There are Four basic metrics for PPC ad campaigns:
- Impression. An impression is the number of viewers to whom the ad is displayed. Impressions measure how often Google has displayed your ads, i.e. how relevant it considers your ads are to its users.
- Click. A click is an instance of a viewer clicking on an ad. This measures the amount of traffic (i.e. the attractiveness) of your ad to users.
- Conversion. A conversion is when a viewer views an ad, clicks it and takes the action you intend them to take on your landing page. Conversions are a measure of the success of a campaign, as a conversion will typically be a sale.
- Spend. Spend is the amount of money you have spent on your campaign within a specified period. Your target ratio of spending to revenue will depend on your business objectives. For example, is it is more important to keep spending low or to get more sales at a lower margin?
These metrics are essential to track, but the measures that will be the most critical for optimising your campaigns derive from combinations of these simple metrics.
These measures are:
Click-through Rate is the percentage of ads that are clicked. A high click-through rate indicates that your advert is attractive to users. Google uses the CTR as an input in its quality score so a high CTR will positively affect your cost per click.
CTR (Click-through Rate) = Clicks / Impressions
Conversion Rate is the percentage of clicks that lead to a conversion. A higher conversion rate will reduce your Cost-Per-Click and Cost-Per-Acquisition.
Conversion Rate = Conversions / Clicks
Cost-Per-Click (or CPC) is the amount spent on each click. Average CPC is calculated by dividing the spend by the number of clicks. Therefore, a lower cost-per-click will reduce your Cost-Per-Conversion.
CPC = Spend / Clicks
Cost-Per-Acquisition (or CPA) is the amount of money spent to get each conversion. The average CPA is calculated by dividing the total spend by the total number of conversions.
CPA (Cost-Per-Acquisition) = Spend / Conversions
Return on Advertising spend
Return on Advertising Spend (or ROAS) is a measure of the effectiveness of advertising. It measures sales as a multiple of ad spend.
ROAS = Revenue/Ad Spend
For example, if you spend £20 on ads and generate £100, that is a ROAS of 500%.
One of the Google ads bid strategies is ROAS bidding, where the advertiser sets a ROAS target that Google tries to reach.
An effective campaign has high-percentage metrics and low-cost metrics. Setting goals for your campaign performance in terms of these metrics is good practice. Watch these metrics closely as you optimise your keywords, ads, and account structure. Use them to measure your campaign’s performance as you work toward reaching your goals.