If you are a website owner or a blogger, then your priority to generate revenue would be through ads, but you won’t end up there are many other sources from which you can earn more revenue.
We live in the information age. Here we have many terms and formulas for advertisement that we are not familiar with, so we decided to take the most popular ones and show you how you can do your revenue calculations with them.
Let me list down the terms that we are going to calculate here.
- eCPM
- eCPA
- eCPC
- CR
- CPC
- CPM
- CPA
- ROI
Contents
eCPM (Effective cost per mille)
It is a term used to evaluate the performance of the ads, and the meaning of eCPM is effective cost per mille. If you want to calculate the eCPM, you have to divide the total earnings by the impressions and then multiply the result by 1000, and you will have to do your eCPM.
Formula to Calculate
Total earning from Ad / Total impressions x 1000 = eCPM
Example
If you have an eCommerce store and run the ads for a week and you have earned a total revenue of $300 from that ad, and the total impressions on the ad was around 500, this is how we are going to calculate the eCPM of this store.
$300 / 500 x 1000 = 600
The eCPM of your store is 600.
eCPA ( Effective cost per action)
This term is used to evaluate the effectiveness of the cost per action. The literal meaning of this term is to find out whether people are taking action from your ad or not. If you want to calculate the eCPA, total earnings are divided by the total actions taken from that ad.
Formula to Calculate
eCPA= Total earning from an ad / total actions taken on that ad.
Example
I run ads for the SEO agency, and my target is to get messages from as many people as I can so, my total earning from that ad was around $5000, and the number of people who take action and message us was around 100. So let’s calculate the eCPA.
eCPA = 5000 / 100 = 50
50 is the eCPA for my SEO agency.
eCPC ( Effective cost per click )
This term is also very common in this field, and the meaning of this term is effective cost per click. This one calculates the clicks on your ads and how many people click on your ad that how much you have earned from each click. If you want to calculate the earnings then divide the total earnings by the clicks on that ad.
Formula to Calculate
eCPC = Total earning from an ad / total clicks on that ad.
Example
Suppose you have a company that makes t-shirts, and you run ads to sell t-shirts. You earn $500 from that ad, and then clicks on your ad are around 150. So, let’s calculate the eCPC for your ad.
eCPC = 500/150 = 3.3
The eCPC for your company is around $3.3 per click.
CR ( Conversion Rate)
When you are running an ad, the CR is the most important term used in it. The conversion rate is the sales that are made to the total number of clicks on your ad. This type of ad is shown to find out if the company’s ad campaign was profitable or not.
Formula to Calculate
CR = total number of conversions / Total number of clicks x 100
Example
Alex has a shop of electronics, and he runs ads to sell them, but if he wants to find out the conversion rate of his campaigns, he has to divide the total number of conversions by the total number of clicks and then multiply the answer with the 100. For example, suppose the total number of conversions is 500, and then they click on the ads is 1000; let’s calculate the CR.
CR = 500 / 1000 x 100 = 50%
The conversion rate for the ad campaign of Alex is 50%.
CPC ( Cost per click)
Bloggers will be familiar with this term because this is the cost per click that the advertisers have to pay to the site owner who displays their ads on their site. It is a very important term if you are working with Adsense or Adwords.
If you want to calculate the average CPC, you have to divide the cost of clicks by the total number of clicks you get on that ad, and you will have the average CPC amount.
Formula to calculate
CPC = Total cost of clicks / total number of clicks
Example
If your ad has two clicks of $1 and $2, then to find out the average CPC, you have to divide the total cost of $3 by the number of total clicks that are 2. The average cost the $1.5.
CPM ( Cost per mille)
Mille is called the thousand in the roman language, and many people think that the M in CPM means million, but that is not true. So if we talk about the literal meaning of the CPM, then it is the cost per thousand clicks. So when you are dealing with the CPM, there are two things that you should look at, and those things are the cost of campaigns and the number of impressions.
Formula to Calculate
CPM = Total cost of campaign / Total impressions x 1000
Example
If the cost of each impression on your site is around 1 cent, then your CPM would be $10.
CPA ( Cost per action)
As we all know already that the CPA is basically to pay someone against his action, and multiple ad networks pay you against your actions. There is no specific action; it might be a newsletter or some signup form. So if you want to calculate the CPA, you have to divide the total cost by the number of actions you received on that ad.
Formula to Calculate
CPA = Total number of the advertiser/number of actions taken
Example
Suppose you run a campaign and on that campaign that has 1000 impressions and it has 100 clicks, and from that hundred clicks, the 50 were the conversions. So, the total cost that the advertiser wishes to pay is $300. So, let’s calculate the CPA.
CPA = 300 / 50 = 6
The CPA calculated for the example is 6.
ROI ( Return on Investment)
It is also a very important term in digital marketing. When you are running an ad for some kind of product, then you need to evaluate if that campaign is profitable for you or not. To find out the Roi, you have to subtract the cost of the campaign from the total revenue and then divide it by the total campaign, and you will have your ROI.
Formula to Calculate
ROI = Total ad revenue – Total ad cost / total ad campaign cost
Example
My company spent $1000 on an ad campaign, and then in return, we earned $2500 from that ad. So, now let’s calculate the ROI.
ROI = $2500 – $1000 / $1000 = $ 1.5
$1.5 is the total return of investment on this ad campaign means you earn $1.5 on every $1 you spend.
FAQ
Q: How do you calculate CPM and impressions?
Ans: The CPM cost is simply divided by the number of impressions divided by 1,000 to determine the cost. In other words, CPM = 1000 * cost / impressions. One more equation that may be of interest reverses the formula: for the cost (what it will cost you): cost = CPM* impressions/1000.
Q: How do you calculate CPM efficiency?
Ans: This is the formula to calculate the efficiency of the CPM.
E = net standard CPM/activity of standard in DPM.
Q: What is a good cost per impression?
Ans: Whenever your company advertises online, the success of your campaign is based on the cost-per-thousand impressions (CPM). Google has a typical CPM of $2.80, while a Los Angeles TV spot has a CPM of $34 or more.
Q: Is CPM better than CPC?
Ans: The answer is that CPM offers a better CPC if you have insight into your ads. Clicks, visits, and other conversions can be more cost-effectively gained through CPM than paying upfront for them with CPC.
Q: How do you calculate CPM to DPM?
Assuming 20 percent of the product is incorporated into the count per minute, you first must determine the number of counts per minute needed. Therefore, divide 2000 counts per minute by 20%, giving you 10,000 counts per minute. Then, calculate disintegrations per minute using the counting efficiency. Ten thousand counts divided by fifty thousand gives us 20,000 DPM.
Summary
If you are a digital marketing student or want to know about the terms in digital marketing like the CPC, CPA, CPM, and Roi, then we have written this article for you. In this article, we explained everything about these terms and told you the formulas to calculate the terms. We also mentioned some examples so you can understand these terms more quickly and easily.
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