What is CPM, CPC, CPA and CTR ? How to Calculate ? Basic formulas in Online advertising
CPM
CPM refers to an online advertising program
CPM means Cost Per Thousand. (M is the Roman numeral for thousand – and so Cost Per Thousand).
This is the amount you will pay the ad-network or website publisher to show your ad a thousand times on their website or across their ad-network.
Whether your ad is shown only once to each visitor (Unique Impressions) or any number of times – is something that you will have to work out with the nad-network or the website.
CPM rates were once (pre yr 2000 bubble-burst era) as much as $75, but have now dropped to as little as $1 CPM.
CPC
The CPC is the amount of revenue that you earn from each time a visitor clicks an ad displayed on your blog, website, or article.
CPC means Cost Per Click. This is how much you would pay the ad-network or website every time a visitor clicks on your banner. CPC rates can be as high as $3 per click or as little as 5 cents per click. It depends on your product and your market – amongst other factors, the more competition there is – the higher you will probably end up paying as you compete with competitors.
CPA
CPA is also known as CPL (Cost Per Lead) and CPS (Cost Per Sale). It is a specific action-oriented online advertising program or pricing model. In this advertising, the advertisers pay the publishers for each specified action such as a purchase, signing up for an email or newsletter, a form submission made by each user or visitor through the linked advertisement by the advertisers placed on the publishers’ websites.CPA means Cost Per Action. The Action could be any of the following types of actions – A visitor clicking on your banner coming to your site and filling up a simple enquiry form (CPR – Cost Per Registration) , or if the visitor makes a purchase (CPS – Cost Per sale). It could be a flat fee or a percentage commission of the sale made.
CTR
CTR is Click Through Rate. This is the percentage rate at which people click on your ad banner. If your banner ad is seen by 100 people but clicked by one person – then it’s CTR is 1% or .01
Similarly, if your ad banner is seen 100,000 times and in the same time period it is clicked 2000 times – then your banner CTR is 2% or .02 .
This is how we calculate CTR …
(Number of Clicks / Number of impressions) x 100
Example, for above case it would be –
(2000 / 100,000) x 100 = .02
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