Let us look at the definitions for the major PPC metrics that are different from Google Analytics metrics.
- Click Through Rate (CTR)
- Maximum Cost-per-click (Max. CPC)
- Average Cost-per-click (Avg. CPC)
- Actual Cost-per-click (Actual CPC)
- Cost-per-thousand-impressions (CPM)
- Impression Share
- Conversion Rate
- Cost-per-action (CPA)
- Earnings Per Click (EPC)
- Return on Investment (ROI)
- Keyword Match Type
- Quality Score
A Click is a user action when the user clicks on a PPC ad. A PPC ad showing up above organic search results will receive more clicks than a PPC ad appearing below (e.g. bottom Adwords ad).
Impression is the number of times your ad is displayed to the target audience. When your PPC ad is shown, an impression is counted. Impressions are measured differently for Google Instant.
Cost is the actual advertising amount that you spend on your PPC campaigns or ad groups or ads or keywords. In PPC (pay-per-click) auction systems, cost is incurred when a user clicks on an advertiser’s ad.
Click Through Rate (CTR)
Click through rate (CTR) is the number of clicks your ad receives over the number of impressions within a specific period of time.
CTR (%) = Clicks / Impressions
In PPC auction systems, CTR is used as a factor to determine quality score and calculate ad rank. One of the major ad ranking factors in Google Adwords Quality Score is CTR. The higher the CTR, the higher the ad ranks.
Both keywords and ads can have click through rates:
- Keyword CTR
- Ad CTR
Maximum Cost-per-click (Max. CPC)
Maximum CPC bid is the highest bidding amount you set at the keyword level or ad group level for the keyword or ad that you are willing to pay for a click on your ad. PPC auction systems automatically reduce the bidding amount, so you are not charged for maximum CPC but actual CPC.
Average Cost-per-click (Avg. CPC)
Average cost-per-click is the cost of all clicks over the number of clicks received by your ad. Average CPC is different to maximum CPC.
Actual Cost-per-click (Actual CPC)
Actual CPC is the minimum required bid for your ad to stay one position above the ad immediately below in a PPC search ad auction and is how much you actually pay for your ad’s click (with no more than the maximum bid you specify for your ad group or keyword). Actual cost-per-click is determined by this formula:
Actual CPC = (Ad Rank to beat / Quality Score) + USD 0.01
Google Adwords search ad auction system describes how actual CPC and ad rank are calculated.
CPM means cost-per-thousand-impressions which is an advertising metric mostly used in display ad campaigns. Google used to only offer CPM as the pricing model for text ads running within Adwords content network.
Impression share is a metric that represents the share of all impressions an ad acquired against other ads that are competing for the impressions. Google provides Adwords impression share data to advertisers.
A conversion is a user action that takes place on your website, including a purchase, sign-up, lead or pageview. PPC auction systems offers tools to measure conversions:
- Adwords conversion tracking – Default conversion tracking tool in Adwords
- Adcenter conversion tracking – Bing Adcenter’s built-in conversion tracking tool
- Yahoo Search Marketing conversion tracking – Built-in conversion tracking feature for Yahoo PPC
- Baidu PPC conversion tracking – Baidu Phoenix Nest’s official conversion tracking tool
- Google Analytics PPC Conversion tracking
- Track Bing Adcenter PPC keyword conversions in Google Analytics
Conversion rate is the number of conversions through your ad over the number of times that your ad is clicked.
Conversion Rate (%) = Conversions x Click
Cost-per-action (CPA) measures the effectiveness of your ad based on actions taken by your site’s visitors. An action on a site can be defined as a purchase, sign-up, lead or pageview.
CPA = Cost / Action
Action = purchase or sign-up or lead or pageview or any other pre-defined action
Earnings Per Click (EPC)
EPC is the amount your PPC advertising earns from each click.
EPC = Revenue / Click
Profit refers to the dollar amount earned after taking cost into account or is revenue less cost.
Profit = Revenue - Cost
Return on Investment (ROI)
ROI measures how much profit you make from each marketing dollar you spend on your PPC ads.
ROI (%) = (Revenue / Cost) - 1
Keyword Match Type
PPC auction systems allow you to control who sees your search ads with keyword match types:
- Broad match
- Phrase match
- Exact match
- Negative match
Quality score is a factor that determines your ad’s ranking in the PPC search ad auction systems. For example, Google Adwords Quality Score is calculated by factors including CTR of keywords, ads and PPC account.