Performance Marketing Basics Flashcards

Question 1

What defines performance marketing, and how does it differ from brand marketing?

Accepted Answer

Performance marketing is advertising paid for and evaluated by measurable actions, such as clicks, form fills, installs, or purchases. Advertisers often pay only when a specified action occurs or track results closely against cost. Brand marketing aims mainly at awareness, recall, and perception, so its success is harder to tie to a single transaction.

Question 2

What does the term conversion mean in paid advertising?

Accepted Answer

A conversion is a user completing a defined desired action after interacting with an ad, such as buying a product, submitting a lead form, or starting a trial. Because the definition drives reporting and bidding, it should reflect a meaningful business outcome rather than minor engagement.

Question 3

What is a click-through rate, and what does it measure?

Accepted Answer

Click-through rate is the percentage of ad impressions that produce a click, calculated as clicks divided by impressions. It measures how compelling an ad is to people who see it. A high rate suggests strong relevance or appeal, but it does not prove that the clicks led to sales or qualified leads.

Question 4

How do cost per click and cost per thousand impressions differ?

Accepted Answer

Cost per click, or CPC, is the amount paid each time a user clicks an ad. Cost per thousand impressions, or CPM, is the amount paid for every one thousand ad views. CPC ties spending to traffic, while CPM ties spending to exposure.

Question 5

What is return on ad spend, and how is it calculated?

Accepted Answer

Return on ad spend, ROAS, is the revenue generated by advertising divided by the amount spent on that advertising. For example, 5,000 dollars in attributed revenue from 1,000 dollars in ad spend gives a ROAS of 5. A ROAS above 1 means revenue exceeded ad spend, though profit depends on margins.

Question 6

Why do marketers track customer acquisition cost in performance campaigns?

Accepted Answer

Customer acquisition cost, or CAC, is the total spending needed to win one new paying customer, calculated as total acquisition spend divided by new customers acquired. Marketers track it because it shows whether growth is affordable. Comparing CAC with the value a customer generates over time reveals whether acquisition is sustainable.

Question 7

What is lifetime value, and why does it matter for ad bidding?

Accepted Answer

Customer lifetime value is the total profit or revenue a customer is expected to generate over the relationship with a business. It matters for bidding because an advertiser can afford to pay more for a customer whose future value is high. Bidding on immediate first-purchase value can cause advertisers to underinvest in valuable customers.

Question 8

How is conversion rate calculated, and what does a low value usually signal?

Accepted Answer

Conversion rate is the percentage of ad clicks or sessions that result in a conversion, calculated as conversions divided by clicks. A low value signals a mismatch between the ad promise and the landing page experience, or a weak offer. It helps diagnose whether problems lie in the ad or after the click.

Question 9

How do you calculate return on investment for a paid campaign?

Accepted Answer

Return on investment equals the net gain from a campaign, meaning attributed profit minus total cost, divided by total cost and expressed as a percentage. For example, a campaign with 3,000 dollars of attributed profit and 2,000 dollars of total cost returns 50 percent.

Question 10

What does profit margin mean, and why must it guide target ROAS?

Accepted Answer

Profit margin is the share of each revenue dollar that remains as profit after the cost of goods and other direct costs are paid. It must guide target ROAS because a campaign with a low margin needs a higher ROAS just to break even.

Question 11

What is impression share, and what limits it from reaching 100 percent?

Accepted Answer

Impression share is the percentage of eligible impressions an ad actually receives in an auction. Its gap from 100 percent is caused by budget constraints, which stop ads from showing, and by ad rank, which affects whether an ad wins auctions it enters.

Question 12

How does frequency relate to reach in an ad campaign?

Accepted Answer

Reach counts the number of unique people who see an ad, while frequency counts the average number of times each reached person sees it. Total impressions equal reach multiplied by frequency. Rising frequency with flat reach usually signals audience fatigue, where repeated exposure stops producing responses and may irritate viewers.

Question 13

What is the difference between a leading indicator and a lagging indicator?

Accepted Answer

A leading indicator predicts future results and can be measured quickly, such as click-through rate, add-to-cart rate, or landing page engagement. A lagging indicator reports results that have already happened, such as revenue, total sales, or customer lifetime value. Good reviews use both, so teams act early without ignoring real outcomes.

Question 14

What is a benchmark, and how should advertisers use one?

Accepted Answer

A benchmark is a reference value, such as an industry average or your own past performance, against which a metric is judged. Advertisers should use benchmarks as context rather than strict targets, since audiences, offers, and markets differ widely. Comparing your own trend over time is more reliable than matching someone else's published figures.

Question 15

How is average order value calculated, and why does it matter for paid campaigns?

Accepted Answer

Average order value equals total revenue divided by the number of orders over the same period. It matters for paid campaigns because a higher value per order can offset a higher cost per click, improving return on ad spend without cutting media costs. Bundles, upsells, and minimum order thresholds are ways to raise it.

Question 16

What is a conversion window, and why does its length matter?

Accepted Answer

A conversion window is the period after an ad click or view during which a conversion is credited to that ad. Short windows undercount delayed purchases, while long windows may credit sales that would have happened anyway. Choosing a window that matches the typical buying cycle makes reported performance more realistic.

Question 17

What is the difference between search ads and display ads?

Accepted Answer

Search ads appear in results when users actively enter queries, so they reflect expressed intent. Display ads appear on websites and apps within content, usually reaching people who have not searched for the product. Because intent differs, search often converts at higher rates, while display is valued for reach and awareness.

Question 18

What is retargeting, and why do advertisers use it?

Accepted Answer

Retargeting shows ads to people who have already interacted with a business, such as visiting a site or abandoning a cart. Advertisers use it because prior interest makes these users more likely to return and complete a purchase than cold audiences. Frequency caps prevent excessive retargeting, which can feel intrusive and waste budget.

Question 19

How is a paid search account typically organized, from top to bottom?

Accepted Answer

The account sits at the top and holds one or more campaigns, which set budgets, locations, and bidding strategy. Each campaign contains ad groups, which organize closely related keywords or audiences, and each ad group holds the ads themselves. Tight grouping lets advertisers match messaging to each theme and control spending more precisely.

Question 20

What is a keyword match type, and why does it affect reach?

Accepted Answer

A keyword match type controls how closely a search query must resemble an advertiser's keyword before the ad can show. Broad matches allow wide variations and more reach, while exact matches limit ads to close variants, giving more control but fewer impressions. Phrase matches sit between these two.

Question 21

Why do advertisers segment campaigns by device or geography?

Accepted Answer

Segmenting by device or geography lets advertisers adjust bids, budgets, and messaging to differences in behavior and value across those groups. Mobile users may convert differently from desktop users, and customers in one region may have different prices, shipping options, or demand. Separate reporting makes these differences visible rather than hidden inside averages.

Question 22

What is a landing page, and how does it connect to the ad?

Accepted Answer

A landing page is the web page a visitor reaches after clicking an ad, designed around one specific goal such as a purchase or sign-up. It connects to the ad through message match, meaning the headline, offer, and imagery should continue the promise made in the ad. Weak alignment wastes paid clicks.

Question 23

How does a daily budget differ from a lifetime budget in paid campaigns?

Accepted Answer

A daily budget caps average spending per day, so the platform may spend more on some days and less on others within a set range. A lifetime budget caps total spending across a fixed campaign schedule with a defined end date. Daily budgets suit ongoing campaigns, while lifetime budgets suit time-limited promotions.

Question 24

Why do advertisers use consistent naming conventions for campaigns and ad groups?

Accepted Answer

Consistent naming conventions make accounts readable, so anyone reviewing data can quickly see each campaign's objective, audience, geography, and offer. Clear labels also make reports easier to filter, compare, and export. Without them, teams waste time guessing which spending belongs to which test, which increases the risk of costly mistakes.

Question 25

What is a conversion pixel, and what does it do on a website?

Accepted Answer

A conversion pixel is a piece of tracking code placed on a web page that sends a signal to the ad platform when a visitor completes a defined action. It lets the platform connect ad clicks to outcomes and use that data for reporting and optimization. Without accurate placement, conversions may be undercounted.

Question 26

What is last-click attribution, and what bias can it create?

Accepted Answer

Last-click attribution gives all credit for a conversion to the final ad or channel the customer clicked before buying. It creates a bias that favors bottom-funnel channels, such as branded search, and undervalues earlier touchpoints like video or social ads that introduced the brand. Comparing it with other models prevents misreading channel value.

Question 27

How does multi-touch attribution differ from single-touch models in campaign reporting?

Accepted Answer

Single-touch models assign all credit to one interaction, usually the first or last touchpoint. Multi-touch attribution spreads credit across several interactions along the customer journey, using rules such as linear, time decay, or position based weighting. The choice of model changes which channels look profitable, so results should be interpreted with care.

Question 28

What is an A/B test in advertising, and what should stay constant?

Accepted Answer

An A/B test compares two versions of an ad, landing page, or audience setting by showing each version to a similar group at the same time. For valid results, only one element should change, while audience, budget, and schedule stay constant. Changing several things makes it impossible to know which change caused the difference.

Question 29

Why is statistical significance important before declaring a test winner?

Accepted Answer

Statistical significance estimates whether an observed difference is likely real rather than produced by random variation in the data. Declaring a winner too early, especially with small samples, often leads to choosing options that do not truly perform better. Waiting for adequate sample size and a planned stopping point protects budget and decision quality.

Question 30

What is incrementality, and why is it harder to measure than attributed conversions?

Accepted Answer

Incrementality measures how many conversions occurred because of an ad that would not have happened otherwise. It is harder to measure than attributed conversions because platforms credit sales that might have happened anyway, such as purchases by people already planning to buy. Holdout groups and controlled experiments are common ways to estimate it.

Question 31

How do privacy restrictions and blocked cookies affect conversion tracking?

Accepted Answer

Privacy restrictions and blocked cookies limit how platforms follow users across sites and devices, so some conversions go unrecorded or are attributed less precisely. This creates gaps in reporting and weakens optimization signals that depend on detailed user data. Advertisers respond by using first-party data, server-side tracking, and modeled conversions where permitted.

Question 32

Why should advertisers check whether platform conversions match backend sales records?

Accepted Answer

Platform-reported conversions and backend sales records often differ because of attribution windows, duplicate counting, refunds, and tracking gaps. Comparing the two reveals whether reported performance is inflated or missing conversions. Reconciling them regularly keeps budget decisions grounded in actual revenue rather than in a single system's estimates.

Question 33

What is bid strategy, and how does target CPA differ from maximize conversions?

Accepted Answer

A bid strategy is the rule a platform follows when setting bids in auctions. Target CPA aims to keep average cost per conversion near a chosen figure, while maximize conversions spends the budget to gain as many conversions as possible. The first favors efficiency, the second favors volume.

Question 34

How should advertisers decide when to pause an underperforming ad?

Accepted Answer

Pause an ad when it has gathered enough data to show weak results against clear targets, not after a few bad days. Sufficient impressions, clicks, or conversions should be present so random variation is not mistaken for poor performance. Reviewing the ad against its own goal and benchmarks keeps the decision fair and consistent.

Question 35

What is budget pacing, and why does it matter for spending?

Accepted Answer

Budget pacing describes how evenly a campaign spends its allotted budget across a period, such as a day or a month. Spending too quickly can exhaust funds during low-value hours, while spending too slowly can leave budget unused and reduce reach. Monitoring pacing early lets managers adjust bids or budgets before the period ends.

Question 36

What are diminishing returns in advertising, and how do they shape budget decisions?

Accepted Answer

Diminishing returns occur when each extra dollar of spending produces less additional result than the dollar before it. This happens because the most responsive audiences are reached first, and later spending reaches less interested people. Budget decisions should weigh the marginal return of the next dollar, not just the average return across the account.

Question 37

Why should advertisers keep testing new creative even when current ads perform well?

Accepted Answer

Advertisers should keep testing because audiences tire of familiar messages, so performance that is strong today can decline as frequency rises and competitors adjust. Regular creative testing gives advertisers fresh options ready to replace fading ads before results drop sharply. It also reveals new messages or formats that may outperform the current best performer.

Question 38

What is the risk of optimizing only for short-term metrics such as cost per click?

Accepted Answer

Optimizing only for cost per click can push spending toward cheap, curious traffic that rarely buys, lowering the quality of customers acquired. Short-term metrics are easier to see, so teams may favor them over lifetime value and profit. Balancing leading metrics with downstream revenue and retention keeps optimization aligned with business goals.

Question 39

How should a team decide whether a winning campaign is ready to scale?

Accepted Answer

A campaign is ready to scale when it has stable results over enough time, healthy unit economics, and room in its audience to absorb more spending. Teams should increase budgets gradually and watch for a rise in cost per acquisition. Sudden large jumps can disrupt learning and cause performance to fall.

Question 40

Why is it important to document changes made during campaign optimization?

Accepted Answer

Documenting changes is important because it records what changed, when, and why, so results can be linked to specific decisions. Without a change log, teams may misread performance shifts, repeat failed experiments, or credit the wrong action for a gain. A simple shared log makes reviews faster and onboarding easier.

Performance Marketing Basics Flashcards

1Core concepts and terminology

2Key metrics and formulas

3Paid channels and campaign structure

4Tracking, attribution and testing

5Optimization and budget decisions

Learning Resources