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Video Transcript

To gauge the success of your social ad campaign, you will need to know if the value it brings to your business is equivalent or greater than its costs. This is known as return on ad spend and this value can be measured in two ways: direct revenue and captured leads.

Direct revenue are the earnings that can be directly attributed to your ad campaign. Let's say you’ve run a Facebook campaign promoting a two for one sale for your apparel line. With a conversion pixel in place, you were able to track exactly how many people made a purchase by clicking through an ad from this campaign. By contrasting the sales volume with the total cost of your campaign you can see if your return on investment was positive or negative. If you spent $500 to generate $1250 in sales, your campaign was a success. If instead you spent $500 and only converted 3 customers who made $50 purchases, it’s time to go back to the drawing board and see which elements of your campaign can be revised.

Many types of social ad campaigns offer lead generation as the campaign goal. If you’re aiming to drive traffic to a blog sign up page, an ebook download or a coupon offer, ultimately you’re developing a pool of prospective customers, otherwise known as leads. In order to understand the ROI of a lead based campaign, you must first know how much a single lead is worth to your business. Say you run an online education agency and you know that the average amount of money a customer spends with you is $1000. If 5 out of every 100 people who download your gated content become customers, your conversion rate is 5 percent. Lead value is determined by multiplying the average sale by your conversion rate and in this case each new lead would have a value of $50. If you run a campaign that brings in new leads at the cost of $80 per lead, you’re spending more money then you have the potential to earn, therefore this acquisition channel is too expensive. If instead your campaign acquires leads at $25 each, it is cost efficient.

Once you know if your campaign has a positive or a negative ROI you can look for ways to optimize it, which we’ll discuss in the next video.