If you’ve been running ads on Facebook, you’ve probably seen all of the metrics that you can monitor to make sure that you get the best results from your campaigns. In fact, there are more than 145 metrics accessible on the business manager to help you determine whether or not your ad is profitable for your business or not.
When you run ads on Facebook, you of course have to look at the basic indicators such as the number of likes, shares, comments, reach and so on, but also what happened after your target audience interacted with your ad by tracking the action on your website or app, like the number of email signups or installs, purchases, and leads, for instance.
And that’s when Facebook’s ad metrics can get confusing and overwhelming. There’s just so many things that you can track and try to optimize on Facebook that it can get tricky to figure out what really matters or even where to start! That’s why we’re giving you a list of 7 metrics that are relevant to most businesses and that will help you get started monitoring your stats and optimizing your ads.
- Return On Ad Spent (ROAS)
- Lifetime Value (LTV)
- Cost per Purchase
- Click Through Rate (CTR)
- Conversion Metrics
- Cost Per Action (CPA)
Impressions correspond to the amount of times your ad has been seen. Impressions are equal or higher than the reach number as the reach gives you the number of how many people were exposed to your message.
The number of impressions is a key metric when it comes to brand awareness campaigns as it directly gives you the amount of times your message has been spread out there on social media.
It is possible to buy your ads on Facebook by impressions. But keep in mind that depending on the placement of your ad, prices may vary. As a general rule though: the bigger and the more central your ad is, the more expensive it is. That’s why advertising in the news feed on Facebook will have a higher CPM (cost per mille, or the cost for a thousand impression), than on the right hand column ad space.
Regardless of it you are doing an impression campaign or not, impressions are still a metric to track and monitor. It gives you an idea of how many people have been reached and how many people have potentially seen your message on social; even if your primary goal is to drive conversions, or email signups, or anything else really. The number of impressions, in relation to the reach gives you the frequency. A frequency of 1 indicates that people were only exposed once to your ad. When the frequency is higher, that means people have been exposed multiple times. If people get exposed multiple times to your ads (a frequency higher than 1.3) that probably means that your targeted audience is rather small.
If you are experimenting with different ads or audiences on the same placement, the right way to optimize an impression campaign is to prioritize the one with the lowest CPM.
#2 Return On Ad Spent (ROAS)
This metric is equal to your revenue divided by your total ad spend. It gives you a pretty good idea of how profitable your ad was. A ratio of 100% means that you broke even. Below that means that you spent more on ads than they generated, and more than 100% means that you got more money than the amount you spent.
This is only a relevant metric to track if you are running a campaign that is directly selling something. Of course, if you are advertising your brand or just raising awareness, you may not have ROAS of a 100% or more.
ROAS might not be a metric to look at if you are running an ad for email signups or lead acquisition. Because these email signups might not be an immediate source of revenue for your business. However, depending on the lifetime value of a subscriber, you can assume if an ad would be profitable or not. For example, if you spent $100 on an ad and got 4 new leads, and these leads will end up spending $40 each on your products during the year, we can say that the ROAS is above 100%. However, if you looked at it right after your ad ended, the ROAS you saw was 0%.
And that’s what ROAS is for most marketers. However, it is very unlikely that Facebook ads are the only cost of your business. That means that not only your ads should generate more than what they cost, but they should also create more value than what your business cost to run. That means that your actual ROAS can be calculated by dividing your revenue by the sum of your total ad spend and all your other costs (think of softwares, employees, stocks, products to buy, freelancers and so on).
But the result is roughly the same: if it gives you a ratio of more than a 100%, you’re profitable.
#3 Lifetime Value (LTV)
The Lifetime Value is not directly provided by Facebook, but it is an estimate calculated by multiplying the average customer value with the average customer lifespan.
To put the ROAS in perspective, understanding the idea of the lifetime value can be really helpful. The lifetime value of a customer is the projected revenue that the customer will generate during their lifetime.
It is the average value that a customer would generate from the moment they become a lead, to the moment they either stop being a customer, or exit your funnel. It is quite hard and complex to come up with a specific formula to calculate the lifetime value of a customer as it highly depends on your business model and on the sort of product that you are selling (subscription base, one-time purchase, e-commerce, and so on).
By understanding and by knowing the lifetime value of your leads, you can then get a better understanding of your ROAS with lead generation campaigns as that ratio will become relevant. If the lifetime value of a lead is $140 and generating that lead cost you $100, then your ad should be profitable – as the lifetime value is an average and/or an estimate.
It is, of course, always crucial to work on improving the lifetime value of your customers. However, if that value reaches a plateau, you can always work on getting more customers to increase the revenue of your company. There’s a limited amount of things your customers can buy and if your conversion rates are already good and optimized, there might not be a lot of lever that you can play with to improve that average value per customer. That’s when acquisition becomes key as getting more customers will be the only variable you have to grow your business.
#4 Cost per Purchase
If you have the Facebook pixel installed on your site or app SDK implemented (which we highly recommend you do), this metric is tracked automatically.
This metric is calculated per ad and it will give you the amount of money you spent on an ad to get a purchase. For example, let’s take an ad that spent $200 and generated 10 purchases.. To get the cost per purchase, divide the amount of ad spent by the number of purchases, and get a cost per purchase of $20. If, for example, each purchase generated a revenue of $50, then this specific ad will generate a $50 revenue for every $20 spent, on average.
What you are looking for, is a Cost per Purchase that is inferior to the price of the product that you are selling. In the previous example then, your ad was profitable.
The cost per purchase is useful to understand if a specific ad is profitable or not, or if running it is making you lose money. However, keep in mind that the ad might not be the only cost you have to put in to make a sale. If you take dropshipping for example, you’ll still have to buy the product from a retailer and send it to your customer. That means that if your cost per purchase is pretty close to the price of the product, your ad might not be profitable in the end!
The cost per purchase will help you understand however how much an ad is costing you to run and generate sales: if that cost is superior to the price of the product that you’re selling, put it in perspective using the LTV metrics as a purchase is not necessarily made immediately.
#5 Click Through Rate (CTR)
The CTR is an indicator of how engaging your ad is. Facebook gives you two types of CTR on their business manager: the link CTR, and the CTR all. The link CTR is the number of link clicks on your ad. And the CTR all is any interaction made with your ads. That includes link clicks, of course, but also likes, comments, shares, swiping the carousel.
Both of these CTR are important as they’re a great indicator of the quality and relevance of your ad. If your CTR is all high but your link CTR is low, that means that your ad itself is engaging, but that your audience is not interested enough to click, or that your call to action is not clear enough. If both of your CTRs are quite close to each other, that means that your ad is performing great and that you’re converting almost all engagements into link clicks. Finally, if none of these rates are high, while you have a decent amount of impressions, that means that your ad is not performing well and that your audience doesn’t feel the need to stop on your content.
The CTR all is what we usually call engagement. It is the number of impressions divided by the number of interactions that your content got. If you are looking to optimize your ads, this is a great metric to look at, because if your ad is not getting any sort of engagement (so, if it has a low CTR), you will be very unlikely to get any clicks on your links, as a link click is far more engaging on a user’s end that just clicking the ‘like’ button.
But, once you are getting a good CTR all ratio, that’s when you can look at your link CTR and adapt your copy to make your call to action more appealing, or to change your offer to make it more interesting to your audience.
#6 Conversion Metrics
Conversion metrics are tracked by the Facebook pixel on your site, or the App Events implemented in your app’s Facebook SDK. Through that pixel\App Event, you’ll be able to track any action taken on your website\app such as an email signup\install, someone contacting you through your contact page, someone adding a product to their cart, a purchase, or pretty much any actionable thing on your site\app. That action is called a conversion.
Depending on the objective of your campaign and the settings you selected, you can calculate the conversion rate which is the number of conversions divided by the number of views. This ratio is not provided by default by facebook and the number of conversions can have different names depending on the objective of your campaign. It will mostly be indicated as the number of Results by Facebook. That ratio gives you an idea of how likely it is for someone seeing your ad and ending up taking action on your site. So of course, you want that ratio to be the highest possible as that would mean that most users that saw your ad will end up taking an action – like adding an item to their cart, or contacting you and so on.
#7 Cost Per Action (CPA)
This one will give you the average cost of a conversion. You can calculate it by taking the total ad spend and dividing it by the number of conversions, giving you the average cost of a single conversion.
The CPR can vary largely depending on your campaign objective, your ad placement, your targeting, your product and so on. There aren’t really specific numbers that you should aim for as every industry, every ad, every campaign is different. But putting the CPR in context with the ROAS or the LTV can really help you understand if an ad is profitable or not in the long run.
Depending on your business model and on your goals with Facebook ads, you may want to have a look at more metrics to make sure that you are on the right path.
However, these 7 metrics are general enough to apply to most businesses and they are a great starting point to make sure if your ads are performing well, if your copy and visual content convert enough, and if your sales funnel / acquisition funnel convert enough, or not.
And at the end of the day, that’s what you want to know when you run ads: you want to make sure that they’re profitable, that they convert well, and that your site is not the weak link of your conversion process.
Just make sure that you can access these metrics clearly on your business manager, make sure that your Facebook pixel\App Events are installed on your site\app and ready to work, and give yourself some time to look at the results of each individual ads and campaigns: focus on the most profitable ones and optimize them! Correct those that perform less, or simply stop running them.