Bright-eyed, bushy-tailed, and wet behind the ears—it’s easy to place more emphasis on one Key Performance Indicator (KPI) during your first Facebook advertising campaign.
The KPI that gets all of the attention is usually the one directly associated with the campaign’s objective. If my campaign is set up to drive mobile app installs or purchases from my ecommerce site, why should I pay attention to anything else?
The answer: they all affect the efficiency of your campaigns. Here’s a quick guide to the KPIs you should be thinking about:
Related – 5 Facebook Advertising Myths to Avoid
1 – CTR (Click-Through Rate)
- Definition: The rate at which users who see your ad are clicking through to the target URL.
- Formula: Total number of clicks on your ad divided by the number of impressions.
- Why it matters: This is an essential indicator of how well your ads are performing. Higher CTR means better engagement – i.e. your ad is resonating well with users who see it. Strive to have a CTR that is 1% or higher.
2 – CPC (Cost Per Click)
- Definition: The average amount you are charged each time someone clicks on the link in your ad.
- Formula: Total amount spent on your campaign divided by total clicks.
- Why it matters: This metric indicates how efficiently your campaign is running. It represents how much it costs you to get a user to your website/landing/app download page.
3 – CPP (Cost Per Purchase)
- Definition: The average amount it costs you to earn a purchase from your website.
- Formula: Total amount spent on your campaign divided by total number of purchases.
- Why it matters: This is an indicator of how efficient your ads are at driving purchases. Compare this figure to your average order value (AOV) – your goal is to have your CPP well below your AOV to keep your profit margin healthy.
4 – Ad Relevance Diagnostics
- Definition: Formerly known as Relevance Score – Facebook has retired this familiar metric in favor of three new metrics that rank ad performance based on how users interacted with the ads after 500 impressions.
– Quality Ranking: How your ad’s perceived quality compared to ads competing for the same audience.
– Engagement Rate Ranking: How your ad’s expected engagement rate compared to ads competing for the same audience.
– Conversion Rate Ranking: How your ad’s expected conversion rate compared to ads with the same optimization goal.
- Formula: Ask Mr. Zuckerberg.
- Why it matters: The more relevant your ad is to a particular audience, the more likely they are to click through and take desired purchase action (assuming your landing page, product page and other web content align with the content of your ads).
5 – Return On Ad Spend
- Definition: How much revenue you’ve earned from your ad campaigns compared to your spend.
- Formula: Total revenue generated by purchases attributed to your campaigns divided by total amount spent.
- Why it matters: Viewing advertising as an investment, your return on ad spend is your return on investment (ROI). If you’re not bringing in more money through product sales than you are spending on ads to generate purchases, you won’t be in business very long.
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