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We hope you all had a great time celebrating Easter (and the end of Q1) with your families this weekend.

As we head into Q2, we have some phenomenal new content heading your way, and it all starts with our month’s theme: Advertising 101.

We’ll be diving deep into all things advertising - from the types of ads that are right for your business to the metrics that define your ads’ success. By the end of the month, you’ll be an expert.

Before we get to that, we would like you to help us out by clicking the button below and taking our survey. It goes a long way in helping us understand what you guys want to see from Beyond9to5 in the future.

Once that’s done, feel free to dive in! 🔥

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Here’s the situation: you spent some time and resources crafting the perfect ad for your business. You run the ad in your favorite newsletter (Beyond9to5, of course) and then you wait patiently, eager to see all of your new conversions rolling in.

While this strategy is effective (especially if you’re running an ad in our newsletter!), you can make your approach much more sophisticated.

Once the ad is made, there are a lot of important elements to be considered before executing the decision to have it run.

One of these considerations is how you will measure the performance of the ad. In the world of advertising, there are so many different metrics to consider that it can be a bit overwhelming trying to figure out what matters.

Let’s walk through a few of these metrics together and see how we can use them to our advantage.

Understanding Advertising Metrics:

Cost Per Click (CPC): CPC is a fundamental metric for assessing the effectiveness of paid advertising campaigns, particularly in platforms like Google Ads and Bing Ads. For startups looking to drive website traffic and generate leads, CPC provides valuable insights into the cost-effectiveness of their advertising efforts.

Scenario: A startup offering online tutoring services wants to attract new students through Google Ads. After launching their campaign, they monitor their CPC closely. They find that their average CPC is $2.50, meaning they're paying $2.50 for each click on their ads. By analyzing CPC data over time, the startup can optimize their campaign by adjusting bidding strategies, refining ad copy, or targeting more relevant keywords to lower their CPC and maximize their budget’s efficiency.

The way to optimize this metric, along with many others in the advertising game, is by getting your ads in front of people who are likely to click on the ad based on their characteristics. This can mean partnering with creators who influence your target customer, or it can mean telling Meta to show your ads to a particular customer segment based on the data they have. In the tutoring example, we might try to target our ads toward parents of young children who live in wealthy neighborhoods.

Some advertising marketplaces (Google, Meta) will have their CPC listed somewhere in their offering. If not, you can always calculate this later on by taking your total ad spend and dividing it by the number of clicks it gets (which should be provided by the advertising marketplace).

Sidebar: CPC is a large reason why clickbait exists. Parties that run ads (YouTube creators, for example) often enter contracts wherein they get paid each time the ad gets clicked. As a result, they aren’t concerned with you actually buying the product that they’re advertising - they just need you to click on it, so they make it as interesting as possible, even if that requires embellishing.

Cost Per Mille (CPM): CPM measures the cost per thousand impressions of an ad, making it a valuable metric for evaluating brand exposure and awareness. Startups aiming to increase brand visibility and reach a broader audience can leverage CPM to assess the efficiency of their display advertising campaigns.

Scenario: A newly launched online fashion retailer wants to raise brand awareness among fashion enthusiasts. They run display ads on popular fashion websites and track their CPM to gauge their ad's performance. After analyzing their CPM data, they find that their ads are generating impressions at a cost of $15 per thousand impressions (no clicks, just views). By optimizing their ad creatives, refining their targeting criteria, and exploring new placement opportunities, the startup manages to decrease their CPM to $10, effectively increasing their brand's visibility while maximizing their advertising budget.

When it comes to impressions, the more you understand who your target audience is, the more money you save on CPM. This is because you can more effectively convey to the advertising party who you want the ad to be shown to. Rather than wasting an extra $5 on ads shown to 5,000 people who would never buy your product, you can spend that money on more targeted impressions that will lead to higher conversion rates.

Cost Per Acquisition (CPA): CPA is the holy grail - perhaps the most important metric for any marketing team. It measures the cost to acquire a single new customer or lead through advertising channels. It’s not just about clicks, but now about conversions (i.e., paying customers). For startups with limited resources, optimizing CPA is crucial for achieving sustainable growth and profitability.

Scenario: A subscription-based meal delivery startup wants to acquire new customers through Facebook Ads. They track their CPA diligently and find that their average CPA is $30, meaning they're spending $30 on advertising for each new customer acquired (significantly higher than the cost per click, CPC). To improve their CPA, the startup experiments with different ad creatives, audience targeting options, and campaign objectives. By continuously testing and iterating their strategies, they manage to reduce their CPA to $20, allowing them to scale their customer acquisition efforts while maintaining profitability.

Again, the most efficient way to optimize this metric is by targeting your ads effectively. (If this still seems like a vague undertaking, don’t worry. We’ll be covering this in more depth next week.)

Lifetime Value / Customer Acquisition Cost: LTV / CAC is perhaps the most important metric for any marketer, particularly if your product is subscription based or results in recurring revenue streams. Put simply, it is the lifetime value of a single customer divided by the cost required to acquire that customer (through marketing efforts). Getting LTV and CAC requires an extra step: LTV can be calculated by taking the average customer spend in a period and multiplying it by the average customer lifespan (how long they have been a customer). CAC is essentially your average CPA over a specified timeframe.

This metric is crucial because it can show how loyal your customers are. If you have an LTV/CAC ratio of over 3x, it means that for every $1 you spend on advertising to a given audience, each converted customer will generate $3 for your company over the course of their purchasing period.

The way to maximize this metric is by building brand loyalty and making a really sticky product. It is a simple way to offset a large ad spend. If you can’t figure out who your ideal customer profile is (and therefore have a higher CPC), then having a recurring revenue stream for each customer is a great way to offset that outsized ad spend.

Looking Ahead
If this week was a bit heavy on the math and made your head spin, don’t worry. Next week we’ll be diving into the more qualitative elements of advertising, particularly how you can get your ads in front of the perfect target. That being said, it’s important to have a strong understanding of how much you are paying for your ads, knowing what a good price is, and having ideas for lowering your ad costs.

For a sneak peak into the rest of the month, check below:

Advertising 101
Week 1: Advertising Metrics (This Week)
Week 2: Audience Targeting
Week 3: Types of Ads
Week 4: Creating Your Ads
Week 5: Virality

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