Facebook Ads: The Metric for Measuring Success and ROI

I published a post for AgoraPulse today called Know Your Facebook Ad Metrics: Those You Use and One You Should. It’s a good overview of what all of the various Facebook ad metrics mean and how you should use them.

I felt that the bottom portion of that post was a good jumping off point for a separate post here. That portion focused on the metric you aren’t using, but you should.

The typical marketer focuses on CTR (Click Through Rate), CPM (Cost Per Thousand Impressions), CPC (Cost Per Click) and number of Actions. Those are all good metrics to follow, don’t get me wrong, but they do not determine success or failure of your campaign in and of themselves.

Facebook Ad Campaign Performance Metrics

The metric you need to be using is Cost Per Desired Action.

The Flaw of Traditional Metrics

The metric I see discussed most often related to campaign success is CTR. But the problem with such a metric is that it lacks context.

I’ve heard people say that you should look for a CTR over .5%, depending on the ad type. If you surpass 1%, that’s awesome. I’ve seen ads reach as high as 10% CTR — meaning that 10 of every 100 people who see your ad clicked on it.

Here are the problems: Fluffy clicks and a widely varying CPM and CPC.

Regular CPM could be as low as $.15. If you don’t care about quality and target the “right” countries, you can get Cost Per Action (likes) as low as $.03.

Meanwhile, you can also use the Optimized bidding methods, where Facebook targets your ad at people most likely to perform your desired action. In these cases, CPM tends to be at least a few dollars, going as high as $20 or more.

An Example

Below is a hypothetical example involving Ad #1 and Ad #2. Both ads have a Reach of 100,000, Frequency of 1.5 and total Impressions of 150,000.

Ad #1: 6,500 Clicks, 4,000 Actions, 4.33% CTR
Ad #2: 2,000 Clicks, 1,500 Actions, 1.33% CTR

Which ad was more successful?

Hopefully you said: I don’t know! I need more info!

Unfortunately, most advertisers stop here, focusing entirely on CTR. But the CPM of Ad #1 is $9.50 and for Ad #2 it’s $3.00. Splits that can easily happen, particularly if Ad #1 is Optimized CPM and Ad #2 is regular CPM.

Based on that, here are a few more stats…

Ad #1: $.22 CPC, $1,425 Spent
Ad #2: $.23 CPC, $450 Spent

Which ad was more successful?

Hopefully you again said: Jon! Dude! I need more info!

Once again, many advertisers worry about the CPC. They’re on the right track, but “Clicks” typically include many uneventful things that pad the stats.

And one more stat…

Ad #1: $.36 CPA (Cost Per Action)
Ad #2: $.30 CPA

For the purpose of this example, I’m going to assume that all Actions measured here are “Desired” Actions. But understand that you may need to sort this out a bit more since depending on the ad you may get Actions that aren’t directly related to success.

In the example above, Ad #2 is more successful and efficient at driving the desired action. But such information is buried — and not displayed within the main Facebook Ads Manager interface.

Cost Per Desired Action and ROI

The reason why you want to isolate the Cost Per Desired Action is so that you can measure ROI. How many Likes, Conversions, Sales or Leads did you get per dollar spent on your ads? And how much revenue directly resulted?

Before you get to ROI, you first need to optimize your ads to determine which are most efficient at driving the desired action. Once you stop those that aren’t working and ride those that are, you can compare your cost of advertising to the direct revenue that resulted.

We don’t talk about direct ROI very often when it comes to Facebook marketing, but here is a case when it’s absolutely possible — and recommended.

Following are some examples of Desired Actions based on types of ads you may be running:

* NOTE: If you are using offsite pixels to measure conversions (purchase, lead, form submission, key page view) that result from your Facebook ad, those conversions would represent your Desired Action.

As mentioned earlier, there is no CPDA (or CPA) metric within the Facebook Ads Manager interface, so you’ll need to calculate that manually. There are a few methods described in detail in that post I wrote for AgoraPulse.

Your Turn

How do you measure success of your Facebook ads? Do you do something similar or something completely different?

Let me know in the comments below!