9 Metrics for Measuring Digital Advertising ROI: Tools to Track Success
Ever wondered if your digital advertising spend is truly paying off? In this article, insights from an Owner and a CEO reveal how to effectively measure ROI. Our first expert emphasizes focusing on metrics linking ad performance to revenue, while the final expert highlights ensuring ads are profitable with breakeven ROAS. Discover a total of nine expert insights that will transform your approach to digital advertising metrics.
- Focus on Metrics Linking Ad Performance to Revenue
- Use Key Metrics and Tools for ROI
- Track Revenue Generated with SquidVision
- Monitor CPA and Conversion Rate
- Measure CAC and CLV for ROI
- Gauge ROI with HubSpot
- Combine Metrics for Direct Returns
- Track Full Funnel for Business Outcomes
- Ensure Ads Are Profitable with Breakeven ROAS
Focus on Metrics Linking Ad Performance to Revenue
To measure the ROI of digital advertising spend, I focus on metrics that directly link ad performance to revenue, using tools like Google Analytics, Facebook Ads Manager, and CRM platforms such as HubSpot or Salesforce to track the entire customer journey. A critical metric is Cost per Acquisition (CPA), which shows how much it costs to acquire each customer from a campaign. If the CPA aligns with or is lower than the customer's lifetime value, it's a good indicator that the ad spend is worthwhile. Conversion Rate is another essential metric, tracking the percentage of clicks or impressions that turn into desired actions, like sales or sign-ups, giving insight into how well ads are converting interest into revenue-generating actions.
Return on Ad Spend (ROAS) is particularly useful for e-commerce or campaigns where revenue attribution is straightforward, as it calculates the revenue generated for each dollar spent on ads, offering a direct ROI measure. Additionally, attribution data and multi-touch attribution reporting—available in tools like Google Analytics and HubSpot—allow me to track the entire path a lead takes, from their first click to the final conversion. This multi-touch approach is invaluable for understanding how different ads and channels collectively contribute to a sale. By combining these metrics, I gain a comprehensive view of how digital ad spend impacts revenue, enabling data-driven adjustments to maximize ROI and pinpoint the most effective channels and strategies.
Use Key Metrics and Tools for ROI
To measure the return on investment (ROI) of digital advertising spend, I focus on key metrics such as conversion rate, cost-per-acquisition (CPA), and return on ad spend (ROAS). The conversion rate indicates the percentage of users who take a desired action after engaging with an ad, while CPA reveals how much it costs to acquire a customer. ROAS provides insight into the revenue generated for every dollar spent on advertising, helping evaluate campaign effectiveness.
I utilize tools like Google Analytics to track user behavior and conversion paths, along with ad platforms like Facebook Ads Manager and Google Ads for built-in analytics on campaign performance. Marketing automation software, such as HubSpot, also helps track lead generation and customer journeys. Combining these metrics and tools allows for a comprehensive assessment of digital advertising impact, ensuring strategies are data-driven and continuously optimized for better ROI.
Track Revenue Generated with SquidVision
The best tool we have found to measure ROI on our digital marketing spend is called SquidVision (https://squidvision.com). It tracks revenue generated from your landing pages all the way down to showing you how much revenue each button and link have generated on the page. They also give you revenue by traffic source, so you can see how much revenue your SEO, paid ads, or social media are generating. It makes auditing our digital-marketing channels so much easier.
Monitor CPA and Conversion Rate
To measure the return on investment (ROI) of our digital advertising spend at DIGITECH, I focus on several key metrics, with cost-per-acquisition (CPA) and conversion rate being paramount. By tracking how much we spend on ads versus how many leads or sales we generate, we can assess the effectiveness of our campaigns.
We utilize tools like Google Analytics and Facebook Ads Manager to monitor these metrics in real-time. For instance, when running a pay-per-click campaign, I look closely at the CPA and compare it to the lifetime value (LTV) of a customer to determine if our spending is justified.
Additionally, I analyze click-through rates (CTR) and engagement metrics to refine our targeting and creative strategies. This comprehensive approach helps ensure our advertising spend aligns with our business goals and drives profitable results.
Measure CAC and CLV for ROI
At our company, we measure the ROI of digital advertising by focusing on two primary metrics: customer acquisition cost (CAC) and customer lifetime value (CLV). By tracking CAC, we understand how much we're investing to bring each customer on board, while CLV gives us insight into the long-term revenue each customer can bring. We then use tools like Google Analytics and Mixpanel to dig deeper into user behavior and engagement metrics, which helps us refine our campaigns over time. This approach ensures we're not just chasing clicks but building sustainable growth.
Gauge ROI with HubSpot
It is of utmost importance to gauge the return on investment for digital advertising expenditures. Our principal mechanism for doing this is HubSpot, which enables us to follow the customer trajectory from the initial ad click all the way to the point where they become a closed deal, and even further in some instances. One vitally important metric we pay close attention to is the direct comparison between the customer acquisition cost and the lifetime value of that customer. When it comes to reliability, this is an almost foolproof method for keeping the advertising budget under control.
One example is the ability to not just quantify the number of leads a campaign produces but also to determine which of those leads becomes paying customers, and for what amounts. HubSpot's attribution reporting is very granular, measuring ROI not only by channel but also by specific ad within that channel, which allows us to identify our top-performing campaigns. On one occasion, we identified a specific ad on LinkedIn that had a very high conversion rate and which produced nearly 28% of the revenue from the overall campaign of which it was a part.
With this understanding in hand, we directed more resources toward the types of ads in question, resulting in an overall ROI increase of 15%.
Combine Metrics for Direct Returns
To measure the ROI of digital advertising spend, I focus on a combination of metrics that reveal both direct returns and campaign effectiveness. Key metrics include conversion rate, cost-per-acquisition (CPA), and customer lifetime value (CLV) to understand how much each ad drives valuable actions and long-term revenue. I also track click-through rate (CTR) and engagement metrics to gauge audience interest and ad quality.
Tools like Google Analytics and Google Ads are essential for tracking ad performance and setting up goals to measure specific actions, such as purchases or sign-ups. I use attribution models in Google Analytics to see which ads contribute most to conversions and leverage dashboard tools like Looker Studio to visualize ROI across campaigns. By consistently analyzing these metrics, I can optimize ad spend, adjust targeting, and maximize returns.
Track Full Funnel for Business Outcomes
At Zoovu, we focus on the end-to-end customer journey when measuring the ROI of digital advertising. It's not just about tracking clicks; we look at the full funnel, particularly from problem-unaware to a discovery meeting, to ensure we're driving real business outcomes. I rely on a combination of metrics like customer acquisition cost (CAC), return on ad spend (ROAS), and lifetime value (LTV), using tools like HubSpot, Google Analytics, and 6Sense to get a comprehensive view. We also track how well our advertising campaigns are integrated with sales, ensuring that leads are not only generated but also nurtured through a personalized experience. In my experience, the key is making sure that digital advertising is aligned with sales goals, and ensuring that every dollar spent is contributing to both short-term gains and long-term growth for the business.
Ensure Ads Are Profitable with Breakeven ROAS
Looking for a good laugh? Ask a digital marketer about ROI.
As soon as the conversation starts, you're swimming in a sea of acronyms: ROAS, CPA, CPC, LTV, TACoS (my personal favorite, for non-marketing reasons). It can get a little overwhelming.
My perspective comes down to a simple question: Are the ads profitable?
"Whoa, whoa, whoa," you may be thinking. "Digital ads are a long-term investment. I pay to build awareness and get sales. What's all this talk about profit?"
Well, running a business is about making money (and making a difference, if you ask me). If the money in your business bank account runs out... that's game over. Awareness won't matter. Sales won't matter.
If you keep that big picture in mind, you'll see that digital ad campaigns have to be profitable; if not right away, then eventually. Otherwise, you'll be pushing your business toward the grave with every dollar spent. And trust me, there are better ways to use that money than lining the pockets of Google and Meta.
Now that we're on the same page, let's get down to it: How do you determine if your ad campaigns are profitable?
One metric I like to use is Breakeven ROAS. But let's define ROAS first:
ROAS (Return on Ad Spend) = Ad revenue / Ad spend
It's typically given as a single digit or percentage that represents a ratio (e.g., 2.5 or 250%).
Everyone loves ROAS, but it's a very contextual metric. ROAS only makes sense when it's paired with your average gross margin—the percentage profit you make on a sale.
Why? Let's play out a scenario: an e-commerce business named Fancy Fred's Fireplaces is running digital ads with a ROAS of 5 (or 500%). Sounds good, right? That has to be good.
It turns out, Fancy Fred's has an average gross margin of 10% on each sale. So when Fred spends $10,000 on ads...
- He gets $50,000 in revenue
- And makes $5,000 in profit margin ($50,000 x 10%)
- End result of ads: -$5,000 in Fred's business bank account
Ouch. Not so fancy anymore.
That's why Breakeven ROAS is so important; it's a metric you can pair with ROAS to ensure you're making money.
Now we're ready to look at a definition:
Breakeven ROAS = 1 / Average gross margin in decimal format
Continuing with our example above, here's how to find the Breakeven ROAS for Fancy Fred's:
1 / 0.10 = 10
For Fred to have profitable ads, his ROAS has to be above the Breakeven ROAS of 10. Otherwise, his business is losing money. And probably won't grow. Or even survive.
Make sure that's not you.
