CPA or Cost-per-acquisition, is the cost you pay per successful acquisition of a preset goal for your ads. These conversions can be any number of things: a user sign up, a specific page visit or duration, etc.
This post is meant to help you immediately start optimizing your CPA, but first it’s key to understand the fundamentals and recognize the importance of CPA.
A little background
Optimizing CPA lets you budget your campaigns directly. CPA is not measuring partial engagement like CPC or CPM. CPA tells you the average cost of an explicit goal you identify for your campaigns. At AdStage, we use sign ups as a conversion goal. If someone sees our ad, we want them to sign up. Other advertisers may want users to view certain pages or sign up for a newsletter. Different campaigns should have different goals.
Paying via CPA is not option on most networks, but it can always be measured. AdWords is the only major network with CPA as an available cost model. Even in the case of AdWords, it’s only available given certain requirements. From Google’s support page, here are the requirements:
- “Your campaign uses AdWords Conversion Tracking or is importing data from Google Analytics.
- The campaign has received at least 15 conversions in the last 30 days. This conversion history enables the system to make accurate predictions about your future conversion rate. So, the more data we have, the more accurate we can be.
- The campaign must have been receiving conversions at a similar rate for at least a few days.”
The reason CPA is not available on most networks is that a large part of the CPA equation relies on the advertiser’s actions. This is why even Google specifies key requirements that make sure your CPA goals are basically in line with what your previous ad performance has shown it will be. Otherwise, it’s either risky for Google to allow CPA bids, or their optimizer can’t accurately place bids near your CPA maximum bid. Regardless of where CPA cost models are available, it is much more important to understand that CPA is influenced mainly by the advertiser – the networks can’t ultimately do anything to ensure CPA goals.
This leads to another important point. Where CPA comes in really handy is when an advertiser knows what the customer’s action is worth. Say your company value’s a sign up (or new user) at $10. As long as your CPA is below $10, you should continue your campaigns and keep optimizing to lower CPA. If the cost is above $10, you need to optimize CPA before your advertising will pay off.
So what can you do?
Our CEO and co-founder, Sahil, had this to say on optimizing CPA:
“Improving a conversion has two steps – you want your ads and targeting to hit the right people who are likely to convert and you need to properly educate people about what to expect after they click over. Be clear about the offering, the process to get started, etc. Then, once they’ve been primed appropriately, the experience takes place on the landing page. Here, the content needs to meet the expectations that have been set by the targeting/ad unit they clicked on. This landing page needs to be optimized elegantly around holding the users hand to the point where they successfully complete a conversion (signup, purchase, etc.). That’s where landing page A/B testing can make a massive difference.”
Testing is key! Once you get to the point of optimizing CPA, you probably have a handle on the other characteristics of ad campaigns. Clicks, CPC, and CTR don’t really matter as long as your CPA is below the value of your customer. That is of course if conversions are your goal, which is the right goal in our opinion. No matter how targeted the ad placement may be, users may wind up at a landing page that isn’t relevant enough, clear enough, or right for the particular user. Your campaigns must do everything to make the complete experience perfect for your targeted users.
Here are 3 steps to help you start optimizing CPA today:
- Make a campaign with ads specifically targeting your product. (For AdStage, our current product is the dashboard. If we talk in generalities like “improve your advertising”, that doesn’t really pinpoint what the user will get from us. Instead, we might say “Try out our free ad analytics dashboard now”.) Tell the user what the product is and incentivize them with a free trial or promotional discount.
- Refine your landing page to the essentials. You don’t need to rebuild your page, but if it’s unclear how to sign up or if it’s not obvious what your company is offering in relation to what the user saw in the ad, make changes. The customer should have a general idea about what they are looking at on your site immediately, and if they stick around for any longer than that, they should be able to see exactly what using your product will be like and how it will benefit them.
- Lastly, put multiple goals in place. There are lots of ways to measure engagement. I’d suggest to start with goals for: a sign up, visiting more than one page on your site, and spending more than 2 minutes on your site. Even if your only goal is for someone to sign up, someone viewing more than one page or spending time on your site, means they’re interested on some level. If you have many people viewing pages and spending time on your site, but not many sign ups, maybe the landing page doesn’t tell them enough or maybe it takes them too long for them to figure it out. Either way, you can fix it. Give the user a call to action and try to make it a no-brainer for them to sign up.
Every network has different benefits. Facebook will get your brand in front of a huge number of people. LinkedIn has a distinct audience of professionals in different fields. And AdWords and BingAds show your ads to the largest audience in the world of people searching the web with terms related to your company.
Not every impression or click will result in a conversion, but you want people to see your brand and product in different contexts. Someone may see your ad on a social network and not pay much attention. But when they use Google and see your ad for the second (or third or forth) time, they will be more familiar with you, even if they don’t know it. And that will help drive conversions.
Track and optimize CPA in your AdStage dashboard by signing up here.
If you have any thoughts about CPA or know how an advertiser can improve CPA, please let us know. We would love to hear your thoughts! You can reach me anytime by email at firstname.lastname@example.org or send us a tweet @getadstage.
Thanks for reading.
In the past few weeks, I went from having no ads and no experience running ads, to launching and trying to optimize our campaigns here at AdStage using our ad analytics dashboard and Google Analytics.
This week, I want to go into more depth about how to use the dashboard and ad analytics, the various ad metrics, and how you can use them to improve your campaigns. Ad terminology and the fact that there are many metrics to follow, can easily get a new advertiser off track. Our dashboard tries to make this as simple and useful as possible, but I think it still warrants some helpful discussion. You can also check out our post on ad terminology here.
You’ve probably seen the overview dashboard in previous posts, but here’s what mine looked like after a week of running ads:
The key metrics we track in the dashboard are ad conversions, clicks, impressions, CTR, average CPC, average CPA, and spend for each network along whatever time interval you select.
All of these metrics can be useful for different campaigns, but for my campaigns, I think ad conversions are the most important metric. Clicks, impressions, CTR, and average CPC let me know general information about the activity surrounding my ads and whether people are seeing and interacting with the ads at all. I want enough impressions to get traffic, and I of course want as large a percentage as possible of those impressions to result in interaction with people in the form of clicks. But if I look at only two metrics, conversions and average CPA are what I will focus on improving.
Lets summarize the importance ad conversions and cost per conversion (or cost per acquisition) and see why I think they are so important:
- Ad Conversions – A conversion of one of my ads means that someone saw an ad, and signed up. In my dashboard, you can see zero conversions across all campaigns. This doesn’t mean there weren’t any signups during this week, but it does mean that my ads didn’t drive the signups we had. Over time the number of conversions should become less important since you’ll have hundreds or thousands of conversions. Then CPA should be prioritized to make certain that you are running effective campaigns.
- Cost Per Acquisition – Cost per acquisition simply breaks divides your spend by the number of conversions to give you the average cost of each conversion. Once you know the value of a customer or user, you can gauge whether your CPA number (on each network) is lower than the value of gaining the customer or not. If it is, you can still optimize your can, or you can put a higher portion of your overall ad budget on that network. If your CPA is higher than what you value a new customer, then you’ll either need to shift budget away from that network or optimize that particular campaign further.
There are a few links that dive further into the topic of optimizing ad conversions and CPA that are worth taking a look at:
- Check out Google’s conversion optimizer for AdWords http://support.google.com/adwords/bin/answer.py?hl=en&answer=2472713
- See whether CPA is the best metric for your campaigns from Search Engine Land’s CPA vs. ROI post
- Quora page on the topic of conversion optimization
If you haven’t already, you can sign up today to check out the AdStage ad analytics dashboard and start optimizing your campaigns to maximize the return on your ad spending.
I tried to keep this post short. Thanks for reading and let me know if these points helped or if you have particular topics that would be more useful to your campaigns. As always, you can reach me at email@example.com or send us a tweet @getadstage.
Ad terminology can be confusing and overwhelming. To help you optimize your campaigns, this post is all about the basics of advertising terminology.
After launching campaigns, it quickly became obvious that I would often have to reference resources to understand advertising. But how do you optimize campaigns without understanding the basics? How do you learn from all the great content on advertising blogs without understanding the terms authors use?
Here are a few great resources that cover ad terminology to get you started:
If you want to get a clear idea of the basics, I’d start with this post. I’ll summarize key ad terminology from my perspective and then you can check out other resources to learn even more. I’ll organize the terms into two categories – payment models and performance metrics. For any advertiser, you need to know what you’re paying for and how to measure whether your efforts are worth the cost. This sets you up to monitor and improve your campaigns as you learn more.
PPC – Pay per click is the most common way advertisers pay for ad campaigns. AdWords and BingAds use PPC, and you can also use PPC on Facebook and LinkedIn. Under PPC, you only pay for each click on your ads by setting CPC bids on each network.
PPM – Pay per 1000 impressions. This type of payment is less common, but it is available on Facebook and LinkedIn. PPM works best for companies that already have “stable revenues correlated with traffic” (source: http://www.ebizroi.com/glossary/ – the best explanation I’ve seen on PPM.). With this type of budgeting, the advertiser needs to measure campaign success using CTR and conversion rates.
Conversions – There isn’t one definition for a conversion. A conversion can be defined as any action a person takes after seeing an advertisement. For new advertisers, a conversion may just be a click on the advertisement. For more experienced advertisers, conversions may be sign ups or visiting certain pages on your website.
Clicks – Clicks are literally clicks on your ads. Clicks are limited in what they provide to an advertiser alone, but they also tell you whether people are engaging with your ads or not.
Impressions – Impressions are the number of times your ads are displayed to users. Impressions are a raw number. People may see your ads once or many times. Anytime someone sees your ad, it counts toward your impressions.
CTR– Click through rate is the number of clicks divided by the total number of impressions. Clicks give you a general idea about engagement with your ads, but CTR gives you idea about your campaign’s efficiency.
CPC – Cost per click is another simple efficiency metric that tells you how much it’s costing you (on average) each time users engage with your ads.
CPA – Cost per acquisition is the most precise way to measure your campaign’s efficiency. Acquisition tells you about the quality and accuracy of your ads. Lots of acquisitions means that your ads are engaging and your destination URL encourages the user to perform the action that you call an acquisition (or conversion).
Spend – Spend is another simple metric telling you how much you’re spending per network over a chosen time interval. When comparing against on campaigns on the various networks, it is valuable to have an idea about where you devoting most of your ad budget. Ideally, you want to reallocate your budget from high spend, low efficiency campaigns toward low spend, high efficiency campaigns.
Each advertiser follows a slightly different recipe for optimizing campaigns. If you’re interested in tracking metrics and optimizing your campaigns, check out our free dashboard – you can sign up here.
How do I hook up Google Analytics?
In the last post, I setup campaigns for Facebook and AdWords. Now, I want to hook up Google Analytics to track my campaigns. It can be a bit tricky, but it’s worth it. (Note: You will need access to your site to add Google’s code snippet required to collect the necessary data)
To find the tracking code, go to the Admin tab on your Analytics homepage (and set up an account if you haven’t already).
Look for the Tracking info tab and you’ll find your unique tracking ID and the tracking code below.
Once you’ve added the code to your site you can define goals. Conversions are your overall goals for those who click on your ads. Ask yourself “what do I want someone that sees my ad to do?” You can use your answer to that question as a conversion. For AdStage, I call a conversion someone coming to the site and completing our beta sign up form. Here’s how I setup goals:
Go back to Admin on the Google Analytics homepage and click your Profile name.Now click the Goals tab. This brings you goal configuration options to actually implement your goal.
The last step is setting up a goal. There are different goal types, but in this example I’ve set up a URL destination goal with a sample goal URL of www.adstage.io. You might like to use the page after someone signs up for you site, for example: www.site.com/?post_signup. There are additional options like goal value and setting up a goal funnel, if you would like to further customize your goals.
Google Analytics is a great tool, but it has some limitations. For features like intelligent insights, easy viewing of high and low performing ads, and much more, I’m now going to setup my AdStage dashboard.
How do I build an AdStage dashboard?
To setup my AdStage dashboard, you’ll need access to our private beta. Sign up here and we’ll set you up to get started. Our dashboard product is completely free. Once I have access, I fill out 10 keywords related to my company and a short blurb about my site. A good combination of specific and broad keywords will offer the best recommendations and insights. Then I can link my accounts using my network credentials. After I have picked my desired campaigns, my dashboard will be ready for viewing in minutes. Once you have access to AdStage, explore around to see all the features – you’ll find some awesome stuff!
And I’m done for this week! I purposely skipped over details like further customization of campaigns, ads, and Google Analytics for a couple of reasons. One, because I don’t know all the answers yet. And two, because I have already covered lots of material for these first posts.
I’ll discuss many new questions in future posts. Next time, I’ll report my first week’s results and my plans for optimizing my campaign performance.
Thanks for reading and check out AdStage if you would like a great, simple way to compare your campaigns and get insights to improve your campaigns in one, well designed dashboard.