How To REALLY Measure PPC Ad Effectiveness
By Anna Johnson on July 15th, 2008Anyone who’s been involved in pay-per-click (PPC) advertising for any length of time will tell you that your click-through-rate (CTR) – i.e. the ratio of clicks to ad impressions – does NOT fully indicate the effectiveness of a given ad.
Not in terms of CONVERTING customers anyway i.e. getting them to take your most desired action (MD) when they land on your webpage.
Sure, a higher CTR indicates that more people are clicking on a given ad… but are they clicking on the ad for the wrong reason? Is it because the copy is TOO appealing – for instance, because it communicates an offer that is too good to be true?
Well, a great way to measure and compare the true effectiveness of one ad versus another is to multiply an ad’s CTR by its conversion rate (i.e. the rate of web visitors who perform the MDA – whether it’s subscribing to a newsletter, buying a product, or performing some other MDA when they land on your webpage).
This formula yields an ad effectiveness rate against which you can compare the ad effectiveness rates of other ads.
Consider the following two ads:
PPC Ad #1:
- CTR: 20 percent
- Conversion rate: 10 percent
- Ad effectiveness rate: 0.2 x 0.1 = 0.02
PPC Ad #2:
- CTR: 10 percent
- Conversion rate: 50 percent
- Ad effectiveness rate: 0.1 x 0.5 = 0.05
Now multiply the ad effectiveness rate by the number of ad impressions for each ad. This yields the number of conversions you would expect for each ad.
For example, if each ad received an average of 100 daily impressions the results would be as follows:
- PPC Ad #1: 0.02 x 100 = 2 conversions per day
- PPC Ad #2: 0.05 x 100 = 5 conversions per day
So, as you can see, although PPC Ad #2 has a lower CTR… because it leads to a higher conversion rate, it is actually more effective in delivering qualified traffic than PPC Ad #1, which has the higher CTR.
