Less precise ad targeting, due to privacy restrictions, inevitably leads to more diverse traffic and lower returns. Landing efficiency is emerging as an important driver of end to end ad performance. In this article we explore three things: (1) how ad platforms use landing quality; (2) how to measure landing efficiency; and (3) the effect on CPM’s when efficiency is high.

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The average ecommerce Return On Ad Spend (ROAS) is currently only 1.75x (excluding retargeting and product listing ads). At 1.75 average ROAS the pressure is on to make the basic economics of advertising work effectively, especially on top / mid funnel campaigns.  

As targeting is increasingly becoming driven by ‘Black Box’ algorithms the attention in performance advertising is inevitably shifting to the landing experience.

The 70-80% bounce problem

Many agencies and paid social managers are frustrated that landing experiences frequently fail to capitalize on the ‘click’ and consequently perform poorly. They have a point: we typically see bounce rates 70% - 80% (and in some cases over 90%) for paid traffic from social landing on product pages. Conversion rates are typically 0.5% - 1%. These are truly appalling metrics and we should not accept this dire performance just because it’s ‘the industry average.’ If you can lift these metrics to something closer ‘normal’ ecommerce conversion rates of around 3% then there is a VERY big opportunity to drive a LOT more revenue from paid social.

But there’s a kicker to this as well. Ad platforms score advertisers landing experiences and use the the score in deciding which bid to accept for a given audience. Ad platforms want better landing experiences, and penalize poorly performing experiences. You can see these efficiencies in A/B tests where one side of the test can be paying a higher CPM (cost per thousand impressions) than the other. This of course impacts your Return On Ad Spend (ROAS) because you’re paying more as a result of poorly performing landing experiences. Enter Landing Efficiency, and new focus on Revenue Per Click.

How to measure Landing Efficiency

There’s one metric that is getting a lot of focus right now: Revenue Per Click (RPC). This is an important addition to the usual stable of performance advertising metrics because it is the best metric to understand Landing Efficiency, and therefore how ad platforms are likely to score your campaigns.

Landing Efficiency defined

Landing Efficiency is defined as the effectiveness of the post-click landing experience in digital marketing, measured by the revenue generated for each outbound click. It provides a simple way to compare the effectiveness of post-click experiences across different campaigns and is useful in troubleshooting campaigns. It’s better known cousin, Cost Per Click (CPC) measures the efficiency of the pre-click experience, and when Revenue per click is divided by Cost per click, this equals Return On Ad Spend.

Revenue Per Click defined

Revenue Per Click is calculated by taking the revenue generated by a specific campaign and dividing it by the number of outbound campaign clicks.

It is especially useful in performance advertising because it can be used alongside Cost per Click to diagnose where problems lie – with the ad or with the landing experience - and can give an indication about how advertising platforms will rank the campaign in bids.  

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In performance advertising, Revenue Per Click typically has a range from $0.5 to $10, though this will vary based on the efficiency of your landing experiences and your average order value. A rule of thumb guide for RPC is that a value of $4 or above is generally an efficient landing experience. This means that for every outbound click on an ad, you’re generating $4. A quick comparison with your Cost Per (outbound) Click metrics at say $1 per click shows that you are making $3 for every click. At this point you’ll see clearly why this is incredibly useful addition to ROAS because it essentially breaks ROAS down into pre-click and post-click performance.

How to use Revenue Per Click

While ROAS is useful for gauging the overall effectiveness of a campaign, it makes it difficult to see where the performance really is – pre or post click? You can have a highly effective ad resulting in lots of clicks that don’t convert and an unexplained high average CPM. ROAS would be low and you might pull the campaign early.  

But as soon as you break ROAS down into its’ component parts, pre-click and post-click, it’s easy to see where the problem is: you’ll spot immediately that the Cost Per Click (CPC) shows an effective ad driving lots of clicks, but when coupled with a low Revenue Per Click its very clear that the problem is on landing, resulting in higher CPM’s higher CPC’s and lower ROAS.

Conclusion

With the current increased focus on ad performance, we need to find ways to evaluate the landing efficiency of different experiences. Given this is where there is the greatest potential in improving advertising performance is, this should be on everyone’s to-do list.

Revenue Per Click has emerged as the hot new metric in performance advertising because it enables advertisers to deconstruct ROAS into its component parts, and troubleshoot campaigns. It also enables you to assess how your campaigns are being scored by ad platforms, and the potential impact on CPM’s

It’s a simple metric that both marketing and ecommerce can get behind, hopefully bridging organizational gaps with a common language that all can understand.

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