Here’s a concise summary of essential metrics used in internet advertising, including their meanings, formulas, and examples.
1. CPM (Cost Per Mille)
- Definition: Cost for every 1,000 impressions.
- Formula:
[
{Cost to Advertiser} = {CPM} * \left(\frac{{Impressions}}{1000}\right)
]
[
{CPM} = \frac{{Cost to Advertiser} * 1000}{{Impressions}}
]
- Example:
If CPM = $5 and impressions = 200,000:
[
{Cost to Advertiser} = 5 * \left(\frac{200,000}{1000}\right) = 1000
]
Advertiser pays $1,000.
2. CPC (Cost Per Click)
- Definition: Cost based on clicks, not impressions.
- Formula:
[
{Cost to Advertiser} = {CPC} * {Number of Clicks}
]
[
{CPC} = \frac{{Cost to Advertiser}} / {{Number of Clicks}}
]
[
{Cost} = {Impressions} * {CTR} * {CPC}
]
- Example:
CPC = $2, Clicks = 1,000:
[
{Cost to Advertiser} = 2 * 1000 = 2000
]
Advertiser pays $2,000.
3. CTR (Click-Through Rate)
- Definition: Measures ad effectiveness by click rate.
- Formula:
[
{CTR (\%)} = \left(\frac{{Number of Clicks}} / {{Impressions}}\right) * 100
]
- Example:
Impressions = 10,000, Clicks = 100:
[
{CTR} = \left(\frac{100}{10,000}\right) * 100 = 1\%
]
4. CR (Conversion Rate)
- Definition: Measures success rate of ad conversions.
- Formula:
[
{CR (\%)} = \left(\frac{{Number of Conversions}} / {{Impressions}}\right) * 100
]
- Example:
Conversions = 20, Impressions = 1,000:
[
{CR} = \left(\frac{20}{1000}\right) * 100 = 2\%
]
5. CPA (Cost Per Action)
- Definition: Cost based on specific actions, such as sign-ups or sales.
- Formula:
[
{Cost to Advertiser} = {CPA} * ({Impressions} * {CTR} * {CR})
]
[
{CPA} = \frac{{Cost to Advertiser}} / {{Impressions} * {CTR} * {CR}}
]
- Example:
CPA = $5, Impressions = 10,000, CTR = 3\%, CR = 2\%:
[
{Cost to Advertiser} = 5 * (10,000 * 0.03 * 0.02) = 30
]
Advertiser pays $30.
6. CPV (Cost Per Visit)
- Definition: Cost per actual website visit.
- Formula:
[
{CPV} = \frac{{Total Campaign Cost}} / {{Number of Visits}}
]
- Example:
Total cost = $1,000, Visits = 200:
[
{CPV} = \frac{1000}{200} = 5
]
Cost per visit = $5.
7. eCPM (Effective Cost Per Mille)
- Definition: Actual CPM applied based on performance.
- Formula:
[
{eCPM} = \left(\frac{{Total Spend}} / {{Impressions Delivered}}\right) * 1000
]
- Example:
Total spend = $300, Impressions = 213,456:
[
{eCPM} = \left(\frac{300}{213456}\right) * 1000 = 1.40
]
Effective CPM = $1.40.
8. eCPC (Effective Cost Per Click)
- Definition: Measures cost-effectiveness for CPC campaigns.
- Formula:
[
{eCPC} = \frac{{Total Spend}} / {{Clicks}}
]
- Example:
Spend = $200, Clicks = 100:
[
{eCPC} = \frac{200}{100} = 2
]
Effective CPC = $2.
9. eCPA (Effective Cost Per Action)
- Definition: Cost-effectiveness of CPA campaigns.
- Formula:
[
{eCPA} = \frac{{Total Spend}} / {{Number of Conversions}}
]
- Example:
Spend = $2,000, Conversions = 200:
[
{eCPA} = \frac{2000}{200} = 10
]
Effective CPA = $10.
10. Estimated LTV (Lifetime Value)
- Definition: The estimated revenue generated by a user over time.
- Formula:
[
{eLTV} = {Avg. Purchase per Year} * {Avg. Purchase Size} * {Loyalty Duration (Years)}
]
11. Estimated CAC (Customer Acquisition Cost)
- Definition: Cost incurred to acquire a customer.
- Formula:
[
{eCAC} = \frac{{Time \& Money Cost of Acquisition}} / {{Number of Customers Acquired}}
]
By applying these formulas, advertisers can optimize their campaigns, track performance, and maximize returns on investment (ROI).