Scratching the Surface of Social Media Advertising

What Is A KPI? And Why Does It Matter?

Understanding your business’ performance on social media goes much farther than the amount of likes, shares and follows a post or page has. It is important to also know the who, what, where, when and why of your business’ campaign efforts.

A business can understand a lot more about themselves, their target audience, and how they are performing by looking at a few key performance indicators on the back end of the platform where the campaign is designed. By doing this, businesses can stay competitive in a fluid market where the environment is constantly changing.

Related: Key Performance Indicators Every Social Advertiser Should Know

Facebook provides businesses with (almost) endless metric options to choose from when it comes to analyzing the performance of campaigns. Let’s take a closer look at some of the more important ones that allow us to gain a better understanding of our campaign efforts.

Understanding Your Levels Of Engagement

When looking at the results of an ad campaign, it is important to take note of the ad engagement. Let’s take a look at reach, impressions, link clicks, and click-through-rate (CTR). Reach tells us how many people saw the ad while impressions tells us how many times the ad was shown. If one person saw an ad three times, it would have a reach of one and three impressions. Simple right?

Now that we understand how many people are seeing an ad and how many times the ad is being seen, it is time to understand how many times our ad is actually being clicked on. Link clicks tells us exactly that; how many times users are clicking within the ad container and being redirected to a particular destination. Click Through Rate (CTR) is the number of times our ad was clicked divided by the number of times it was shown (impressions).

So in short, CTR is the rate at which our ads are actually being clicked on by consumers. Looking at CTR can help businesses to understand whether or not their ad is enticing. If an ad is performing poorly in terms of link clicks and CTR, something probably needs to be fixed. Is the ad copy clear and concise? Does the headline communicate our message well? Is the creative visually appealing and representative of our goal? These are a few of the questions we need to ask ourselves when evaluating an ad with poor CTR performance.

How Your Money Is Being Spent

It is very important to fully understand where our money is going when we run a campaign. We can break down the metrics to determine how much we are actually spending on each of these individual results.

Amount spent is simply the total amount that a business has invested in running an ad. Cost-per-click (CPC) is the amount spent on each click. So, if we were to look at our ad spend in terms of clicks, we can determine how much we are paying out for each individual click. Cost-per-action (CPA) is the amount it costs for a desired action.

Related: How to Use Offline Conversions to Bring Your Digital Marketing Efforts Full Circle

We set our desired action when we are creating our campaign. So if our desired action is purchases, we can track how much we are spending per individual purchase. Maintaining a low CPA is indicative of a well performing ad. Lastly, our Return On Ad Spend (ROAS) tells us the dollars earned for each dollar spent on advertising. To sum it up, we want a higher ROAS and lower CPC and CPA.

Putting It All Together

By keeping a close eye on these KPI’s, businesses can better understand the overall performance of their ads as well as whether or not they are spending dollars wisely. This is especially useful in comparing performance over time or performance across different campaigns. In summary, understanding these metrics and keeping track of them on a regular basis is essential to running successful ad campaigns.