How to Track Your ROI When Buying Traffic

Published by
Kenny Novak
on May 04, 2015
Posted in How-to

With online marketing, there are two ways you can get people to your site. You can use SEO, and passively become the place people go when they want to find information about your topic. Or you can buy traffic, incentivizing visits and hoping those people will be interested.

SEO is the better long-term strategy. It takes a significant investment, mostly in time, to get yourself into a position of authority. Once you’re there, though, it’s much easier to maintain that position. The people coming in are by default interested in what you have to say, so they’re potentially easier to convert.

Paid traffic, on the other hand, is more of a supplementary measure. It’s great for a quick influx of traffic to fill in the gaps between updates, or to give you a flow of customers before your ranking kicks in.

When you’re running a site, you might expect paid traffic to be as much as 90% of your incoming traffic early on. Once you establish some content and some SEO authority, that percentage will drop. Big sites with good reputations might only have 10% of their traffic coming from paid advertising.

Make no mistake; paid traffic is essential for a well-rounded website. Few websites are able to make it solely on organic traffic, and even if they can, paid traffic often has such a good ROI that it’s worth investing in regardless. Tracking that ROI, though, now that’s an interesting topic.

What to Track

UTM Parameters

ROI is Return on Investment, and it’s a simple calculation. How much money do you put in, and what do you get out of it? There are a bunch of pieces of information you can track and compare to come up with your ROI from different perspectives. What should you track?

  • Impressions. At the heart of every paid traffic campaign is an advertisement that people see. You want to see how many people see a given ad you run.
  • Clicks. Obviously, you want to find out how many people are clicking on the ads you run.
  • Costs. Many paid traffic sources will give you a simple reading of your cost per click. If they don’t, you can calculate it yourself by comparing your total investment with the number of clicks you get in the same amount of time.
  • Conversions. As a raw number, the number of conversions you get in a given time isn’t all that useful. When you compare it to other factors, though, it becomes much more important.

You can also track less obvious information, like the total revenue you make from your paid traffic, and the average cart value for a given customer. These can vary from week to week and month to month, so make sure you’re not relying on a static reading for an ongoing decision-making process.

One thing you need to do when you’re tracking this information is make sure you’re differentiating between paid and organic traffic. When you’re calculating the ROI for your paid traffic, you can’t factor in traffic you didn’t pay for, right?

One of the easiest ways to track specific paid traffic is by using Google’s UTM parameters. UTM parameters are additions to a URL that you’ve almost definitely seen but haven’t recognized. A normal URL might look like www.example.com. Meanwhile, a URL with UTM parameters would look like www.example.com?utm_source=FacebookAds&utm_campaign=CampaignName

Both URLs lead to the same page, but the one with UTM parameters feeds extra data to Google Analytics and other analytics suites. The idea is that you use a specific set of parameters in the links you feed to your paid traffic sources. Organic traffic doesn’t come from these sources, so the links don’t have those parameters. With the parameters, you can filter to just your paid traffic in Google Analytics, to get all of the data you want to track.

Comparison to Make

With all of the information you’re tracking, the raw numbers don’t give you much. It’s in the comparisons that the data really matters.

Clicks and impressions. You want to compare these numbers to see how effective your ads are in your niche. For example, say you have 1,000 clicks to your ads in a week. That sounds pretty decent, right? Well, it’s great if 1,100 people saw your ad. On the other hand, if 100,000 people saw your ads, only 1,000 clicks is incredibly low.

If you have a low click through rate, you need to consider adjusting your ads. You might be targeting the wrong niches, your ads might not be attractive enough, or you might have issues with the quality of the destination sites for your ads.

Clicks and costs. This is one of the most common calculations to make and gives you the cost per click of your ads. Sometimes, you’ll be able to see this reading easily through the system you use. Facebook ads, for example, give you easy access to this as a number in a table, rather than making you derive it from other factors manually.

Conversion rate. This is another derived number that gives you an indication of how well your ads are working. If you have 1,000 people come in from your ads, and 100 of them convert, that’s a 10% conversion rate; not bad. The other 900 may be partially interested, and you can remarket to them later or convince them to opt in to a mailing list for future messaging. Knowing your conversion rate gives you a perspective and a foundation from which to build.

Cost per conversion. This gives you the insight into how much it costs to acquire a customer. Once you know this, you can take steps to improve this metric, lowering the cost and acquiring more customers.

With the cost of a conversion in hand, you can then compare it to the average value of a converted customer, as measured above. This tells you your return on investment on a per-customer basis. If you spend $10 to acquire one customer, but that customer’s average purchase amount is $7, you’re losing money. Conversely, if their average shopping cart is a $250 value, you’re making quite a bit. Either way, you want to know.

Written by Kenny Novak

Kenny Novak

Kenny is an SEM and SEO professional. He uses blogging and content marketing as a launchpad for small businesses looking to grow their online presence.

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