When it comes to optimizing Facebook ad campaigns, data is the answer.
But just like too much chocolate can make you sick to your stomach, too much data can make optimizing your campaigns a real nightmare.
What’s working? What’s broken? Which Facebook ad metrics should you pay attention to? Which metrics should you downright ignore?
It can get really complicated, really fast.
Here are 5 important metrics you need to know in order to determine if your ad campaigns are helping your business grow or simply burning holes in your pockets.
1. Cost per action (CPA)
As a business owner or marketer, your job is to get your target audience to take action. Depending on your business, the action you want your audience to take can be a number of things, like:
- sharing, liking or commenting on a piece of content
- subscribing to your blog
- watching a video
- downloading your whitepaper
- adding a product to their cart
- purchasing a product
If you’re able to determine how much you can afford to pay for that action while at least breaking even, then you’ve got a solid metric for gauging the success of your campaign.
Using CPA to measure campaign success
Here’s why it pays (quite literally) to know the cost per action (or actions) that matter for your business…
Say you run an e-commerce store and 1 out of every 5 people that add something to their cart end up making a purchase (that’s a 20% conversion rate). Furthermore, your average order value is $100.
That means, over the long run, you need an average of 5 people to add a product to their cart in order to generate $100 in revenue (1 sale).
Therefore, 5 add to cart events = $100 in revenue.
Knowing this, how much can you spend for each add to cart event without losing money (profit margins aside)?
I’ll spare you the math. You can spend $20 per add to cart event.
That right there is your cost per action. In this example, it’s considered your cost per add to cart.
Pay anything more than $20 per add to cart and you’ll lose money. Pay anything less than $20 per add to cart and you’ll make a profit.
This was an oversimplified example—we’re not factoring in customer lifetime value, profit margins, etc.—but it shows how important the cost per action metric really is when it comes to analyzing campaigns.
Here’s how to setup your own cost per action metrics:
- Login to your Facebook Ads Manager
- Click on Columns > Customize Columns.
- Type “Cost Per” into the search box
From there, you’ll have access to all the cost per action metrics made available to you, based on the custom conversions and standard events you’ve already set up:
Some of the more popular options are:
- Cost per purchase
- Cost per add to cart
- Cost per lead
- Cost per mobile app download
- Cost per video view
- Cost per page like
The metric you choose to use will depend on your marketing objective and the type of ad campaign you’re running. Keep in mind this will only work if you have custom conversions or standard events setup. If this all sounds foreign to you, I suggest you read Facebook’s guide on Conversion Tracking and go from there.
2. Click-through rate (CTR)
Many marketers bash the age-old click-through rate because they argue it’s only a small piece of the puzzle.
It’s true. If your more important facebook ad metrics like cost per purchase and cost per lead are low enough to make your campaigns profitable, what do you care about a low 0.3% click through rate?
It’s a valid argument, and I’m all for revenue-based metrics rather than click metrics (more on that later).
But still, click-through rate is a great way to gauge how well your audience is responding to your ad creative.
How to analyze click-through rates
As a rule of thumb, we let our ads hit the 10,000 impressions mark before making any decisions based on CTR.
For smaller budgets, we may cheat a little (shhh!), but for the most part, this is enough ad impressions to start turning off certain creatives and re-allocating budget to those with higher click-through rates.
Typically, anything below 1% CTR gets turned off because we’re confident that we can do better than that (we’re talking regular old banner ads here…CTRs on other ad formats are typically higher).
Ads in the 1-2% click-through rate range are closely monitored and analyzed alongside their relevant cost per action metrics to see if, at the end of the day, they’re actually generating revenue.
We’ll also try to be more direct with our ad copy and call to action to let the user know exactly what they’ll be seeing on the other side—this usually bumps up our CTR a bit.
If that doesn’t cut it, we’ll turn those ads off. The creative or ad copy is likely the culprit, and rather than waste time trying to figure out what’s broken, we focus on improving our winners.
Ads in the 2%+ CTR range make the second round, and we try to bump that number up over time as high as possible by testing “similar but different” ad creatives and copy (AdEspresso is a godsend for this).
Sometimes we get lucky and hit 5%+ CTR to cold traffic right out of the gate:
Those campaigns usually turn into unicorns, and we run them as long as we can.
In general, if we notice low CTRs across the board, we know we’ve got an audience problem on our hands.
In that case, we’ll go back to the drawing board and figure out exactly who the intended audience is, how we can reach them, what their pain points are, and what kind of message is going to cause them to take action.
Now you’re probably asking yourself, “but isn’t that what relevance score is for?”
And you’d be right!
Problem is, the relevance score metric is based on a whole bunch of other factors like cost per click, cost per 1000 impressions, frequency, click-through rate and more.
Put simply, the relevance score doesn’t give you any actionable takeaways that you can use to improve your campaigns.
There’s a better metric to use as an indicator of success, and it’s number 3 on our list.
3. Cost per thousand impressions (CPM)
Cost per thousand impressions (CPM for short) is the perfect metric for getting a bird’s eye view of an ad set’s performance.
If it’s your first time running Facebook ads or if you don’t have much account history, then analyzing your CPM metrics won’t give you much insight.
But if you’ve spent a bit of money and have some data to play with, CPM might just be the metric you’re looking for.
CPM is what I like to call the easy metric because it’s the perfect benchmark to use when comparing different campaigns and ad sets against each other.
Using CPM to compare facebook ad campaigns
Once you have a few campaigns under your belt, you’ll have a good idea what your average CPM is—that is, the average cost for you to show your ads to your intended audience 1,000 times.
For example, here’s a screenshot of a campaign we’re managing where the average CPM across campaigns is $5.34:
Armed with this knowledge, we’re able to compare any future campaigns we create to the average CPM in order to determine whether we’re paying more or less than usual.
If we notice a campaign is running at something like $15 CPM, we can turn it off right away without having to dig into any other data because we know it’s not as profitable as other campaigns we’re running.
Monitoring CPMs also allows us to compare different ad sets against each other. Below, both ad sets served just over 80,000 impressions, but the cost per thousand impressions (CPM) of the ad set highlighted in green was almost $2 cheaper than the ad set highlighted in red:
In this case, the revenue generated from both ad sets was similar so we kept both of them running, but over the long run, the campaign with the cheaper CPM would most likely have crushed the other one.
Another upside to monitoring CPMs is that with limited ad budgets, it can help you decide early on where to spend your money in order to maximize your ad impressions and essentially your reach.
Speaking of reach, it’s never good to reach too many people too often…
Frequency is the average number of times your ad was served to each person.
For the mathematically inclined, Frequency = Impressions / Reach.
As marketers and business owners, we obviously want our target prospects and customers to see our ads (what else are we paying Facebook for, right?), but there’s a happy medium to how often they should see those ads.
Too little and your message just won’t get across. Too much, and you’ll annoy the hell out of people.
But that’s not all. Your frequency has a huge impact on how much money you hand over to Facebook, too.
How to keep facebook ad frequency in check
Massimo Chieruzzi, founder and CEO of the Facebook Ads tool AdEspresso, sampled over 500 campaigns looking for a correlation between frequency, campaign performance and ultimately cost. Here’s what he found:
The impact of frequency on click-through rates and cost per clicks – img source
The study shows that, as frequency increases, click-through rates decrease and cost per clicks increase.
Put simply, if you were to let an ad hit a frequency of 9, you’d be paying 161% more per click than when you first launched it and had a frequency closer to 1!
That’s why frequency is a key facebook ad metric to monitor when analyzing your campaigns.
To give you an idea of what level of frequency to aim for, here’s a table from the same study mentioned above:
At a frequency of 5 is where things really start to ramp up – image source
As a rule of thumb, when your frequency hits 5 you should re-assess your campaign and see if you’re still being profitable with the extra costs incurred due to the increase in frequency.
Remember…keeping a frequency of 1 just to keep costs low is NOT the answer.
People need to see your ads a few times before taking action (sometimes even 7+ times!). It’s all about finding the happy medium that gets your prospects to take action while still remaining profitable.
Tip: The key to fighting high frequency is to rotate different ad creatives in order to keep it under control. If you’ve exhausted all of your creatives and your frequency is still higher than you’d like, it may be time to find a new audience to target.
I’ve saved the best for last.
You’re advertising on Facebook for one reason, and that’s to make money. Whether it’s by generating direct sales, capturing leads, or getting more people in the door to your brick & mortar store, getting more money than you put in or at least breaking even to acquire new customers is what you’re after.
Whether it’s by generating direct sales, capturing leads, or getting more people in the door to your brick & mortar store, getting more money than you put in or at least breaking even to acquire new customers is what you’re after.
The best way to measure the success of your investment is by monitoring the ROI and ROAS of your Facebook ads.
ROI stands for Return on Investment (Revenue – Cost / Cost) and measures the profit generated by ads relative to the cost of those ads.
ROAS stands for Return on Ad Spend (Revenue / Ad Spend) and measures gross revenue generated for every dollar spent on advertising.
One isn’t particularly better than the other. Business owners usually measure both to get a good grasp on the success of their marketing campaigns.
If your conversion tracking is set up properly, you can have the revenue numbers you need to calculate ROI/ROAS imported directly into the Facebook ads manager. This way, you can tie revenue back to specific ad campaigns, ad sets and ads:
Here, the data shows us that $500 in ad spend resulted in $10,008.60 in revenue for our client’s business.
That’s an ROAS of 2001% percent ($10,008 / $500), or just over $19 generated for every $1 spent on Facebook ads!
This is what a winning facebook campaign feels like – gif source – GIPHY
It’s safe to say we ran this campaign as long as we possibly could (you can read the full case study along with how we did it here).
But the key takeaway is this…
We only knew this was a winning campaign because we were able to measure our return on ad spend and return on total investment.
If you take revenue out of the equation, you’re left to analyze the other metrics on this list that don’t paint a complete picture.
That’s why it’s crucial to have your Facebook pixel and conversion tracking set up properly from the get go—so that you can pull in the website purchase conversion values which are needed to calculate ROI/ROAS.
If you’re not sure that your pixel and tracking are set up properly, Facebook has great documentation on how to set it all up here.
Now the million dollar question—what ROI/ROAS should you aim for?
Only you can answer that question because it depends on many things like profit margins, customer lifetime value and more.
However, if you’re in business, you should know your numbers and what level of ROI/ROAS you need to achieve in order to break even or turn a profit.
When it comes to analyzing facebook campaigns, it’s important to look at both revenue-based metrics (ROI, ROAS) and creative or ad-based metrics (CPA, CPM, CTR, Frequency). Checking these metrics regularly will give you a good idea of how your campaigns are doing.
Keep in mind that Facebook has a mind of its own sometimes, and metrics can jump all over the place for a wide variety of reasons.
If not, then you’ll want to dig deeper into the data and analyze the facebook ad metrics I just shared with you to figure out what’s wrong and adjust accordingly.
If all else fails, then hire some help or get a fresh pair of eyes to look at your campaigns.
Which facebook ad metrics do you pay attention to when optimizing campaigns? Leave a comment below!
Ben is our Facebook Ads Specialist and is responsible for generating thousands of quality leads for our customers in the replacement & remodeling industries. When he’s not busy launching new campaigns, he squeezes in time to write helpful posts on the Webrunner blog.