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Performance Metrics - Investment and CTR

Visitor ✭ ✭ ✭
# 1
Visitor ✭ ✭ ✭

Hi!
I was confronted today with this question:

1 - Given an investment of €5 what has to be the CTR of the campaign to break even that investment (€5). Considering an avarege CPC?

2 - If you could give me some information about the basic metrics to run and optimize a performance campaign would be great.

Thanks.
João

3 Expert replyverified_user

Re: Performance Metrics - Investment and CTR

Follower ✭ ✭ ✭
# 2
Follower ✭ ✭ ✭
Hi João M,
Firstly your business goal matters a lot in such cases. If your goal is branding CTR matters. You need to think what you treat as a Conversion.
For Eg - If you have a lead based account, more the CTR the better it is. But if you have an e-commerce account even a 100% CTR is useless if you have no conversions.
Try to explain this question using a specific business goal.

And some basic metrics to run and optimize a performance campaign are -
1] Quality Score
2] CTR
3] Conversion Rate
4] Wasted Spend
5] Cost per Conversion

Re: Performance Metrics - Investment and CTR

Rising Star
# 3
Rising Star
Hi João,

#1 In truth CTR has NOTHING to do with your €5 situation - rather the metric you should pay attention to the average CPC. Of course if your CTR is horrible you'll never get any traffic but also you'll never be charged either. If you're trying to run a campaign that has a slim ROI margins then using the keyword planning tool to look at avg. CPC is very important for you.

#2 Take a look at the AdWords fundamentals guide to better educate yourself on the AdWords platform.
https://support.google.com/partners/answer/6123875?

Hope this helps!
- Josh

Joshua, Rising Star
Was my response helpful? If yes, please mark it as the ‘Best Answer.’

Re: Performance Metrics - Investment and CTR

Visitor ✭ ✭ ✭
# 4
Visitor ✭ ✭ ✭
Hi Loukik H,

well this was an interview question. Let's assume we're talking about a company which the objective was to download an e-book from a landing page and spend €5. Let's assume a CPC of €0,25, eg..

Can we calculate the CTR to break even? Or it was a question without a point?

Thanks

Re: Performance Metrics - Investment and CTR

Visitor ✭ ✭ ✭
# 5
Visitor ✭ ✭ ✭
Hi Josh,

this was an interview question, meaning it was an hypothetical situation. Let's assume we are talking about a e-book download and the company spend €5. The CPC was, for example, €0,25. Is it possible (has meaning) to calculate the break even CTR?

Thanks

Re: Performance Metrics - Investment and CTR

Follower ✭ ✭ ✭
# 6
Follower ✭ ✭ ✭

Hi João M,
I think calculating CTR won't make sense but it's just a personal opinion. With all respect I would like to wait for others to reply to this.
Regards

Re: Performance Metrics - Investment and CTR

Visitor ✭ ✭ ✭
# 7
Visitor ✭ ✭ ✭
Hi Loukik H,

no problem. When I was there I did not know what to answer, cause I could correlate CTR with investment. But maybe I understood the wrong way. What do you think it would make sense to calculate with this data? Once I know for sure: the question was to find the break even? And I think it was the CTR.

Thanks,

Re: Performance Metrics - Investment and CTR

Follower ✭ ✭ ✭
# 8
Follower ✭ ✭ ✭
Converted Clicks
Cost per Conversions
Such metrics would help you find your answer
Marked as Best Answer.
Solution
Accepted by topic author João M
August 2016

Re: Performance Metrics - Investment and CTR

Top Contributor
# 9
Top Contributor
The question has no answer... but it raises more questions.

The things you would need to know would be :

How much is each ebook download worth to the advertiser?

What is the download rate - i.e. how many books are downloaded for every 100 visitors?

Once you know that, you can figure out how many visitors you need to download enough books to cover your €5 spend - this is the break even point.

Divide your €5 by that number of visitors and now you know how much you can afford to spend per click (cpc) to break even.

The CTR is a red herring - it still depends on just how many clicks you need to cover your costs. If you get those clicks from 100 impressions or 100,000 impressions is (almost) irrelevant - I say (almost) because there are other factors that will impact in the medium term, such as QS - but we could unravel this question for hours if we wanted to.

You can only figure out your break even point when you know what the conversion is worth. Without that you simply can't - which is why lead gen is harder to cost than ecomm.

Re: Performance Metrics - Investment and CTR

Top Contributor
# 10
Top Contributor

Hi @João M,

 

"Is it possible (has meaning) to calculate the break even CTR?"

 

No, it isn't. Nor does it have any sense. That was a stupid question from the interviewer and honestly I would not seek employment at a company where interviewers are not capable to set up reasonable tests queries. 

 

First: under a default cost-per-click scenario you do not pay for impressions therefore CTR - which is clicks per impressions - is a redundant factor when it comes to break even. Second: The break-even point (BEP) in economics, business and cost accounting is the point at which total cost and total revenue are equal. We would need additional data to calculate it. Third: It's unclear what you mean by spend. Is it the available advertising budget or the expenses incurred during the development of the e-book + other expenses?

 

Best,

Lakatos