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An Introduction to Digital Advertising Metrics
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An Introduction to Digital Advertising Metrics

March 22, 2024

Picking the best digital advertising metrics to track and measure is crucial to your campaign's success. If you aren't tracking advertising efforts properly, you'll never know what's working and what channels to focus your advertising money on.

Identifying your core ROI goals means you'll be able to measure data that tells the story of how your target audience engaged with your advertisements.

Here are a few of the key metrics to track that will help you measure success and identify ROI:

CPA-- Cost Per Acquisition

How much does it cost you to secure a new lead on any particular channel?

Knowing the cost to obtain a client for your business is the basis of your marketing budget, so it's crucial information to add to your ROI analysis. Combined with other advertisement data, this will determine whether your business will make a profit.

Ideally, you'll want to get a sense for which mix of ad channels (Search, Facebook, Display) work best for your business. Then you'll be able to better maximize your ad budget moving forward.

Here's the formula for CPA:

ROI Analysis - cost per aquisition

CPA is an easy but important formula. Knowing how much it costs to secure a new lead is essential to understanding your ad ROI.

Nevertheless, we still don't know the actual value of your client's customers. The next thing we'll cover is LTV, which is important for further ROI evaluation.

LTV-- Lifetime Value

Do you know the lifetime value of your customers? You should!

Why? Because this will give you a number that represents an estimate of the revenue a new customer generates, with all related costs factored in.

If you know your LTV, you'll be able to compare it directly to the cost of acquiring a new customer through your digital advertising campaign.

Here's the formula you can use to calculate your LTV.

ROI Analysis - lifetime value ROI

CR-- Campaign Revenue

Now that we understand how to measure and analyze the lifetime value of your customers, we'll be able to track the revenue generated by your digital advertising campaign. As you can see below, you only need to multiply your campaign's conversions by LTV and closing ratio (50% would be.5).

Why include the closing ratio? Obviously, every new lead you generate isn't going to become a customer, so you'll need to factor in how often you are able to finalize new leads to estimate campaign profit correctly.

ROI Analysis - campaign revenue ROI

ROAS-- Return on Advertising Spend

ROAS is an illuminating metric to utilize for ad campaigns, and a lot of marketers use it interchangeably with ROI itself. But, there are big differences between the two. What is the difference between ROI and ROAS?

Tim Mayer, CMO of Trueffect describes:

"ROI measures the profit generated by ads relative to the cost of those advertisements. It's a business-centric metric that is most effective at measuring how ads contribute to a company's bottom line. In contrast, ROAS calculates gross profit generated for every dollar spent on advertising. It is an advertiser-centric metric that measures the effectiveness of online advertising campaigns."

So advertising ROAS is a lot more focused on the results from particular campaigns, while ROI incorporates the bigger picture relative to the company. This means that it's much easier for you to be tracking and analyzing advertising efforts with ROAS! You know the cost and you can calculate the profits.

ROI Analysis - return on ad spend

Establishing your own criteria and campaign goals based on past performance is the best way to proceed with your advertising efforts.

Want to bypass all this complicated jargon and let the experts handle your digital advertising? Contact us today!

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