Blog / Why is Digital Marketing so Important?
Now that you’ve invested in digital marketing, you want to see if it’s paying off, right? But when you get your digital ad performance report, how do you make sense of it? How do you know if you need to make adjustments? The numbers, terms, and acronyms could make even the most business-savvy minds short-circuit. So, let’s take a step back and unravel the mystery one layer at a time.
The most common terms you’ll see in a digital ad performance report:
Impressions describe how often your ad appears on a user’s screen. One impression means that one person had the opportunity to view your ad. If your ad appears on one user’s screen ten times, that’s ten impressions!
- The number of impressions you want to receive depends on your goals. The goal of most impression-based campaigns is to show your ad to your target audience as often as possible. This is beneficial if your goal is branding or name recognition. It doesn’t matter if someone clicks your ad, the goal is for it to be seen. With pay-per-click impression campaigns, your budget is only spent when someone clicks your ad. Your ads are shown until your budget is expended—often across a wider array of channels. With more targeted impression campaigns, you may pay for a specific number of impressions on specific channels. These impressions may be more expensive and result in fewer placements, however, they are more likely to reach a targeted audience.
Reach refers to the number of unique
users that see your content. In other words, reach measures the size of the audience that has seen your ad. Reach is often much lower than impressions since an ad can be displayed multiple times to the same user.
- Your goals for reach will depend on your campaign objective. Keep in mind that if your impressions are high and reach is low, you’ll be showing your ad to the same people repeatedly. It might be necessary to create multiple ad variations so people don’t get tired of seeing the same ad over and over, which might harm your brand more than help.
Click-through rate (CTR) is the number of clicks your ad receives divided by the number of times your ad is shown (x 100). So, if your ad gets five clicks and one-hundred impressions, your CTR is 5%.
- If your goal is driving people to the website to make a purchase, then a higher CTR is a valuable metric to measure. If your goal is visibility, measuring impressions is more important. Average CTR varies by industry and by ad type. A retail company offering a special may have a higher click-through rate than a service organization introducing a new employee. To determine industry averages, some digital companies, like WordStream, offer comparisons, but these should be viewed as guidelines and not rules, since the data is not specific to your company and competitors.
Cost per mille (CPM) (aka cost per thousand) specifies the cost per one thousand impressions. So, if the cost of an online ad placement is listed as $2.00 CPM, you pay $2.00 for every 1,000 times your ad is displayed.
Cost per click (CPC) defines the price you pay each time your ad is clicked. To determine this number on a report, the total cost of your clicks is divided by the total number of clicks your ad received.
- The cost you pay for an impression or click is not always in your control. Behind the scenes, you are bidding on the opportunity to place your ad in front of your target audience, in real time, against others seeking to place their ad in that same spot. The successful bidder is selected based on what they are willing to pay, as well as several other factors, including the quality of your ad, keywords, landing page content, and several other (always changing) factors. You can use these metrics to compare different keywords and ads. Keywords and ads that have a high CPC/CPM may need to be updated to make more efficient use of your budget.
Conversions occur when a visitor to your website completes a desired goal. That can mean filling out a form, clicking on a link or phone number, making a purchase, or other actions you identify.
- For many campaigns, conversions are the goal. Setting up your campaign to optimize for conversions often means using very targeted ads, bidding higher for placements, or specifying certain channels for your ads—again at a higher cost—in return for more engaged consumers. Higher clicks and higher impressions do not necessarily mean higher conversions. Optimizing for conversions means planning your campaign around reaching the types of consumers that will “convert” from passive consumers to engaged consumers.
Cost per acquisition (CPA) is the average amount you’re charged for a conversion. To calculate CPA, divide the total cost of your placements by the total number of conversions your ad generated.
- Knowing your CPA will help you determine your return on investment. If your CPA is lower than the value your average customer generates, your ads are bringing in more money than they cost, which means those ads are a great investment.
We hope this quick rundown has helped you better understand some commonly used terms so you can make sense of your digital ad performance reports. In the end, whether you’re running a search, social media, or display advertising campaign, understanding the analytics is essential to measuring your campaign’s success!