Ad Metrics and What They Mean
Let me tell you exactly how to figure out why your paid advertising isn’t working. What’s up, guys? Welcome to this video. In this video, I want to talk about the metrics and what they mean. And this is the metrics on the different ad platforms. So it’s not uncommon when you run ads to have some sort of challenges upfront, trouble, getting sales, getting conversions. Maybe we’re getting sales, but they’re not profitable. Or maybe we’re getting no sales at all. And this happens more times than I care to talk about, even for somebody who’s got millions of dollars in ad spend and we’ve been running client accounts for years, sometimes we don’t get it right. We launch and things don’t work.T he thing that sets us apart is we know what to do next. And this is where I see a lot of business owners and media buyers fall apart, is they’re great at getting things up and running, but when things don’t work, they do a lousy job at being able to pull that data out and turn it into actionable insights. And that’s a business killer right there, because what happens is then you start guessing running tests based on your guests. Every test has a 50 / 50 chance of failing, and you could potentially end up spinning your wheels and just burning your cash. So the key to making paid ads work long term is being able to understand the data, because even if you don’t succeed up front, you’ll be able to get the data, make sense of it, figure out what to test next. And your next test will be smarter because it’s actually based on informed data that you pulled from your ad account. So let’s talk about the metrics and what they mean. So we generally break these down into two sections. We have your funnel or website metrics, and we have your ad metrics. And this is super, super important because I can’t tell you how many business owners have come to us possibly having just fired a media buyer and agency and saying, hey, their ads sucked, only for us to dive into the account and find out that their click through rates are 1.5, 2.5 everything looks great, but nobody’s converting on the website. They’ve got a 0.5 conversion rate or 1.2 conversion rate. And it’s like there’s some things we can do with the ads, don’t get me wrong, but the ad metrics at face value look pretty good. The problem looks to be part of the website, and the business owner hadn’t even considered that, or nobody had brought it to their attention that your website is actually really dropping the ball. I had a similar conversation with a business owner recently where we looked into their ad account and we found out that their conversion from add to cart to checkout was really low. It was almost half of what it should be. And I showed them the math on if you were just to get that one step to industry standard, you’d add 65% sales to your volume, they would have jumped them from, I think it was 1700. It would have added another 1100 sales. That’s it. Same ad cost, same ad, same click to rate, everything.If they just improved the number of people going from cart to checkout, they would have added 65% to their revenue. And that’s a game changer for a business, especially this conversation.This business owner was concerned about profitability. They’ve been struggling to be profitable for a while and too much more of that, and he’s going to be in a position where he’s not quite sure what he has to do with this business. That’s a funnel metric that somebody should have brought to his attention, said, hey, we’ll definitely keep pushing on the ads, but let’s fix this because you’re leaking traffic already. So let’s talk about the funnel metrics first, because I Think those are a little bit easier to understand. So you’ve got all your funnel metrics are going to be basically your conversion rates. If you’re driving people to a lead magnet, what’s the opt in conversion rate? If it’s a webinar, what’s the registration conversion rate? If it’s a VSL, what are your opt in rates, your sales rates? Or if it’s, let’s say, like an advertorial, what is the conversion rate of people clicking the button and going to the checkout page? How are people moving through your funnel? And you want to be tracking that at every step.S o if you have opt in to VSL, to calendar, to application, to thank you page, we should be tracking somehow every step of that funnel. So we can look at the percentage of people that are moving through that funnel, and we could decide, does this meet industry standards or what we expect for a similar funnel and audience, or are we above or are we below? And then obviously from there, you can highlight the ones that are below, and that gives you sort of the target for what you need to fix next. Hey, we know this one page is struggling. Let’s go look at that page, come up with some theories about what we can test to fix things.S o those are your funnel metrics. That also includes things like your cost per purchase, your average order value, returning customer rate, time on site. These are all funnel metrics. You can get pretty deep into the weeds looking at data between your Shopify, your WordPress data, Google analytics. But those are funnel metrics. So we have benchmarks for each of the business models.I might at some point turn that into a PDF. I’ve got a spreadsheet that our team uses to basically paste somebody’s funnel in there and say whether or not it’s meeting expectations. But if you don’t have that, you should have it or get it. But you should know, based on the funnel type, what the normal industry average is for conversion rates. That way you can quickly assess as a media buyer or business owner where the problem is. So as an example for Ecommerce, the industry standard for add to cart is around 10%. That means 10% of the people on your product pages should add to cart about 50 to 60 of them, probably 40 to 60, if I’m being generous, should initiate checkout and then another 45 to 60 of those should complete the purchase. And you’re going to see that 10% 50 / 50 across most sites. I don’t know what it is about humans, but it’s a very, very typical experience. So you know immediately if you see a checkout or an added cart rate that’s not there, that you can have a conversation with that business owners about things you can do to fix it. Or if you are the business owner, you can look at that page and possibly even higher conversion rate person and say, hey, how do we make this page better? What is it that’s causing people not to move forward? So those are your funnel metrics. Then you’ve also got your ad metrics. So these include things like your CPMs, your Click to Rates. I look at click to rate all and click to rate link on Facebook. If you’re looking at Google or YouTube, it’s going to include things like View Rate, view Rate and Click to Rate CPC on both platforms, CPM on both platforms. And those are really the math equation that make up your ad level metrics. Now, I want to add a caveat here. In most cases, if you improve the ad metrics results improve. I will say, however, that this is not always the case. And what happens sometimes not as often as business owners would like you to believe becauseI’ve had this conversation a lot. Sometimes you will have really high engagement on the ads, or really great performance on the ads and terrible conversions on the website. And it’s not actually a website problem. It’s really a congruence problem. What’s happening is your ad is doing a really good job of getting people excited about something. But then when they land on the website, it’s not the thing that they thought it was or it’s not the price they thought it was, or there’s some sort of mismatch or disconnect. So people are super engaged with the ad. They click and go to the website and it’s just not what they thought. So they drop off. So at that point it actually is kind of an ad problem because you’re bringing the wrong people you’re bringing the wrong people to the website. Now, I say this again, business owners hear me loud and clear, that is the rare case, that is not the norm. Most of the time if a funnel is not converting, it’s because the funnel sucks. But I can’t tell you how many business owners, I’ve sent thousands of leads only for them to say these leads are no good. I can’t get a hold of anybody. It’s like, oh, okay, well, how many times you’ve followed up? Well, I’ve called some of them once. It’s like, oh, well, there’s your problem right there and that’s the end of that conversation. So don’t blame the ads for a lack of sales processor funnel on your end, but just bear in mind that sometimes if you’ve tried a lot of things on the funnel and nothing seems to be moving, you might want to consider that maybe you’re just bringing the wrong people. So again, maybe 5% of the time, maybe3% of the time, that’s the case. The rest of the time you can trust the data. So your ad level metrics, CPC, CPM, click to rates, generally, again, industry standard, I’m always looking for a click to rate of at least one, but that freaking varies wildly. I mean, I’ve got some businesses where 3% is low for us and we’d be having a bad day if we had a 3% click to rate. And I’ve got some businesses that are super profitable, crazy profitable on a 0.5 click to rate. So there are industry averages, but the best thing you can do is to get into your own ad account or the client’s ad account and look at what’s happened historically and do some of the math based on that. So look at their conversion rates, look at their click to rates, look at their CPA, their target KPI, and figure out, does this math make sense? And like I said, a lot of times we’ve been profitable with very low click to rates because the ads doing their job. So it’s kind of the opposite situation of what we’re just talking about, where the ad is attracting the wrong person, the ad is actually repelling the wrong people. And so we’ve only got 0.5% of people clicking, but those 0.5 are buying it 5%, 7%, 10%, and the whole math equation makes sense. So what those numbers need to be again is going to kind of depend on the business, CPCs are going to vary depending on the audience you’re targeting, the amount you’re spending, the quality of your ads. CPM is a tricky one on Facebook. It’s not exclusively an ad metric because it is also competition based. So if there’s 1000 people vying for that one audience, CPMs are going to be higher supply and demand. Facebook wants to make money. So that’s not necessarily a reflection on your ads. But I will tell you the reason I consider it an ad metric is because you can get lower CPMs with better ads. So as an example, there’s an Ecommerce brand we were working with that had had blowout success a couple of years prior, had some issues in their business, had to pause, and they came back to us on the tail end of that and we had to get up and running again. Well, as soon as we started running, we noticed our click through rates were crushing their previous click through rates two, three, four times. But the CPMs were also two, three, four times. So we were ending up with traffic that wasn’t much. It was actually less profitable because we were getting this traffic for around the same cost per click, but they were converting less often, they were spending less money. After doing some research, inevitably we figured out that the Facebook at some point had decided to show their ads more frequently to the older population, which the client had reported to us is not their buyer. He said these people love our product, they’re interested, but they don’t buy.They just look at it. We think the price is a little bit high for them, they can’t stomach it, so they don’t buy. So when we excluded all of those audiences and we just targeted the people that he told us were the best people for them, what we inevitably saw was the CPMs came down in a huge way, which is very counterintuitive to what you’d expect on Facebook. But we saw the CPMs went from 25 to 30 dollars down to sub ten, seven, eight, nine dollars. So now the math equation for profitability has had a significant boost and it’s going to be way easier for us to make things work. But interestingly, similar to what I was saying, the click to rates were cut by about a half, maybe even two thirds, and those people were converted at a much higher rate, though. So CPM is one of those things that you can influence by doing certain things in the ad account.If Facebook doesn’t like your ads, you have lots of disapprovals, lots of low quality ads, nobody’s converting, you’re going to have high CPMs. Facebook’s penalizing you for creating a bad user experience. But if you instead are creating ads that people engage with, they convert really well. They like them, they give value. Facebook will reward you with lower CPMs because they want everybody to see your ads because you’ve demonstrated that you have a good user experience. So those are the ad metrics. Obviously, you’ve got your ad metrics and your funnel metrics. So again, if you don’t already, you want to have baselines for your whole funnel. What should my CPMs be? CTR all. Again I’m using on Facebook. CTR Link. I use both of those.Those are good ad level metrics to see how people are engaging.So if I have a super, super high CTR All, but low CTR link, that means somewhere in my ad copy or my video, I’m losing people. I have a high percentage of people that are clicking See More or clicking Play, or clicking like, or clicking on the button, but people are not sorry, not clicking the button, but aren’t clicking on the button to go to the website. And so then you need to look at your ad a little more closely. Obviously, maybe your thumbnail, your image, your headline is engaging. It’s getting people’s attention. But once they look at that ad copy or watch your video, they lose interest. So at that point, you want to look at, are we targeting the right people or is it just that our ad needs to be reworked? So using the ratio of Click to Rate all to click to rate link can be really powerful for helping you hone in on what part of your ad is broken. If you got a high Click to Rate All, your headline’s good, your thumbnail is good, your opening text to your copy is good. It’s the body copy of the video. Same thing, vice versa, though. So what I mean is, I wouldn’t want to reinvent all of it. I would stick with the assets that are working. I would just change the rest of the video or the rest of the ad copy. And that’s one of those ways that you make these data driven iterations. Instead of completely reinventing the ad, possibly having the same situation, you take the ad, you keep the pieces that were good, you fix the pieces that were broken, then you launch again, and then you ask CTR All still good. Did we move the CTR Link at all? Did it improve or decline? And then you can make those adjustments and continue to do that over time. And that’s how you make success inevitable with media buying. So hopefully that makes sense. Again, CPC is kind of a math equation of the CTR and the CPM. You should know where it needs to be for your business. What is the max CPC you can tolerate based on your conversion rates and AOV? And then that obviously lets you pretty quickly identify whether or not the ads are meeting your expectations. In the past, it’s been really nice.You could do some intraday optimization on Facebook, launch ads, launch a ton of ads in the morning, kill the ones quickly that don’t work. Now there’s up to 72 hours delay on Facebook’s data, so it’s not quite as easy for you to make some of those adjustments. But still good benchmark for you to know, to be able to quickly look at whether or not your ads are meeting your expectations or not. So that’s it. That’s the funnel metrics, the ad metrics, what they mean, how to use them. If you have any questions on this, definitely feel free to leave me a comment or let me know. Again, if enough people reach out, what I’ll do is I’ll just turn the spreadsheet we use internally into some sort of a downloadable asset that everybody can use, so you can have the various business models that people run ads to, webinars VSLs, sales pages, and you’ll have the sort of industry standards for benchmarks. So you can plug your own data in there and you can quickly see whether or not your funnel matches up with where it should be or where it could be. But other than that, if you have any questions, let me know, and we’ll see you guys in the next video. Bye.