Let’s talk now about the effectiveness of advertising online. In this article, I will touch on such important indicators as the conversion rate, click through rate and return on investment.
Thus, I will talk about each of these terms, and show you how to calculate the effectiveness of advertising online. So, let’s get started!
What is Conversion Rate (CR)?
Conversion Rate or CR – Usually when we speak of conversion rate, we mean that the site, which are all the ads and all the target users, set a specific goal.
Let’s imagine that we have an online store, the purpose of which is to buy goods. For example, on a site within a day comes 2000 visitors. At the same time, a certain number of these visitors make a targeted action (purchase of goods).
Suppose that only 13 visitors made a purchase of the goods. In this case, the conversion is the ratio of the number of users who committed the targeted action to the total number of visitors, multiplied by 100%.
How can you calculate this indicator?
In our case, the evaluation of the effectiveness of advertising will be as follows …
CONVERSION = 13/2000 * 100% = 0.65%
As a result, the conversion was 0.65%. It is the conversion that largely determines the success of the advertising online campaign.
And there will be success on the part of the advertiser’s website, because the effectiveness of advertising online can be increased due to internal factors (landing pages) and external factors (advertisements). That is, increasing conversion is a very important factor in successful advertising campaign.
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What is Click Through Rate (CTR)?
Click-Through-Rate or CTR – The number of clicks for the number of impressions. The clickability determines to what extent your advertising material is attractive. That is, how well an advertisement is made, selected, written and how well the banner is made.
It is clickability CTR is a very important indicator of the effectiveness of advertising online. That is, the conversion rate is the efficiency on the advertiser’s side (on landing pages). And clickability is an indicator of efficiency on the side of the advertising system.
How can you calculate this indicator?
Let’s imagine that we have created a contextual announcement, which for the week scored 3700 hits. That is, 3700 users saw our advertisement.
Of these users, only 87 people clicked on our ad. In fact, we received 87 targeted conversions to the site. Let’s calculate the clickability …
CTR = 87/3700 * 100% = 2.35%
Quite good clickability turned out. For contextual advertising it is low. And for banner advertising this is a very good indicator.
So, click-through rate shows the effectiveness of advertising online on the side of the advertising platform. That is, it shows how well we prepared an advertising campaign.
Keep Reading: 8 Tips For Advertising Online
What is Return On Investment (ROI)?
Next we have a global indicator, which should be monitored by an advertising specialist so that advertising is not an easy source of traffic, but also a source of profit.
You need to track not only the number and cost of clicks (for example, the cost of subscribers or applications for credit). It is necessary to keep track of the amount of money that is returned to the business. So, this is a measure of return on investment (ROI).
How can you calculate this indicator?
Let’s assume that we conducted an advertising campaign with a budget of 100,000 dollars. Caused a number of visitors to the site (for example, in the online store). At the same time, it was with this advertising campaign that orders for the amount of 370,000 dollars were paid.
The costs associated with these orders were 75,000 dollars. It turns out that the net profit was 295,000 dollars. Return on investment will be equal to …
ROI = (295,000 – 100,000) / 100,000 * 100% = 195%
Now I will explain the meaning of return on investment, as the most important indicator of the effectiveness of advertising online. So, imagine that you spend 100,000 dollars on advertising, while you also have a net profit of 100,000 dollars.
Then it turns out that the return on investment is 0%. Thus, the result means a point of profitability. We spend 100,000 dollars and get 100,000 dollars of net profit. We do not have additional profit, but at the same time we pay back all the costs for online advertising.
In order for advertising to be really effective in the context of profit accounting, it is necessary that the ROI be above zero. If we have ROI negative, then we simply lose money and put them in the wrong advertisement. With negative ROI, advertising does not pay off.
Therefore, it is for ROI to be guided when evaluating the effectiveness of advertising online. This is the most important metric in terms of business.
That is, you are doing some kind of test advertising campaign, look at the ROI and count. If the return on investment is positive, then you can increase the investment in this type of advertising.
If the indicator is slightly negative, you can reconfigure advertising campaigns or somehow improve the site’s efficiency (for example, increase the conversion of advertising pages) and bring ROI to a positive value.
If the indicator is strongly negative, then such a source of advertising will not pay off further. It is ROI is a very important indicator of the effectiveness of advertising online, which guides business owners. Therefore, a specialist should be able to calculate ROI for various advertising campaigns.
Conclusion
So, we have analyzed the main indicators that characterize the effectiveness of advertising online. Now you know what is CR, CTR and ROI.
Also, it should not be difficult to correctly calculate and determine these parameters. In general, for a successful advertising campaign online, be sure to pay attention to such indicators. These indicators will help you calculate the effectiveness of advertising online.