advertising metrics

After this complete guide, you will know all the information you need about the most important advertising metrics.

What Are Advertising Metrics More Exactly?

Advertising metrics are the navigation system of your business for the online advertising world. You cannot and you should not navigate without them.

These metrics measure the performance of your advertising campaigns and create you a clear picture of what works and what needs to be improved, changed, or canceled.

But there are tens of advertising metrics, which ones should you track, how is each important and how can you calculate them?

If you track the wrong metrics, you could think that your online advertising works awesome. I personally saw this hundred of times and I will show you how to fall in this trap.

20 Advertising Metrics

Find below 21 advertising metrics,. For each you will find a detailed explanation and the math formula so you can calculate it.

Conversion Rate (CR)

Conversion Rate is the most important metric in online advertising. It shows you the percentage of people who clicked on an ad and completed a specific goal that you established - click, purchase, subscribe.

If your conversion rate is high, it means that your business is doing very well. Depending on how high or low is your conversion rate, you can tell the following things about your business:

  • The audience of your website is great or it should be changed.
  • The prices you use are good or should be improved.
  • You have room for improvement.
  • You established the ideal customer for your products and services.
  • You advertise on the right channels.
  • Your online advertising is efficient.
  • Bounce rate.

How Is Conversion Rate Calculated?

Conversion Rate is calculated by dividing the number conversions by the total number of users who visited your website.

Conversion Rate = (Conversions ÷ Clicks or Visits) x 100

Cost rate (CR) Formula

Example: If you get 100 conversions from 10,000 clicks on an ad, the conversion rate is 1%.

Aim high: It is hard to say which conversion rate will be good for you as there are many variables, but a CR of 5-10% should be high enough.

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Lifetime Value (LTV)

Lifetime Value is the advertising metrics that shows how much business you can expect from a customer of yours, for the whole period of working together.

If a customer of yours has a very high LTV, it means that it is important for your business and you should pay huge attention in keeping him happy.

There are 2 reasons for that.

This customer generates good business for your company.

And even more, it is much easier and less expensive to keep a customer happy than to acquire a new client.

How is LTV calculated?

LTV = Average Revenue Per User x Average Length of Relationship (in years)

Lifetime Value (LTV) Formula

Example: If a customer pays you for a one-time project $5,000, the LTV is $5,000.

But if another customer pays each month a monthly plan of $150 and you expect that we will stay with your company for 5 years, the LTV is $9,000.

Aim high: Higher the better.

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Return On Investment (ROI)

As the name says, this metric tells you how much money returned to you after the initial spend on an ad. It will show you the profit, and not the revenue.

In other words, ROI tells you if it was worth investing or not.

How is Return On Investment (ROI) calculated?

ROI = (Amount Gained – Amount Spent) ÷ Amount Spent

Return on Investment (ROI) Formula

Example: Let's say you earned $500 from an ad that costed you $100. Your ROI is 400%.

Aim high: A good marketing ROI is 5:1.

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Return on Ad Spend (ROAS)

Return on Ad Spend (ROAS) shows how much revenue you got back from the amount of money you spend.

Don't confuse Return on Investment (ROI) with Return on Ad Spend (ROAS)

ROI measures the profit generated by ads relative to the cost of those ads, while ROAS measures gross revenue generated for every dollar spent on advertising.

A high ROAS means that your advertising strategy works is very efficient.

Use ROAS also to evaluate and measure the performance of each part of your ad campaigns. See which of them are bringing you the best returns and focus to make them even better.

How is Return On Ad Spend (ROAS) calculated?

ROAS = Amount Gained From Ads ÷ Amount Spent On Ads

Return on Ad Spend (ROAS) Formula

Example: If you got $500 from an ad and you spent $100, the ROAS is 500%.

Aim high: A good ROAS is 4:1. For each invested dollar, you get back 4.

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Bounce Rate (BR)

Bounce rate is the percentage of site visitors that leave your website without going to another page and without performing any action (clicking a link, filling a form, making a purchase).

A high bounce rate means that the audience is not right for your ad.

To understand with more ease, here is an example.

Let's say you sell cars and you advertise them online. If somebody clicks on the ad, it means that he is interested to find out more about your cars, but when the landing page opens, he sees that these cars are expensive and that he can't afford them.

He will immediately quit.

What should you understand if this happens and the bounce rate will stay high, is that you need to improve your ad and find your ideal customers.

If on your ad you would have specified the price of these cars, that person would not have clicked or if he would clicked, he would stayed on the page because he knew the price of the cars and we was ok with that.

When people land on a website with the right products, services, or information for them, they will stay and complete actions.

Bounce rate is also affecting your website ranking in Google Search, pay attention to this metric. Bounce Rate should be as low as possible and it is the metric that you will always analyze.

How is the Bounce Rate calculated?

Bounce Rate = (Single Page Visits ÷ Total Visits) x 100

Bounce Rate (BR) Formula

Example: If 500 visitors enter a page, and 250 leave without doing any action, the Bounce rate is 50% which is not so bad.

Aim high: A bounce rate in the range of 26 to 40 percent is excellent.

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Engagement Rate (ER)

Engagement rate shows how well is your audience connecting with your content.

By engagement, we understand clicking, commenting, liking, sharing, and so on.

How is Engagement Rate calculated?

Engagement Rate = Engagements x 100 ÷ Impressions

Engagement Rate (ER) Formula

Example: If from 5,000 visitors, 100 visitors made actions (click, like, share, etc), th engagement rate is 2%.

Aim high: Over 5-6% is an exceptional engagement rate.

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Facebook Engagement Rate

Facebook has a different way to measure engagement, the platform divides the number of people who engaged with the content by the number of people who saw that content and then multiplied by 100 to get a percentage.

That is why we included this as a different metric from the standard Engagement Rate.

How is Facebook Engagement Rate calculated?

Facebook Engagement Rate = (Engaged Users x 100) ÷ Total Reach

Facebook Engagement Rate Formula

Example: If your Facebook post gets 50 likes, was shared 20 times, and it was seen by 1,000 people, then your Facebook Engagement Rate is 7%.

Aim High: 1-2% is considered a high Facebook Engagement Rate.

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Instagram Engagement Rate

This metric is not official but you have to know and use it.

It will show you the engagement for your Instagram posts. Compare engagement rates and see what works great so you can focus on that type of content.

How is Instagram Engagement Rate calculated?

Instagram Engagement Rate = (Likes + Comments ÷ Total followers) x 100

Here are 3 methods to calculate Instagram Engagement Rate.

Instagram Engagement R

Example:If you have 50,000 followers and you got a total of 1,000 combined likes and comments, the Engagement Rate of your Instagram account is 2%.

Aim High: 5-6% is a very high Instagram Engagement Rate. Usually such rates are obtained by top influencers.

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Linkedin Engagement Rate

Linkedin engagement rate is the same with the general engagement rate formula.

How Linkedin Engagement Rate is calculated?

LinkedIn Engagement Rate = Engagements x 100 ÷ Impressions

LinkedIn Engagement Rate Formula

Example: If your LinkedIn post gets 20 likes, 10 shares, and 1,000 impressions, the engagement rate is 3%.

Aim High: A good LinkedIn engagement rate is 2%.

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Twitter Engagement Rate

Also for Twitter we will use the general engagement rate formula.

How Twitter Engagement Rate is calculated?

Twitter Engagement Rate = Engagements x 100 ÷ Impressions

Twitter Engagement Rate Formula

Example: If your tweet gets 20 likes, 10 retweets, and 500 impressions, the engagement rate is 6%.

Aim High: Anything above 1% is a great Twitter engagement rate.

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Open Rate (OR)

Open rate is a super important metric for email marketing. This metric says a lot about your audience and your email marketing efforts.

A high open rate means engaged audience and people interested in what you have to say. It usually translates into high sales.

While a low open rate means that your email marketing is not efficient. You have to carefully analyze your audience, your content, and your emails (both subject lines and content).

How Open Rate is calculated?

Open Rate = (Opened x 100) ÷ Delivered

Open Rate Formula

Example: If you send 10,000 emails and only 500 people open them, the open rate is 5%.

Aim High: Anything above 22% is a great general open rate for emails. This value strongly depends on your audience. If you are sending emails to your traditional customers, you should expect an open rate of 80%.

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Cost per Acquisition (CPA)

CPA will give you an estimate of how much your new customers are costing you and help you determine whether your strategy needs to be revised.

It is one of the most important metrics in online advertising.

How is Cost per Acquisition (CPA) calculated?

CPA = Ad Spend ÷ Conversions

Cost per acquisition formula

Example: If you spend $1,000 on an ad campaign and you get 100 conversions, the CPA is $10.

Aim High: It depends on the acquisition and industry. You normally want a very low CPA but even a high CPA will work well if you have very large profits.

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Facebook Cost per Result

This metric is Facebook's version of the standard cost per acquisition (CPA). The difference is that it covers a broader set of goals than the standard CPA. 

How is Facebook cost per result calculated?

Facebook Cost Per Result = Results ÷ Total Amount Spent

Facebook Cost per Result Formula

Example: If you spent $1,000 on Facebook ads and you got 50 leads, the cost per result is $20.

Aim High: You want a Facebook cost per result low as possible but first calculate how much is a lead worth for you. If you sell yachts and you pay $500 per result, it might work extremely well.

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Cost per Click (CPC)

Cost per click is one of the most popular metrics in online advertising.

It shows you how much you pay to get a click.

How is cost per click (CPC) calculated?

CPC = Cost ÷ Clicks

Cost per Click (CPC) Formula

Example: You pay $500 and you get 100 clicks translates into a CPC of $5. So you paid $5 for each person who clicked on your advertisement.

Aim High: For most businesses, a 5:1 revenue-to-ad ratio is considered acceptable. Try to get better than this.

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Cost per Thousands (CPM)

It is CPM and not CPT because M from CPM stands for Mille (thousand) in latin.

CPM shows how much you spend for 1,000 impressions.

How is Cost per Thousands (CPM) calculated?

CPM = (Ad Spend ÷ Ad Impressions) x 1000

Cost per Thousand (CPM) Formula


Example: If you buy 100,000 impressions and you paid $1,000, it means that your CPM is $10.

Aim High: Impossible to say which is a good CPM, it depends very much on your industry.

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Click-Through Rate (CTR)

CTR measures the number of clicks that you've got from a total number of impressions.

For example, in an email marketing campaign, the CTR will tell you how engaging is your content. A low CTR means that the email subject line was interesting but the content was not.

How is CTR calculated?

CTR = (Clicks x 100) ÷ Ad impressions

Cost-Through Rate (CTR) Formula

Example: If your ad is displayed 1 million times and you get 10,000 clicks, then your CTR is 1%

Aim High: It depends on your industry and on which advertising medium you apply it (search, email, etc).

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Cost per View (CPV)

CPV is the most used in video-based advertising. Basically it shows you how much you pay for each video view.

How is Cost per View (CPV) calculated?

CPV = Cost ÷ Views

Cost per View (CPV) Formula

Example: If you pay $1,000 for your video to be watched 10,000 times, it means that your CPV is $0,1.

Aim High: It depends on the industry and on the advertising platform you are on. Best is to have the smallest possible CPV.

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Cost per Lead (CPL)

CPL tells you how much you paid for each lead.

A high CPL is not necessary bad. If you sell products or services with very high margins, you can pay big for CPL.

How is Cost per Lead (CPL) calculated?

CPL = Cost ÷ Leads

Cost per Lead (CPL) Formula

Example: If you spent $1,000 on your advertising campaign and you've got 100 leads, the CPL is $10.

Aim High: It depends on your business model and the industry you are in. Even a high CPL can be great for your business.

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Cost per Engagement (CPE)

As the name says, cost per engagement shows you how much you pay for each engagement.

How is Cost per Engagement (CPE) calculated?

Cost Per Engagement = Amount Spent ÷ Engagements

Cost per Engagement (CPE) Formula

Example: If you boost a post on Facebook, spending $1,000 and it gets 10,000 engagements (likes, comments, and shares), it means that the CPE is $0,1.

Aim High: It is very different depending on the business industry you are in.

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Advertising Analysis (AA)

This metric was invented by us, the Rocket Gorilla team, and it is used in several ways.

With AA, you will have a general picture of your overall online advertising efforts.

For example, you can compare AA metrics for each month of the year seeing which months were better, or you can tell if a company is doing online advertising well.

If the AA metric is positive, then it its good, it means that you make more money than you are spending. It is a good starting point of your online advertising analysis.

If Advertising Analysis is negative, then you have to carefully check each of your advertising channels and see which one is not working. Maybe some are doing well but one of these channels are generating huge loses and that is why your AA is negative.

How is AA calculated?

Advertising Analysis = Total Revenue Obtained From All Advertising Channels - Total Spent on Advertising

Advertising Analysis (AA) Formula

Example: If get $10,000 and you spend on advertising $2,000, it means that your AA metric is $8,000.

Aim High: You should measure this metric each month and improve it.

Conclusions

I hope this complete guide about advertising metrics will help you get a better picture of your online advertising efforts.

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