Basic Formulas in online Advertising : CTR CALCULATION and CR CALCULATION

CTR CALCULATION :

CTR is click through rate , it measures the effectiveness of any advertisement . It is calculated by using a simple formula as below :

Example  : A campaign having 728×90 Ad has served 10,000 impressions and has generated  100 clicks so what will be CTR of that Ad ?

CTR = (number of clicks / number of impressions) x 100

using above metrics ,

CTR = (100/10000) x 100 = 1 %

1% CTR means on every 100 impression there is one click.

CR CALCULATION :

CR is conversion rate , to calculate the conversion rate a simple formula is used :

CR = (number of conversions/Impressions) x 100 ,

so if number of conversion made are 20 in 1000 impressions , the conversion rate will be (20/1000) = 0.02 %

Basic Formulas in online Advertising : CPC CALCUALATION

CPC CALCUALATION :

As we know we have different rate models in online advertising , CPC – cost per click is one of the popular and well known used metric . Here the advertiser has to pay as per clicks and not on impressions . The page views can be any number , as the advertiser is concerned about clicks here .

Example : Suppose a campaign having 300×250 size banner running at CPC of $2 and the number of clicks the Ad has got is 1000 , what is the amount that the advertiser has to pay actually ?

The formula for CPC goes as below :

Cost to an Advertiser : CPC x number of clicks

using the above metrics ,

Cost to an Advertiser = 2 x 1000 = 2000

So , $ 2000 is what the advertiser has to pay !

CPC = Cost to an advertiser / number of clicks
Also , Cost = Impressions * CTR * CPC.

Basic Formulas in Online Advertising : CPM CALCULATION

CPM CALCULATION

cost per mille (1000) – This is one of the most used metrics on the web. It is the cost that has to be paid by an advertiser  for serving 1000 impressions .

Example :In a campaign , say an Ad of 728×90 is running and the CPM set is $5 and the impressions to be served is 2,00,000 , what will be the actual cost to  the advertiser ?

The formula for CPM goes this way :

Cost to an Advertiser = CPM x (Impressions / 1000)

using the above metrics :

Cost to an Advertiser= 5 x (2,00,000/1000) = 1000

So , $ 1000 is what the advertiser has to pay !

When CPM needs to be calculated : use the final cost.