Know online advertising

Basic Formulas in Internet Advertising

Also, Average Cost Per Acquisition (CPA) = Average Cost per Click / Conversion Rate

Some more formulas that are used :

CPL / CR = CPA or
Cost Per Lead divided by Conversion Rate = Cost Per Acquisition


VPA – CPA = NP or
Value Per Acquisition minus Cost Per Acquisition equals Net Profit.

CPV is cost per visit which is new with respect to CPM, CPC and CPA but is now commonly used by compnies. The costing is done as per the actual visits.

CPV = Total cost of the campaign/ Number of total visit or incremental visit after the campaign started

Suppose, the total cost is $1000 and the visit increased from 50 to 250 visits so incremental visit is equal to 200.

Applying the above numbers in the CPV formula, we get

CPV = 1000/200 = $5

i.e. Each visit cost is $5 to the advertiser

  • eCPM CALCULATION : (Effective cost per mile)

Effective CPM is the actual CPM that is being applied, If the CPM set is $2 and the eCPM is $1.5, the net profit is $0.5 . eCPM helps you measure how well your ads are performing.It is calculated by dividing total earnings/total spend by total number of impressions in thousands.

eCPM = ( Total spent / Impressions delivered ) x 1000

Example : An ad size of 728 has delivered 213456 impressions and has also spent some $300 with CPM set as $1.5, what will be the eCPM ?

Using the formula,

eCPM = ( 300 / 213456 ) x 1000 = $1.40

We can also calculate eCPM using eCPC, but for that we need to know the conversion rate. and than using the formaula as below :

eCPM = eCPC x conversion rate x 1000

eCPC, is a metric used by Internet marketers to calculate the effectiveness of their online campaigns when the rate model used is CPC . eCPC can also be termed as ” profitable per click” so if the actual CPC is $2 and the eCPC is coming as $1 per click, than $1 is the profit on each clicks .

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