When measuring the effectiveness of paid advertising, you’re often presented with an overwhelming array of choices.

Where do you start, and which metrics should you focus on? What is your true north?

In this article, I segment key paid marketing metrics into three different categories. Each set of metrics contributes to the funnel differently and tells a much different story than the next. I’ll then wrap up with some actionable techniques you can use to optimize your results.

Traffic-Driven Metrics

The metrics we’ll be covering today are all connected. It all starts with what I categorize as “traffic-driven metrics.” These metrics are the most commonly measured by marketers. If you want to understand the health and performance of your paid ads, these are the metrics to measure.

  • Impressions: This shows you how many times your ads have been served. In other words, the number of people who have seen your ads.
  • Clicks: The number of people who have clicked your ad after seeing it.
  • CTR: Click-through rate of impressions to clicks as a percentage.
  • CPC: The average cost-per-click across a campaign.
  • Quality Score (AdWords): This is used by Google to measure the relevance of your ads to the keywords you’re targeting. Factors include CTR, landing page quality and relevance of the keyword to the ad and search query.
  • Relevancy Score (Facebook Ads): A score from 1 to 10 that measures how relevant an ad is to its target audience.

These metrics are key when understanding the performance of your ads. But if this is where your measurement ends you’re missing out on the bigger picture. For your PPC efforts, your results may look something like this:

Traffic Driven Metrics

Going by this data alone, you might conclude that Campaign #2 is your highest performer, while Campaign #4 is hemorrhaging the most money.

Acting on this data alone can be dangerous because you don’t have the full picture. It’s unclear which of these clicks are really turning into leads. Therefore, we need to go one step deeper.

Conversion-Driven Metrics

Despite how much insight it brings, too few marketers are using conversion tracking. In a nutshell, conversion tracking is a free tool that shows you what happens after somebody clicks on your ad.

Whether you’re using AdWords or Facebook Ads, conversion tracking (or Facebook Pixels for the latter) is imperative. Without it, you won’t understand how your paid marketing efforts are truly performing.

Within the context of AdWords, there are three different kinds of conversions:

  1. Webpage Conversions: These include purchases, leads or sign-ups. You can also track visits to key pages such as your “Contact” page.
  2. Call Conversions: 65% of Fortune 500 companies say phone calls are their highest quality leads. Yet very few are effectively tracking them. With call tracking, you can measure which of your campaigns lead to telephone inquiries with ease.
  3. App Conversions: Track which clicks turn into app downloads on the Android Play store. Also, applies to iOS downloads, but functionality is limited.

Based on the same campaign data we used in the previous section, we get a much better view of the bigger picture:

Conversion-driven metrics

With this data, you can analyze performance based on Cost-Per-Lead. So even though Campaign #3 has the lowest total cost with an average CTR, Campaign #1 has the lowest Cost Per Conversion.

AdWords has also recently introduced a powerful attribution modeling feature. It determines how much “credit” each ad click receives from a conversion. In other words, you can reallocate budget and amend your bidding strategy based on how well a campaign contributes to conversions.

There are six different models you can use to attribute your ads:

  • Last Click: 100% of the conversion is attributed to the last ad a visitor clicked on.
  • First Click: Opposite of the above, where the conversion is attributed entirely on the first click.
  • Linear: Attribution is spread out across the entire journey, evenly distributed to all ads that assisted in a conversion.
  • Time Decay: More credit is attributed to the ad closest to the time of conversion. Time decay uses a period of 7 days to do this, so a click 8 days ago gets half the credit than one a day before conversion.
  • Position-based: 40% of the credit goes to the first click, another 40% to last and the remaining 20% is distributed across the remaining clicks.
  • Data-driven: Uses your existing data to determine how to attribute the credit across all clicks. This model is only available if you generate at least 20,000 clicks and 800 conversions per action.

Last click attribution modeling is the default option. If you lack time to dig into this feature, then this will certainly do the job. However, in the real world, people don’t just click once and then convert. Having a more sophisticated model will highlight the touch-points that contribute to conversions and sales.

Now you have the data necessary to attribute clicks to conversions. But what about contribution to the bottom line?

Revenue-Driven Metrics

The metrics we’ve outlined so far contribute to the top and middle of the paid marketing funnel. These are great when monitoring various elements of our campaigns, but for most marketers “true north” comes in the form of revenue.

Use your CRM to track leads back to your campaigns. Use call tracking, as mentioned before, to attribute calls that turn into sales.

From this data, we get something that looks like this:

Revenue-Driven Metrics

Campaign #3, which wasn’t looking too great from a cost per conversion perspective, now appears to be far more lucrative. Although it costs an above-average amount (this can vary business to business) to generate a lead, it has the strongest ROI out of all four campaigns.

By tracking the journey from top to bottom this way, you have a complete view of the paid marketing funnel. Instead of simply understanding how much a conversion costs, you know how much it’s truly worth and its impact on your business.

Using This Data to Optimize Your Funnel

Access to this data not only allows you to re-allocate budget accordingly. It also gives you insight for optimization across the entire funnel. In this article, I’ve talked heavily about measuring the right metrics. But choosing those to optimize is just as key. To round up this guide, here’s some actionable advice on optimizing various parts of the paid marketing funnel.

  1. Optimize AdWords quality score

Quality score isn’t just about improving your CTR. As your quality score increases your overall CPC decreases, allowing you to generate more bang for your buck

There are many factors that contribute to your quality score. This includes landing page quality, a keyword to search query relevance and your account history. Check out the full list from Google on this page.

The benefits of having a high-quality score include:

  • More impressions and clicks on your ads
  • A higher position in the SERPs
  • Discounted CPC as Ad Rank improves
  • “Unlock” more ad extensions, such as site links

Your quality score is displayed on a scale of 1 to 10. 4-6 is considered “Good” while 7-10 is “Great.” Anything below 4 and you’re operating at a disadvantage.

In a recent update, Google has allowed advertisers to access historical quality score data. By segmenting the data by day, you can see how your quality scores have changed over time:

Google Change over time

Image source

Optimizing this key PPC metric is usually a matter of prioritizing relevance across your entire campaign. The keywords you’re targeting should heavily match your ad copy. Likewise, your landing page must be relevant to your ad copy and target keywords.

Include negative keywords in your targeting. This makes sure you avoid sending irrelevant traffic to your site. This requires some heavy monitoring during the first week or so of your campaign’s lifetime, but it ensures you’re targeting only the most relevant traffic.

Similarly, make your ad copy as relevant as possible. This requires you to focus your ad groups to a tight selection of keywords. The result, however, is an increase in relevant traffic and, as a result, conversions.

Speaking of traffic—be sure to make your ads enticing to click on in the first place. Relevancy is just one aspect of this. Creating copy that inspires action will help generate more clicks. A higher CTR = better quality score.

Finally, make sure your landing pages are as relevant as possible. If you drive traffic from several ad groups to the same landing page, your quality score may be at risk. As a result, your conversion rates may also suffer, which brings us nicely to the next step in the optimization process.

  1. Optimizing Facebook Ads Relevancy Score

As marketers, we constantly obsess over how our audience perceives our message. Getting message-to-market match right is key, and Facebook knows this. Which is why they created Relevancy Score to measure how relevant an ad is to the audience that it’s targeting.

When people see your ad, they either click/share, respond negatively by stating they don’t want to see it, or do nothing. The more positively people react to your ad, the higher your Relevancy Score.

The score ranges from 1 to 10 and is aimed at making people take a specific action. The higher your Relevancy Score, the lower your CPC. Here are 3 approaches to improving Relevancy Score for your ads:

  • Use specific targeting: Get as specific as possible when targeting age, location, interests, and other psychographic information. Using Custom and Lookalike audiences are a surefire way to do this.
  • Test video content: Video content generates a huge amount of engagement on Facebook, and can quickly improve your Relevancy Score. Check out Facebook’s video ad tools to get started.
  • Test different images: Images are the first thing users notice in your ad. They have an impact on your conversion rate, and so should be regularly tested. Try experimenting with different formats e.g. adding a face, mascot, or text image if you have something interesting to say.
  1. Optimizing your landing pages

Driving the right traffic to your website is key. But if your landing pages aren’t built to convert then you’re going to waste your money.

To reiterate—make sure the copy and creative matches the ad you’re driving traffic from. This means tailoring landing pages to each campaign. You need to deliver upon the expectation you’ve set for your visitors.

Most clicks appear from someone needing a problem solved (or out of curiosity). So, what or how do you solve that problem differently? Your USP must be relevant to the problem the user was searching a solution for.

Social proof, inspiring calls-to-action, and a clean, user-friendly design as all key. There are many guides out there that show you how to design a high-converting landing page. But in the context of this article, it’s all about the copy and keywords.

This isn’t just from a PPC perspective. Optimizing your landing pages for the right keywords can be great for SEO traffic, too.

The optimization principles I’ve talked about here are self-serving. Traffic and conversions are the key focus.

However, they will also always have an impact on your ROI. A higher quality score = lower CPC and a higher ROI. Similarly, by optimizing your landing pages, you’ll increase the conversion rate of clicks to leads. Go one step further and optimize every page along the funnel for compounding results.

I’d love to know how are you currently measuring and optimizing your paid marketing efforts? Share your experiences in the comments below.