Recently there has been talk of a new metric within the PPC industry: conversions per impression. I first read about this metric from Chris Crompton of Search Engine Land.
In my view, this metric represents the overall effectiveness of your PPC campaign. The click-through rate (CTR) measures how relevant your ads are to user search queries. The conversion rate tells you the percentage of visitors who complete your predefined goals once the ads are clicked. These are important metrics, but it may be time to consider conversions per impression (CPI) as well. Let’s take this example:
Of the 500 times my ad is seen (the “impression”), 20 searchers deem it the most relevant and click—a CTR of 4%. Of these 20 visitors, 2 find my landing page or site meets their expectations and they complete my predefined goals, resulting in a conversion rate of 10%.
Individually, these metrics tell part of the story, but not the whole story. Measuring the success of this ad using the CPI metric, I find that 2 users convert out of the 500 times the ad is seen, thus leaving a CPI percentage of 0.4%.
So how might this metric come in handy? Let’s use a timely example. I search for “New Orleans Saints Super Bowl Merchandise” and see these ads:
Ad #1 receives: 2,000 impressions, 150 clicks, 15 conversions
CTR = 7.5% Conversion Rate = 10%
Ad #2 receives: 2,500 impressions, 100 clicks, 25 conversions
CTR = 4% Conversion Rate = 25%
Ad #1 gets more visitors to the site, but ad #2 proves to have the better post click experience. Using our new metric, CPI for each is:
Ad #1: 0.75%
Ad #2: 1.00%
Ad #1 may have the better CTR because the offer of 15% off the purchase is more appealing than having to spend more than $99 to get free shipping. If someone is just looking for a $20 hat, the offer in the first ad is more beneficial. However, once visitors get to each site, the conversion rate tells us that ad #2 does a better job of turning clicks into customers. Perhaps the landing page of the second ad showcases more products than the first ad and has an easier user experience. Ultimately ad #2 does a better job from the start of the search process to the completion of the conversion. However, CTR and conversion rate are still important metrics as they break down the success of these ads.
I admit that I do not know what an ideal CPI percentage is (or if one is known). I do know that this metric is gaining traction and needs to be considered by PPC managers. I encourage your feedback about the importance of this metric and if/how you are working it into your campaign reporting.
Tags: conversions per impression, Google AdWords, Pay-Per-Click (PPC)
This entry was posted on Thursday, January 28th, 2010 at 2:05 pm and is filed under Search marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
January 28th, 2010 at 2:40 pm
Hey Matt, great post! I agree, it’s key to have the best balance of CTR and conversion rate. We use Perry Marshall’s Super SplitTester, which goes one step farther and calculates profit per impression. Very useful tool and has really increased our clients’ ROI. (I’m not an affiliate or anything – just a fan!)
January 28th, 2010 at 5:49 pm
Good article, Matt. I’m definitely in favor of adding CPI to the picture to round out the picture. Perhaps real math nerds (wish I was) can see true performance by looking at the CTR and CR, but CPI makes it easier for the rest of us to get a true holistic look at how an ad or keyword is performing.
January 28th, 2010 at 9:11 pm
Matt,
Interesting thought process. Though I would argue that CPI is not a very actionable metric. I feel that it is too “big picture” – too all-inclusive. Impressions as a pay-per-click metric are determined by a very wide spectrum of variables: Max CPC, negative keywords, search queries, competition, seasonal/daily fluctuation, etc. Pairing this seemingly “wild” metric with conversions doesn’t really tell me much. Yes, you can gain understanding of how your entire PPC-targeted audience funnels down into customers/conversions, but I’m interested in what you propose we do with that information? Maybe go crazy with search query reporting and add tons of negative keywords to drop your impression stats… (and therefore increase CPI for the sake of increasing CPI)
The way I see it, you would still have to break your statistics down into the run-of-the-mill CTR and conversion metrics to make any meaningful changes to your campaigns.
Don’t mean to burst your bubble – just throwing in my 2 cents! ; )
January 28th, 2010 at 11:30 pm
Hi John,
Appreciate the feedback. I wrote this blog entry for two reasons. One was to take a look at the PPC process as a whole. That is from initial search query —–> clicking an ad —–> going to a landing page —-> completing the conversion. I understand that this is a “big metric” picture and can be influenced by many variables, but so can CTR, conversion rate, CPA, etc. when you look at these metrics at the campaign level. For example, a campaign might have a CPA of $10, but when the branded terms are removed the CPA rises to $30. Just like these metrics, CPI need to analyzed at the keyword, ad group, and text ad levels.
My second reason for this entry had to do with a recent client meeting to go over the monthly report. I went into detail about the trends we were seeing and what the metrics were telling us, but the client specifically wanted to know the percentage of searches that were turning into conversions. This client query got me interested in exploring CPI in more depth.
As I say, it may be time to consider the metric of CPI. CTR and conversion rate are both crucial metrics, but when you look at them as two separate processes each only tells half the story. Those stories being getting the click and then getting the conversion. CPI ties them together and evaluates the entire process. Time will tell if CPI turns out to be a truly actionable PPC metric.
January 29th, 2010 at 10:12 am
Matt,
Fair enough! May be I just need to sit down and review some CPI trends in more detail…
Kudos on putting the idea out there for discussion – and for defending it.