What is a 'conversion rate'?

The concept of 'conversion rate' is fundamental in digital advertising and performance marketing. It specifically refers to the percentage of users who take a desired action after clicking on an ad. This action could vary depending on the campaign's goals; it might involve making a purchase, signing up for a newsletter, downloading a resource, or completing a form.

Understanding conversion rates is essential for evaluating the effectiveness of an advertising campaign. A higher conversion rate indicates that a greater proportion of users find the ad compelling enough to engage further, reflecting successful targeting, appealing creative elements, and effective landing pages. This metric helps advertisers assess the return on investment (ROI) of their ad spend and make informed decisions to optimize campaigns.

The other options, while related to online advertising metrics, do not accurately define conversion rate. For example, the percentage of users who click an ad pertains to click-through rate (CTR), which shows how many users were interested enough to engage with the ad itself. The ratio of ads displayed to clicks received pertains to general performance metrics but does not capture the follow-through action necessary to measure conversions. Lastly, the total budget spent on an ad campaign relates to financial management rather than conversion actions, making it unrelated to the measurement of conversions in advertising.