On this episode of Ground Up, Kieran Flanagan talks about the early days of freemium at HubSpot, instilling a growth discipline that expanded well beyond the marketing team, managing cross-functional teams, and more.
Ground Up Podcast | Oct 21
Jessica Greene on May 28, 2019 • 24 minute read
Even the acronyms are confusing. CPA means “cost per acquisition” in Google Ads reports and “cost per action” in Facebook Ads reports, but both phrases essentially mean the same thing.
And “cost per acquisition” is often used interchangeably with “cost per conversion,” but don’t confuse that with CPC, which means “cost per click” and is another metric entirely.
When you’re just getting started, paid media metrics and KPIs can be really confusing.
But it’s crucial to clear up that confusion before you start running ads. Running ads without understanding what those metrics mean is a quick way to burn through your budget without producing any meaningful results.
In an attempt to simplify paid media metrics, we asked 71 marketers to weigh in on which metrics are the most important. Our respondents not only explained what all of the different metrics mean but also how tracking those metrics can help you improve ad performance.
Here’s what they shared.
Editor’s note: View your most important Google Ads, Facebook Ads, Bing Ads, Instagram Business, LinkedIn Ads, and Twitter Ads metrics side-by-side in Databox. The Facebook Ads & Google Ads Dashboard below offers a great example of using Databox to consolidate metrics from multiple channels.
“The only important metric for paid media is return on ad spend (ROAS),” says Zach Greenberger of adMixt. “Anything else is a distraction.”
Canz Marketing’s Zarar Ameen agrees: “ROAS is one of the most critical metrics for marketers to keep an eye on.”
Most of our respondents agreed. In fact, when we asked our respondents to rank commonly tracked paid media metrics from most-to-least important, ROAS came out on top:
“You need to spend money to make money, or so the saying goes,” says Colibri Digital Marketing’s Andrew McLoughlin. “But if your paid advertising efforts aren’t generating a net profit, you need to make some serious changes.”
“ROAS is the most important metric because it’s going to tell you whether your advertising campaigns are successful or not,” says Devin McHatten of Telos Digital Marketing.
“ROAS can guide practitioners toward investing their budgets effectively and understanding which types of creative and copy do and don’t resonate with users, and it can guide companies towards producing inventory around top-performing products,” says Portent’s Alex DeLeon.
“If you aren’t getting out significantly more than you put in, you aren’t doing your job correctly,” says Lightbulb Media’s Lewis Kemp. “It’s all too easy to hide behind vanity metrics that have zero effect on the client’s bottom line. Focus on the stuff that keeps the lights on.”
“The higher your ROAS, the better,” says Nada Pupovac of No Bounds Digital. “But profitability depends on the type of business you have. For many businesses, $4 generated in revenue for every $1 invested is a success, but other businesses strive for an even higher ROAS.”
“To gauge your ROAS goal, you need to define your profit margins,” says Growth Hackers’ Jonathan Aufray. “Every business is different. Some require a ROAS of 2:1—others 5:1 or even 10:1—in order to stay profitable.”
And Zach Greenberger says to keep the stage of the funnel in mind when measuring ROAS. “You can’t expect the same ROAS from a first-time prospect as a long-retained customer.”
“By maximizing ROAS at every stage in your funnel, you end up at your ideal overall blend. As long as that blend is profitable and keeping your business growing, your campaign is in great shape,” Greenberger says.
Cost per acquisition (CPA), cost per conversion, and cost per action (also CPA) all essentially refer to the same thing—the amount you pay per a specified action on your ad. That action can be any event you’re targeting: a sale, click, phone call, newsletter sign-up, form completion, etc.
Cost per acquisition (CPA) and cost per conversion are Google Ads metrics, and they’re used interchangeably. You’ll usually see CPA when bidding for terms and cost per conversion when viewing reports. And cost per action is a Facebook metric that also measures actions users took on your ads.
Lots of our respondents said that CPA is the most important paid media metric to track. Here’s why.
Fundera’s Ricardo Velez says that “cost per acquisition is incredibly important because it allows you to see the financial impact of your campaigns.”
“It’s the easiest metric to capture to give you an indication of ROI,” says Megethos’ Keegan Brown.
“It’s easy to get caught up in the details of secondary metrics, but if we stray too far from the basic question ‘Did this campaign make us any money?’ we start to lose focus,” says Sam Underwood of Futurety. “We always benchmark CPA daily to ensure any changes we make are reflecting positively on this metric.”
“One of the reasons we see a continued migration away from traditional advertising spend and toward digital is the accountability of the channels in terms of ROI,” says Portent’s Michael Wiegand. “Without measuring CPA, digital paid media is no better than traditional media.”
“Even if it isn’t your bidding strategy, you should still be calculating and monitoring your CPA,” says Roger West’s Natalie Lane.
First Launch’s Dhruv Jadav agrees: “All marketers should work to try and bring their cost per conversion down.”
Sam Olmsted of Superior Honda says CPA provides a great benchmark for optimizing your ad’s performance: “Understanding the cost per conversion allows marketers to be more nimble in their approach and to change strategies based on the data.”
DMG’s Michael DiPietro agrees: “CPA allows marketing teams to hone in on which marketing efforts and paid media channels are the most effective.”
“By understanding the cost to obtain a new lead, client, or customer on a per-channel basis, businesses can begin to analyze existing ad efforts and growth strategies, as well as formulate new ones and reallocate ad spend and marketing budgets accordingly,” DiPietro says.
“Shifts in CPA can be directly tied to either marketing inputs (cost per click) or customer experience inputs (conversion rate) that help focus reactions to performance shifts,” says Joshua Slodki of PACIFIC Digital Group.
Kate Wheeler of iPromo argues that “too many people focus on cost per lead (CPL) and skip CPA. But you could run an ad that generates a lot of leads at a low CPL—but none of which convert. And you could run another ad with only a few leads, but all of which convert.”
“This is why it’s important to track your average CPA. It can provide some valuable data that will allow you to better allocate your ad spend,” Wheeler says.
And Susan Jahns of West End Marketing + Media says that CPA beats ROAS because you can measure CPA sooner. “CPA is early enough in the purchase funnel that channel optimization can still occur, whereas ROAS can take longer, depending on the length of consideration and purchase within a sales funnel.”
“Conversions can often be multiple touchpoints, which are also important for journey tracking, but acquisition is a much more valuable data point,” Jahns says.
“I believe there’s one metric that trumps all others when it comes to lead generation: customer acquisition cost,” says RunRepeat’s Paul Ronto.
“CAC should not be confused with CPA, though many companies use the terms synonymously. CAC measures what it costs to get a paying customer. CPA, on the other hand, is just the cost of some event and can be assigned to a secondary metric like a lead, a trial user, a like, a share, a registration, and so on.”
“Without knowing your CAC, you can’t price your product appropriately.”
“For CAC to be a meaningful metric, it needs to coincide with lifetime value (LTV). LTV tells you how much revenue you can expect to bring in off of an average customer over his/her lifetime.”
“CAC and LTV work hand-in-hand. Obviously, your CAC needs to be less than your LTV over time for your company to survive. The ideal ratio is about 3:1 (LTV:CAC).”
“The closer you are to 1:1, the less likely your business will succeed. And if you’re not spending enough and your ratio is closer to 5:1 or 10:1 (although this looks good on paper as far as profitability is concerned), there’s probably missed opportunity in the market,” Ronto says.
Signal Media’s Lee Murray agrees that CAC is a key metric to track: “Being able to track and report on the actual cost of acquiring a new customer is the most important metric a business owner or CEO wants to see to make sure they’re achieving a return on their investment from a particular marketing channel/tactic.”
While CPA measures actions taken on an ad, most of the time, you want users to take another action on your website after interacting with an ad. That might be something like adding an item to a cart, starting a free trial, making a purchase, filling out a lead-gen form, etc.
For that reason, many marketers recommend measuring website conversions.
“Conversions help marketers determine what actions users are taking after clicking through an ad,” says Ian Kelley of Vital Design.
So why is that important? The Business Clinic’s Sarkis Hakopdjanian explains: “I would rather have 100 new website visitors every month that are genuinely interested in a client’s products and services than 10,000 website visitors that clicked an ad, didn’t find the content relevant, and bounced.”
“It’s great to get traffic to a landing page, but if your page visitors aren’t submitting a form, making a purchase, or taking some other type of action, you may want to reevaluate your targeting strategy,” says Doug Stewart of Appleton Creative.
“Measuring conversions helps marketers understand where to optimize their campaigns,” says Tiffany Schreane. “It also tells you about the behavior and intent of your audience—are they spectators or are they actually converting—and is a great complement to engagement metrics.”
“We could run two campaigns side-by-side with the same budget and see that campaign #1 got 500 clicks and campaign #2 got 400 clicks,” says Greenvelope’s Alex Kelsey. Just looking at click-through rate or cost per click, we would think campaign #1 was superior.”
“However, tracking those users through to the website reveals that of campaign #1’s 500 clicks, 50 signed up for a trial and 10 purchased. But campaign #2 resulted in 80 trials and 18 purchases. From this view, campaign #2 was a much larger success.”
“Tracking conversions from specific campaigns will show that the ad not only engaged customers enough to make them click, but it also encouraged them to follow through with the process,” Kelsey says.”
“Conversions could be anything from signing up to download a white paper, submitting the contact form for a quote or call back, setting an appointment, calling a special phone number on your campaign landing page, or purchasing something on an ecommerce site,” says Joe Wilson of Volare Systems.
“It’s critically important to properly define what a successful conversion is,” says James Bregenzer of CLEANCODED. “This will give you the insight needed to confidently increase investment in what’s really working (and drop what’s not), and it makes the process of communicating successes to others much easier.”
“Even if a client is only concerned with site traffic, take time to learn what matters to them about that traffic and measure it with a conversion goal like time on site or number of pages visited,” says Seth Crowder of EchoPoint Media.
And sometimes, the most obvious conversion (like a purchase) isn’t necessarily the best to track.
As SeedX’s Jacqueline Basulto explains: “We track ‘Add to Cart’ as a conversion metric. It’s typically much cheaper than a purchase conversion and provides you with a much larger pool of people to re-market to and convert into lifetime customers.”
In addition to conversions, Cloud Employee’s January Collamat also recommends tracking assisted conversions—conversions that happened later and not immediately after interacting with an ad.
“Most of the time, we stop after looking at conversions—forgetting that people who see your ads might have converted later through a different channel—and we fail to attribute those conversions to paid ads.”
“This results in campaign managers turning off ad campaigns thinking they’re not successful, when in fact it helps start their consumers’ buying processes.”
“No metric is more important to measure than conversion rate (CvR),” says COFORGE’s Eric Melillo. “CvR is expressed as a percentage that you get by dividing the number of conversions by the number of clicks. So, 200 clicks and 10 conversions would be 10/200, or a CvR of 5%.”
“CvR helps validate your offer-to-audience match—or expose a mismatch,” says Lily Ugbaja of FindingBalance.Mom. “Once you know what’s working and who it’s converting, it’s easier to tweak everything else for an increased ROI.”
“On the other hand, having low conversion rates lets you know it’s time to go back to the drawing board and test your positioning, avatar, and/or offer,” Ugbaja says.
“For agencies, optimizing your campaign for higher conversion rates is the essence of why someone would hire you,” Melillo says. “It will also drive your client conversation rates, so be sure to use a good visual reporting tool like Databox to represent your success metrics.”
Editor’s note: Databox makes it easy to track and calculate your CvR across all channels. Download the free Google Ads Campaign Performance dashboard below to see your conversion rate alongside other key metrics like click-through rate, cost per conversion, number of clicks, and average position.
Another metric our respondents highly recommended was click-through rate (CTR).
“CTR is how many times your ad was clicked on per the number of times it was shown,” says Roger West’s Samantha Simon. “A high CTR means your ads are driving the highest number of people possible to whatever it is you’re promoting.”
“If people are clicking, it means they’re interested in what you have to offer,” says MAXBURST’s Andrew Ruditser. “If your CTR is low, then it’s obvious that the content you’re sharing is not grabbing your audience’s attention. If your audience isn’t showing interest, there’s a problem that needs to be fixed.”
“If you see that an ad or search term has a high/low CTR, you will get an idea of what types of calls-to-action or other marketing messages are/aren’t really resonating with your target audience,” says Amanda Molinaro of PayKings.
And in addition to helping you make sure your ad caters to your target audience, Jeff Moriarty of JMoriarty Marketing also says that “it helps to show you whether the keywords your ad is showing for are related enough to the ad text you have crafted.”
“Also,” Ammo Marketing’s Michael Terwindt says, “Google and Facebook rely on CTR heavily for their respective quality and relevance scores.”
“Without knowing how many users/customers click through to your webpage or product, you’re unable to track the results that matter the most to your business and campaign,” says Moises Parada of Fidelitas Development. “It‘s an essential component of revenue growth for several businesses.”
Plus, as Digital 22’s Chris Ellis says, “a small increase in CTR can have a huge impact on the overall profitability of an account.”
“In my opinion, you should closely monitor your cost per click (CPC),” says Energy Seek’s Ollie Smith. “This is the amount you pay each time a user clicks on your ad.”
“Ideally, you want to identify and target clicks that are valuable but inexpensive. Determining the success of your paid campaigns will assist you in achieving this.”
“Earnings per click (EPC) is the most important metric to track for paid advertising,” says David Sanchez of Mammoth Web Solutions. “You calculate it by multiplying your conversion rate by your customer value (the amount of money you earn, minus fulfillment costs, from one new customer).”
“For example, if an average customer generates $100 and you have a conversion rate of 1%, then your EPC is $1. In this example, that means you could advertise profitably on keywords with a CPC under $1.”
“Maximizing your conversion rate and your average customer value will produce a higher earnings per click. When this number is optimized as high as possible, you can pump money into your paid ad campaigns and reliably make a great profit.”
“Impressions is a simple—yet often overlooked—paid media metric,” says Craig Streaman of Streaman Marketing. “A well-placed impression can be just as, if not more, valuable than a click.”
“I’ve seen plenty of marketers/clients optimize for clicks, drop impressions, and then wonder why their direct and organic channels are showing a decrease in volume. Impressions generate awareness and often lead to brand-based searches.”
“With the rise of machine learning and AI, intelligent software has the ability to help you target the right audience with smart targeting and placements,” says Veda Ford of Malone Media Group. “Algorithms use targets’ online behaviors to determine their intents.”
“As a result, CPM has become even more relevant because you get a better idea of your budget percentage when you compare it to impressions served. And because of platform algorithms, your reach gives you a good estimate of the number of people in the market on that channel.”
“It’s very important to pay attention to your quality score for Google Ads,” says AdVision’s Kelly McEvitt. “Quality score is a rating given to each of your keywords, ranging from 1-10.”
“Quality score greatly influences the amount of money that advertisers and businesses bid to remain competitive, so the better the quality score, the more potent their dollars are,” says Reunion Marketing’s Dane Saville.
“For example, an ad with a quality score of 6 requires a bid half as much as an ad with a quality score of 3 to compete for the best ad rank for absolute top impression share,” Saville says.
“You should aim for your score to be around 7 or 8,” says Fisher Unitech’s Jackie Tihanyi.
Facebook Ads have a similar metric: relevance score. “If you have a low relevance score, you’ll need to look at your audience targeting to ensure you have it honed into your target demographic,” says WebCitz’s David Wurst.
“Improving your quality and relevance scores has a positive benefit for your ad expenses and impression shares in both platforms,” Wurst says.
“You should measure quality score and average rank position,” says Stephen Lorenz of Huntington Pacific Media. “These two metrics show you whether or not your ads make sense.”
“If you have a low-quality score for keywords, then your ads, keywords, and landing pages are being rated as not relevant. But your average position also tells you your relevancy score for your ad. It shows how you rank against others, and where you’re normally positioned.”
“It’s another metric to use in making your entire advertising funnel cohesive and relevant to your potential audience.”
“Search absolute top impression share tells us how often the ads we ran appeared in the very top spot on the first page,” says Spades Media’s Jim Banks. “Given the proliferation of sitelinks and shopping ads, the higher that number is, the more conversions we make.”
“On Google Ads, it’s a battle for the top. Knowing what this metric comes in at is crucial to performance. There is no point focusing on conversion metrics if you’re only showing in the most prominent position less than once in every 10 impressions. Dial that metric up, and then focus on other metrics.”
“As far as benchmarks, it really varies depending on the campaign type. For branded campaigns, you should be above 50%. For generic, you’d be pleased with about 30%.”
KoMarketing’s Andrea Cruz recommends tracking revenue per keyword: “This will tell you what keywords are actually providing a return.”
“The ratio between the number of paid keywords and overall paid traffic on ads is a pretty great metric to track,” says Studio 96’s Aya Abitbul. “It’s similar to CTR. But if you’re having a low CTR, you might be unsure why that is: the keyword targeting or the ad copy itself.”
“Tracking the ratio between paid traffic and number of paid keywords serves as an index to see whether you’re targeting the right keywords at all.”
“Ideally, users will always click on your site for a handful of select keywords, so if you have a high CTR on those words, it means you’re targeting relevant users with your ads and ad copy.”
“But if the ratio is too high, it means you’re casting the net too wide and spending unnecessary dollars that probably won’t convert—and that the traffic isn’t as optimized as it could be.”
“To best spend your paid media dollars, start by targeting a few keywords first and pay attention to this ratio.”
“The metric all marketers should track for paid ads is frequency,” says MAB’s Haris Karim. “Frequency represents the number of times a person sees your ad.”
“It’s valuable data because there’s no point in continuing to optimize ad creative and a specific sales funnel if you’ve already exhausted the audience,” Karim says.
“If your frequency is too high, you’re at risk of ad fatigue, and performance will drop,” says Ladder’s Edwin Plotts. “And it’s an especially important metric for retargeting audiences. If your ad impression frequency is averaging 12+ per person, you might be burning money and annoying your audience.”
For Google Ads, search lost (IS) budget has so much power, but it’s often overlooked in favor of more conventional metrics,” says Ampjar’s Franklin Duke. “This percentage lets you know how many auctions you’ve been left out of due to your budget.”
“A lot of time marketers don’t know how much to spend on their campaigns. This metric helps you start small, and then gives you the power to reverse-engineer exactly how much your budget should be in order to be competitive in the SERP without overspending.”
“If you’re running video ads, you should pay attention to time watched,” says Wistia’s Phil Nottingham.
“This metric is a really good proxy for how much your audience is engaging with your content since it tells you how much is being consumed and allows you to compare different creatives and ad groups to see which videos are leaving the biggest impressions.”
Editor’s note: Get a consolidated view of key Wistia, Facebook, LinkedIn, and Twitter performance metrics by downloading this free General Social Performance dashboard.
“In the end, it’s all about getting in touch with people,” says Alexandra Lens of Chocolate Films. “So I think the most important paid advertising metric to track is the leads you collect. This way, you can truly build on your paid advertising to turn marketing efforts into sales.”
“A metric that is sometimes forgotten is actual phone call leads,” says Jeroen Minks of Vazooky Digital. “Google Ads have the opportunity to use a Google forwarding number so that the phone call can be traced back to the exact keyword that person searched for.”
“Even beyond Google Ads, it’s possible to track these phone calls. A marketer could use a unique phone number that is only shown on the landing page of their marketing campaigns. Also, it’s possible to set up click-to-call tracking via Google Tag Manager and Google Analytics.”
“Session-to-contact rate is a really important metric to track when a session goes from an unknown to a known visitor by submitting a form,” says Emelie Svedberg of Structsales.
“This is where you actually can start to have personal (partly automated) conversions with the people who’ve viewed your ads.”
“If you’re only going to track one metric, I would recommend tracking cost per lead (CPL),” says Stefania Sigurdson Forbes of FranchiseBlast. “It is your North Star.”
“Qualified leads are people who are looking for your product and are qualified to buy it; vendors contacting you or spam don’t count.”
“The disadvantage of this metric is that if you are not spending on media, it doesn’t work. It also reflects the media type that you are using, not just the quality of your site.”
“As an integrated marketing and advertising agency, we spend more time and resources on implementing tools to track and analyze the original source of a lead, sale, or inquiry,” says David Haut of Simply180.
“Source is key as it impacts not just what channel is performing but, on a more granular level, what particular campaigns and messaging is resonating most with a client’s target audience. Plus, it provides us with insights to better manage and optimize budget spend in real time, while also planning for future campaigns.”
“Traffic source conversions is extremely important,” says Zac Johnson of Blogging.org. “If you already know you have winning ad copy and creatives, you can start advertising everywhere and have a good standard for the expectations you might receive.”
“For this reason, split testing and analyzing the metrics of your different traffic sources is ideal.”
“Engagement should be tracked because as your audience growth rate increases, you need to ensure that you are speaking to the right people—and that those people are listening,” says thumbprint’s Morgan Lathaen.
“Engagement should be tracked on all social media sites, including Instagram, Facebook, Twitter, and LinkedIn. Aim for 3% to 5% engagement on your posts.”
“Bounce rate is both important and sometimes forgotten,” says SmartAcre’s Beth Kern. “You can get so excited to see the impressions and clicks come in that you forget to look at the quality of this traffic.”
“A high bounce rate can mean one of two things: either your audience isn’t a match for the page you are sending them to, or the quality of the page is low and it doesn’t meet the needs of the audience.”
“It’s important to look at if you have bot traffic coming from paid, and you might want to change the placement of your ads if you’re running a remarketing campaign.”
“In the world of social media, you need to find a balance between converting users and entertaining them,” says Top Growth Marketing’s Jack Paxton.
“Social media marketing is no longer a direct-response channel. You not only have to have a good offer and website conversion rate, but you also have to have good shareable content.”
“If your content is getting shared, you will benefit from Facebook giving you lower CPMs and CPAs as you get more earned impressions, and this is the number-one factor for going viral.”
“Every account we’ve scaled to over $10k/day have all had a small number of ads that got thousands of shares to allow us to get to that spend-level profitably.”
“Paying for one impression at a time just won’t do it. You need to turn one paid impression into hundreds of earned impressions through shares.”
“There’s no such thing as one metric to rule them all,” says Kandece Digital’s Ginny Torok Duwa. “One metric never tells the full story of buyer behavior. Instead, truly understanding buyer behavior helps you continuously optimize ad spend for the highest return.”
“Understand audience behavior by tracking first- and last-touch attribution (and everything in between). Stitch purchasing data with marketing data to understand the full story of how every tactic contributed to the buyer’s journey.”
“No purchase is a one-step journey, so no ad strategy should have a one-metric measurement,” Duwa says.
Cultivative’s Amy Bishop agrees that tracking multiple metrics is key: “The most important metric to track is the one that ultimately ties to your end goal. If your end goal is sales—as it commonly is—then tracking sales should be your most important metric.”
“No matter your main goal, though, there should always be a suite of metrics to monitor cost efficiency, profitability, return, and general account health to identify ways to continuously improve your performance.”
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