Inside the Ad Testing Metrics

By Brad

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Ad Testing

p662299_m2When you are running ad tests, there are generally six different metrics that you can use to determine winners; however, the way they are used can be very inconsistent, and some metrics are misunderstood.

Over the course of the next six weeks; we will be featuring one metric per week and taking a deep dive into:

  • What is the metric
  • How is it calculated
  • Pros
  • Cons
  • When should you use it
  • Minimum data considerations
  • Combining it with other metrics
  • Any other considerations

The Metrics

Click Through Rate (CTR):

CTR is the ratio of clicks to impressions.  Using this metric ensures that  you receive the most clicks possible.

Quick Pros:

  • Achieve the most possible traffic
  • Increasing  quality score

Quick Cons:

  • Doesn’t care about revenue (ROAS)
  • Doesn’t care about conversions (CR, CPA)

View in-depth article on CTR.

Conversion Rate (CR)

Conversion rate is the ratio of conversions to clicks. This metric ensure you receive the most conversions possible of the clicks you receive.

Quick Pros:

  • Get the most conversions possible when you get a click

Quick Cons:

  • It doesn’t care about the volume of conversions (Conversion Rate)
  • It doesn’t take into account the volume of clicks (CTR)
  • It doesn’t care about the cost of a conversion (CPA)
  • If you have multiple conversion types; you need to calculate the metric for each type (contacts, expensive purchases, cheap purchases, calls, etc)
  • It doesn’t take actual revenue into account (ROAS)

View in-depth article on Conversion Rate.

Cost Per Acquisition (CPA)

Cost Per Acquisition is the ratio of spend to conversions. This metric is simply how much you paid to get a conversion.

Quick Pros:

  • Controls how much you pay for a conversion
  • Ensures a conversion doesn’t cost more than its generated revenue

Quick Cons:

  • It doesn’t take into account the volume of conversions (Conversion Rate)
  • It doesn’t take into account the volume of clicks (Click Through Rate)
  • If you have multiple conversion types; you need to calculate the metric for each type (contacts, expensive purchases, cheap purchases, calls, etc)
  • It doesn’t take actual revenue into account (ROAS)

View in-depth article on CPA.

Conversion Per Impression (CPI)

Conversion per Impression is the ratio between conversions and impressions. It ensures you get the most conversions possible for the impressions you receive.

Quick Pros:

  • It takes into consideration both clicks (CTR) and conversions (Conversion Rate)
  • When you want to base winners off of both CTR and Conversion rate; it’s the best metric to use

Quick Cons:

  • It doesn’t care about the cost per conversion (CPA)
  • It doesn’t take actual revenue into account (ROAS)

View in-depth article on CPI.

ROI vs ROAS vs Conv. Value/Cost

There are several commonly confused metrics in ad testing and management. We go in-depth into these acronyms and their calculating to dispel the myths and examine how this data is used in your PPC accounts.

View in-depth article on ROI vs ROAS.

Return on Ad Spend (ROAS)

ROAS is the ratio of revenue to spend. It ensures that you maintain minimum margin on your sales. It is most commonly used for ecommerce sites.

Quick Pros:

  • It takes actual revenue and costs into account

Quick Cons:

  • It doesn’t care about the volume of conversions (Conversion Rate)
  • It doesn’t take into account actual traffic (CTR)

View in-depth article on ROI vs ROAS.

Revenue Per Impression (RPI)

Revenue per Impression is the ratio of revenue to impressions. It ensures you receive the most revenue possible for the impressions you receive. It is most commonly used for ecommerce sites.

Quick Pros:

  • It takes into account revenue (ROAS) and volume (CTR)
  • It is great for maximizing the most revenue possible from an account

Quick Cons:

  • It doesn’t care about the volume of conversions (conversion rate)
  • It doesn’t always lead to the highest ROAS possible

View in-depth article on RPI.

Combining Metrics

There are many times that you should be using two metrics when testing to ensure your ad testing is helping you to achieve your goals.

For instance, if you are an ecommerce account with this simple goal:

  • Maximize revenue as long at a target 400% ROAS

In this case, you need to examine two metrics at the same time to determine winners:

  • Examine ROAS of each ad. Any ad under 400% is eliminated
  • For the remaining ads, choose the highest RPI (Revenue Per Impression)

That simple process will make sure that you are achieving your goal of maximizing your within your target ROAS.

We’ve covered combining metrics before in examining The Best Ads Testing Metrics for Lead Generation Campaigns, and we’ll continue to do so throughout this series.

Wrap-Up

Over the next several weeks, we will take a deep dive into every metric so that you can ensure you are picking ads that further your advertising goals.

If you’d like to stay on top of updates, feel free to subscribe to our newsletter (in the sidebar), subscribe to our RSS feed, or follow us around the web on Twitter, Facebook, or Google+.

To easily see all of these metrics for your ad tests, take a look at Adalysis.

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