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Tuesday, December 31, 2013

Basic Formulas in online Advertising : CPA CALCULATION

CPA CALCULATION :

Another metric that we have and is generally used is cost per acquisition which is irrespective of impressions and clicks both .This metric deals with any action or basically when something is acquired like user sign up or when any sale is made.

Cost to an advertiser = CPA x ( Impression x CTR X CR  )

Suppose CPA is $5 , number of impressions is 10,000 , CTR is 3% and CR is 2%.

using the above metrics ,

Cost to an advertiser = 5 x ( 10000 x 0.03 x 0.02 ) = $30

Similarly , if you know the actual cost , we can easily calculate the CPA for the Ad using the below formula :

CPA = cost to an advertiser / ( Impressions x CTR x CR )

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

and,

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

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