Online advertising uses Internet as a channel to promote brands and products of an advertiser. In order to measure the success rate of a product/brand. It is essential to know what are the basic formulas in advertising and how they are calculated., Let’s take a look on the basic formulas used in advertising as below.,
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| Online advertising |
A campaign has 4 different banners and the CPM is set to $4 and the impressions to be served is 300000. What would be total cost.
Cost = CPM x (Impressions/1000)
Cost = $4 x (300000/1000) = $1200
- CPM(cost per mille)
Similarly, What would be the CPM if a campaign has budget of $1500 and 300000 Impression
CPM = Cost to an Advertiser x 1000 / Impressions
CPM = $1500 x 1000/300000 = $5
- CPC(cost per click)
If a campaign has got 50 clicks for 300000 Impressions and budget of $1500. What would be the CPC?
CPC = Cost to an advertiser / number of clicks
CPC = $1500/50 = $30
- CTR(click through rate)
If a campaign has served 100000 Impressions and generated 20 clicks. Then the CTR would be.,
CTR = (number of clicks / number of impressions) x 100
CTR = (20/100000) x 100 = 0.02%
- CVR/CR(conversion rate)
If a campaign has served 100000 Impressions and generated 120 clicks and 50 conversions. CVR would be calculated differently based on the rate Models.
CVR/CR = (number of conversions/Impressions) x 100 (CPM model)
CVR/CR = (50/100000) x 100 (CPM model) = 0.05%
CVR/CR = (number of conversions/clicks) x 100 (CPC model)
CVR/CR = (50/120) x 100 (CPC model) = 41.66%
- CPA(cost per action)
A campaign has got 50 conversions for 300000 Impressions and budget of $1500, Then the CPA would be.,
CPA = Total cost of the campaign/ Total Number of actions
CPA = $1500/50 = $30
- ROI(return on investment)
If a campaign has generated $2000 revenue on spending $1500. The ROI will be 1.33.
ROI = Total Revenue generated by the campaign/Total Spend
ROI = 2000/1500 = 1.33
- eCPM(effective CPM)
eCPM is the actual CPM that a campaign is being applied.
eCPM = ( Total spent / Impressions delivered ) x 1000
eCPM = ($1500/100000) x 1000 = $15
- eCPC(effective CPC)
eCPC is the actual CPC that a campaign is being applied.
eCPC= (Total spent / clicks)
eCPC =$ 1500/20 = $75
- eCPA(effective CPA)
eCPA is the actual CPA that a campaign is being applied.