How to Determine the Return-On-Investment of an Advertising Campaign

Before I launch an advertising campaign for a client, we have a conversation to determine some metrics that we can use to keep an eye on the return they’re seeing from their ads. This is an important conversation not always had between ad agencies and their clients. I start by determining their Average Revenue per User (ARPU). Other financial factors sometimes come up at this point as well such as churn-rate and operational/administrative costs that impact the profit they take home at the end of the day. We then discuss the goals they have for the campaign and what return they would like to see. This process ensures my clients are seeing positive returns on their advertising from the first month.

Facebook and Google Adwords offer different ROI’s as they represent two very different approaches to advertising. Below, I’ve broken down some of the ways in which they’re different and the impact these differences have on the returns ad campaigns deliver.

Conversion Tracking: Facebook vs. Google Adwords

Conversion tracking becomes incredibly important when you’re launching a campaign that needs to keep a close watch on the return-on-investment. Potential customers convert in different ways, some make purchases directly online, some call-in to convert and others submit order forms online.

Google Adwords allows all three of these behaviors to be tracked, along with any other type of conversion tracking you want to configure in Google Analytics. In contrast, Facebook does not support call-tracking. Instead, they allow you to track page likes, link clicks, comments and shares which are more relevant to their platform.

Audience Targeting: Facebook vs. Google Adwords

Facebook allows for much more advanced and detailed targeting in that you can target people based on their career path, the number of children they have, their religious affiliations, their political leanings etc. Google allows for some demographics targeting and does allow you to target people by their interests, however, not quite to the level of personal detail that Facebook does.

Facebook Ads Don’t Tend to Generate Direct-Sales

They generate ‘brand awareness’ and in-direct or long-term sales.

Most of my clients are looking to increase direct conversions, that is why I recommend Google Adwords over Facebook advertising initially. If my clients are looking to grow their audience, get video views, or improve their brand awareness, I recommend Facebook advertising. Sometimes, I’ll run a Google Adwords campaign for the first three months so that my client is seeing a health return-on-investment before I recommend running a very small Facebook advertising campaign in the background to generate awareness and long-term leads who may come back to convert in a few months time.

Cost-Per-Lead vs. Cost-per-Paying-Customer

I’m not sure if ‘cost-per-paying-customer’ is a metric used by most advertisers, but it is the one that I came up with so I can differentiate between what my client is paying for each lead and what they’re paying for each paying customer. They are two very different metrics and they matter for different reasons. For instance, if my clients advertising account is delivering 40 leads each month but only 10 of them are turning into paying customers, I want to be able to clarify for my client how much they’re paying to bring in each of the 40 leads and how much they’re paying for each of the 10 paying customers. I can learn from the 40 leads that the advertising campaign is bringing in too many irrelevant leads which is information I can use to trim down my account targeting.

What does this have to do with Facebook vs. Google Adwords? Well, based on my experience Facebook does tend to generate a fair quantity of leads but a discouragingly low percentage of them translate into paying customers. Therefore, I have seen misleading metrics used to convince companies to run advertising on Facebook because of the great ‘conversion rates’ when those conversion rates are based on actions that include ‘likes, shares, comments, engagements, reach, and link clicks’ but do not always indicate a conversion that generated revenue.

What’s the Verdict?

I recommend Google Adwords to small and medium sized businesses that need immediate return-on-investment. If you’re a larger company looking to establish your brand as a ‘household name’, or you have some other non-monetary goal – Facebook advertising may be able to help you achieve this.