What Is a Digital Advertising KPI?
Define your key performance indicators for digital advertising success.
Digital Advertising KPI
What is a digital advertising KPI and how does it differ from other advertising KPIs?
Key performance indicators (KPIs) are metrics that measure how well a campaign is performing. In traditional advertising, such as on the television, a KPI might be calls — how many customers call your company after seeing your ad?
Digital advertising KPIs are a little more complex because there are so many metrics to follow. KPIs for a paid advertising campaign could include impressions, clicks, contacts, and marketing demographics.
Today, when someone clicks on a paid ad, the advertiser can see how much time they spent on their site. They can track their activity throughout the site. They can identify the individual’s age, gender, and location. They may even be able to see things such as whether it’s rainy at their location at the time they click, what their income probably is (based on zipcode), and what other sites they frequent.
The advertiser must take this information and convert it into something more manageable — this is where KPIs come in. Key performance metrics are used to pare down to what really matters. Often, this is customer conversion. An advertiser may track how many people clicked on an ad and actually completed a purchase. Alternatively, an advertiser may just track traffic, social media follows, or other similar relationship-building activities.
KPIs are used both in relation to the industry and relation to the company’s prior performance. If restaurants often have a click-through rate of 0.04% and your restaurant has a click-through rate of 0.01%, there may be an issue. Likewise, if your restaurant had 30,000 unique visitors last month and only 15,000 this month, there may be an issue.
So, KPIs are used to track the performance of an advertising campaign — and to determine whether that campaign is succeeding or failing based on prior performance and comparable performance.
Understanding digital KPIs isn’t necessarily the challenge. But many companies find it difficult to track their KPIs because they’re advertising on so many channels. For instance, a company can track a paid ad. But they need to go a step further to track the user through their sales funnel; otherwise, they will only see the user clicking on their site, and won’t know whether they converted to a sale.
Digital Marketing Metrics
Digital advertising KPIs are a subset of other digital marketing metrics. As noted, digital marketers get a huge array of marketing metrics. On your website, you might see:
A user’s referrer.
How long they stay on your site.
Where they go on your site.
What they purchase.
Who they are (in basic demographics).
But that’s not necessarily the advertising KPIs you want to track. Key performance indicators are just that — the most important performance indicators you have. So, your KPIs might be:
How many people are making purchases from which referrers.
How much they’re purchasing over their lifetime (customer lifetime value).
A KPI might be the amount of traffic you’re getting from web search, as well as the conversions you’re getting from web search. You might see that your traffic is going up, but your conversions are going down. Or you might see that your conversions are going up, but your customer lifetime value is going down.
These digital advertising KPIs yield insights that you can use to improve your advertising campaigns.
Marketing KPI Examples
Today, a lot of digital marketing is done through social media. So let’s take a look at some digital marketing KPIs for Facebook. Facebook provides a robust marketing platform. You can run ads, promote posts, or boost events. Marketing KPIs could include:
How many follows your page has/users your group has.
How many people are engaging with your posts.
How many people are clicking on your links.
How many people have signed up for your events.
How many people have purchased an item through Facebook.
But what’s notable is that only some of these are solely on the Facebook platform. The first four can be seen on the Facebook platform. But the last, fifth (“How many people have purchased an item through Facebook”) requires that you be able to track Facebook interactions through your website.
On your website, you would need to track Facebook as a referrer. From there, you’d have to be able to see that they converted through the website.
That’s just one of many marketing KPI examples. It’s important to note that you do need to be able to track marketing through multiple channels; otherwise, you’re not going to be able to tell how effective your campaign really is.
Advertising Metrics
Is the advertising metrics definition the same as the advertising KPI definition? No, it’s very different. Let’s take a look at some advertising metrics to understand the difference.
When it comes to your website, your advertising KPIs might include traffic (hits) and purchases (commitments). But your website will likely also collect information such as the demographics of your audience.
The demographics of your audience isn’t necessarily a Key Performance Indicator (KPI). But it’s still an important metric. You will be able to see how your traffic is, for instance, for men ages 25 to 35 compared to men ages 35 to 55. Perhaps you’ll see that men who are older are far more interested in your product.
It’s something that you should consider when developing your advertising. But it’s not necessarily a KPI — it’s not telling you how well you’re performing overall. KPIs are designed to tell you, at a glance, whether your campaigns are working and how well they’re working relative to the past. If they are too detailed or too specific, then they become useless for this function.
ROI and KPI in Digital Marketing
What about ROI and KPI in digital marketing? How does ROI fit into the digital marketing KPI dashboard?
ROI is always an important metric. Return on Investment shows how much money you’re actually getting for your advertising spend. In the digital advertising world, you might also be inclined to track ROAS — Return on Advertising Spend. It’s similar, but a little more specific.
ROI is a KPI; if your ROI is going down, something might be wrong. You may have reached market saturation. You may have plateaued. Or perhaps the needs of your market have changed.
But ROI isn’t the only or even most important KPI. The key issue with ROI is that while ROI can tell you whether your results are improving or getting worse, it can’t tell you why. ROI relies on other metrics to tell you why the campaign is performing as it is.
Of course, better ROI is always preferred. If your organization’s ROI is much worse than other organizations in your size or industry, it’s indicative that you need to change your organization’s strategies. Similarly, if your organization’s ROI is much worse than your organization last quarter, there’s been a shift that you need to address.
KPIs for Display Ads
Display ads are one of the most common types of digital marketing. So, what are the most popular KPIs for display ads? For display ads, there are:
Impressions. This is how frequently an ad is viewed. In the old days, ads were charged per impression. Today, they’re often charged by click.
Clicks. This is how often someone has actually clicked on the website. Often, there’s validation that the individual actually got to the website.
Conversions. With the right tracking tokens, you can tell which clicks actually led to a conversion. You can even see “who” the user was by tracking them through something like Google’s network.
Impressions, clicks, and conversions are some of the most important KPIs related to performance. But there are also cost-per-click metrics (how much each click is costing you) and, of course, ROI.
Those are your KPIs. Your metrics might be different. Your metrics could include things like what hours people are visiting you, what demographics they’re from, and so forth. Both metrics and KPI are critical for a solid marketing campaign.
Marketing campaigns require a lot of data. Consider: it would be hard to modify your campaign at all if you weren’t sure what your current conversion rate was.
Programmatic Advertising KPIs
When it comes to programmatic advertising, your KPIs will be generally the same. But you’ll also be focusing on specific programmatic advertising KPIs, such as the bid cost of your advertising. A programmatic campaign is going to “bid” on ads and purchase ads based on its own programming. So, you will want to keep a better eye on your ROI and your ROAS.
For programmatic advertising, you’ll want to know exactly how much value your campaign is bringing in. You may be concerned about your customer lifetime value or your average order spend. And you will want to know whether your ROAS is trending upward or downward.
Otherwise, you will be concerned about the same KPIs: impressions/views, clicks/visits, etc. And note that the same verbiage may be used across different platforms to mean different things. A “view” of an ad could be an impression, view, or awareness. A “click” of an ad could be a click, visit, or traffic.
Because these important KPIs can be called different things (and even recorded differently), an advertising intelligence system is required to ensure that the data has been properly sanitized and consolidated.
