Display performance 101: Conversions and conversion rates

Part of what makes online display advertising interesting is the fact that it allows you to track performance. That and many ways in which you can get granular with the details on who you want to show your display ads to. But more on that another time.

With digital marketing, you have the tools that enable you to find out how you’re measuring against your objectives. Still, good tools aren’t enough. You also need to select the most relevant metrics.

For a lot of marketers and in a lot of situations, CTR (Click-through rate) is chosen as the default performance metric. And it’s not hard to understand why.

Within a short time, CTR provides insight into how well people respond to your display ads. The higher the clickthrough rate, the better the ads and the campaign. Right?

Well… think again.

A high clickthrough rate doesn’t tell you anything about the quality of visitors that you’re bringing in. For instance, your campaign might be getting a 0.3% CTR, more than 3x the average clickthrough rate for display ads. Still, if you dig a bit deeper, the bounce rate on your campaign could be 95%. Something’s not quite right if 95% of clicks just leave.

No doubt, for Google Adwords search ads, CTR is important because it is included in the quality score. A good CTR in search engines means a better quality score and lower costs for your campaign. However, quality score applies only to search ads, it doesn’t apply to display advertising campaigns.

The next performance metric is CPC. There’s a silent rule of thumb here: a high CPC means low performance.

Like with CTR, that’s not necessarily true. Even if you pay more for each click that you get, if the clicks are relevant, they’re ultimately worth the price.

So with CTR and CPC out of the question, what would be a good performance metric? Conversions and conversion rate.

Umm… what’s that? Conversion?

For those of you who don’t know, conversions represent important actions for your business that users complete on your website.

Conversions are the best way to measure performance because that’s why you’re really advertising. Because you want to increase sales or the number of leads you get. You don’t want clicks and you don’t simply want low CPCs.

The most common example of a conversion is a sale, whenever someone buys something from you. There are also other types: filling in a form, account signups or free trial signups. You can set up conversions on page view, for instance the thank you page that someone sees after they’ve made a purchase.

How to measure performance using conversions

You can easily see how well your campaigns are performing by calculating the conversion rate for your campaigns. Conversion rate represents the percentage of people that complete an important action on your website from those who click your ad.

Conversion rate = number of conversions/number of clicks *100

Also, while conversions and conversion rate are important, there’s one more element that matters. To calculate the actual return on investment for your campaigns, you need one more piece of information: conversion value.

Let’s take the following example. You have campaign A that brings in 30 conversions at 1% conversion rate. You also have campaign B that brings in 15 conversions at 0.8% conversion rate. At first, you’d say that campaign A performs much better than campaign B.

Still, let’s say that the average conversion value for campaign A is $30 and for campaign B is $85. Now, the profit you make from campaign A is $900 and the profit you make from campaign B is $1275. Things look a bit different now, don’t they?

Provided that you invested an equal budget in those campaigns, campaign B yields a much better return on investment than campaign A.

Click through conversions and view through conversions

With display campaigns, there are two types of conversions: click through and view through.

Click through conversions are recorded when a user views your ad, clicks on it and converts on your website. View through conversions are recorded when a user views your ad, does not click on it, but returns later to your website to convert.

You should know that the value of view through conversions has been very much debated. There still are a lot of marketers who argue that view through conversions have little impact and they’re just a waste of money. However, there are studies that show how display ads drive an increase for branded search terms, phenomenon known as search lift from display ads.

Even if they don’t lead to direct purchases, view through conversions can help you build brand awareness, especially in retargeting campaigns.

How to start using conversion tracking

So, we’ve explained why conversions and conversion rate matter. We’ve also shown you why you should use it when evaluating campaign performance. But what do you need to do in order to start getting this information?

1. Decide what a conversion means for you. Is it a new sign up or a purchase? Why are you advertising?
2. Install conversion tracking and/or set up your conversions.

Conversion tracking is a free tool available in most advertising platforms. Some advertising networks provide a conversion pixels for each of the conversions you want to track. Google, Facebook and Twitter work like this. You can generate a different pixel for each of the conversions you want to track and send the code to your webmaster or install it yourself if you have direct access.

Other platforms provide a single tracking code that you need to instal on all your pages and define your conversions afterwards. Bannersnack, for example works like this. You get one tracking code to install on all your pages. Once you’ve installed the tracking code, you can define conversions on page view, form sign up or on engagement right from your account.

There are also advertising platforms that do not provide any conversion tracking. Facebook didn’t in the beginning and currently, neither does Linkedin. There still is a workaround for this, but you need to have Google Analytics installed (most website owners do). You can set up goals in Analytics, tag your ads URLs with the appropriate parameters and use that to see how well your ads are performing.

However, whenever available, it is highly indicated that you use conversion tracking. Not only do you get to see exactly conversions from the ad platform reporting, but you can also use the information to further optimize your campaigns once there is enough historical data to work with.

Also, don’t forget to assign a value to your conversions when you set it up. Even if you don’t get exact data on the purchases, assigning a simple average value can show you the return on investment from your campaign. A/B testing is always a good idea.

Conclusion

The creator of Nike is famous for saying that half of the money invested in advertising is wasted, but unfortunately we don’t know what half. Online, that’s not the case. With proper metrics and using conversion tracking, you can easily learn how your ads are performing and where you need to invest more.