KPIs are indicators of how well companies are performing as compared to their business objectives. They can include numbers such as the yearly return-on-investment (ROI) or profit margin of an investment. KPIs can even be found in sports with common stats such as a player’s points per game (PPG).
In the world of ad tech, advertisers utilize KPIs to measure the performance of their ad placements, whether done in house or via an agency/consultancy. Common KPIs include CPMs, CPAs, CTRs, etc. Although KPIs are useful tools to measure an organization’s performance against its end goals, we must be wary not to let optimization KPIs overshadow the ultimate goals.
Common KPIs
- Cost Per Mille (CPM): The cost of buying 1,000 impressions
- CPM = (Cost of Ads/ Impressions) *1,000
- Click Through Rate (CTR): The rate of which clicks are generated versus the number of impressions served
- CTR = Clicks/Impressions * 100
- Cost Per Click (CPC): The cost of each click
- CPC = Spend/Clicks
- Cost Per Acquisition (CPA): Also known as cost per action, CPA measures how costly it is to drive a consumer to do a certain action, such as make a purchase or register for an email list
- CPA = Spend/Actions
- Viewability: Viewability is an important ad quality metric in ad tech that measures the whether or not an ad actually reaches a set of eyeballs. According to the Interactive Advertising Bureau (IAB) and the Media Rating Council (MRC), a display ad is considered viewable if 50% of the pixels are in-view for at least 1 continuous second. For video ads, the same holds true except for 2 continuous seconds.
- Viewability = Viewable Impressions/Measured Impressions
- Video Completion Rate (VCR): The percentage of all video ads that play through the entire video. There are also the 25%, 50%, and 75% variations.
- VCR = Video Completions/ Video Starts
- Conversions Rate: The percentage of users who undertake in the desired action
- Conversion Rate = Conversions/Clicks
- Return on Investment (ROI): Measures how much profit the initial investment generates
- ROI = Net profit/Total Investment * 100
- Other Key Metrics to Consider
- Revenue
- Cost/Spend
- Profit (Revenue – Cost)
- Impressions
- Clicks
- Fradulent Impressions
- Brand Unsafe Impressions
- Engagements
Aligned Goals
Within a company hierarchy, there can be vastly different goals at different levels of the ladder. Whereas the C-Suite may be rewarded for total company performance and growth, a trader at an agency or trading desk may be rewarded based on the number of impressions or clicks that they can muster. However, it could very well be the case that the trader actually buys many fraudulent and unviewable impressions, thus “performing well” according to their KPIs but actually hurting the overall performance of the company.
An example on the publisher side is traffic acquisition and traffic monetization. Whereas a traffic acquisiton manager may be compensated on the number of users it drives to the site, the revenue monetization manager may be compensated on the amount of revenue it can drive per user session. If the acquired traffic is all from bots, the monetization manager would have a very hard time monetizing traffic!
Ultimately, KPIs are useful tools to gauge company performance over time. However, they should be regularly adjusted and reviewed at all levels of the company to ensure that they promote actions which drive the profitability and sustainability of the company.
Sources
- https://www.linkedin.com/pulse/7-most-important-digital-marketing-kpis-track-rameshwar-thakur/
- https://ziftsolutions.com/blog/2017/09/digital-advertising-kpis-your-keys-to-measuring-performance/
- https://www.digilant.com/digilant_university/programmatic-buying-101-digital-marketing-kpis/
- https://blog.adext.com/en/important-kpis-measure-digital-marketing-advertising-strategy
- https://datorama.com/blog/2018/05/23/top-advertising-kpis-paid-media-dashboard/
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