Tuesday, December 31, 2013

Basic Terms in online Advertising

1. Impressions

This used to be a term more appreciated, which means how many times a user saw your ad or banner or any online advertisement. Each time your ad has been viewed counts as an impression.

2. CTR (Click Through Rate)

How many users that saw your ad have clicked on it too and visited your website or landing page.
The Click Through Rate is calculated as Clicks / Impressions.
Example : Let’s say your ad reached 100 impressions, and 10 users also clicked on the ad, it means your CTR is 10%.

3. Conversion

Once a user saw your ad, clicked on it and visited your website or any landing page and does any action like buying of any product or registers or downloads depending upon the which action has been considered as conversion for that campaign , a conversion is calculated.

4. Call for Action

It's the most important for the user to take any action.Call for Action is what drives the users to interact with your campaign. Depending on the goals that the advertiser set for the campaign, the Call for Action may be: Request a quote, download a brochure, sign up for a newsletter, and of course- buy a product or book a room online.

5. CPL ( Cost per Lead) / CPA (Cost per Acquisition)

It's the cost spending on clicks / conversion .
Example :  Let’s say your ad drew 100 clicks at 100$, and you achieved 10 Conversions, then you CPL / CPA is 10$.

The lower the CPL/CPA value , means good is the conversion rate.

6. ROI (Return on Investment)

The best example to understand ROI is :
Let’s say you are promoting your restaurant and the Call for Action is booking online reservation for dinner. You already know that your profit from every guest is 10$. In that case, if the CPA is 8$, which means you spent 8$ advertising money to get a reservation, than your ROI is positive, because you have 2$ profit on every reservation.

7. CPM (Cost per mille)

Commonly used measurement in advertising !!
CPM is also called as CPT i.e cost per thousand , which means we need to pay cost on every 1000 impressions.
Example : If CPM is $5 , it means cost of 1000 impression is $5 .

8. CPC (Cost per click)

Just like CPM , CPC is also a measurement used in online advertising , the only difference is this cost is based on clicks and not impressions . If any user is shown the Ad but he doesn't clicks on it their won't be any cost effect as the cost is based on clicks only.
Example : If CPC is $5 , it means every click costs $5 so 20 clicks than it will cost us $100.

*Also , consider a campaign where payment is based on impressions, not clicks. Impressions are sold for $10 CPM with a click-through rate (CTR) of 2%.

1000 impressions x 2% CTR = 20 click-throughs
$10 CPM / 20 click-throughs = $.50 per click.

9. CPA (Cost per acquisition)

It's another word for cost per action and is used interchangeably with this term. CPA measures the advertiser’s per conversion cost from start to finish, from the inclusion to the search engine results to creating interesting landing pages that grab the attention of the visitor. This means cost per acquisition measures how much it costs in advertising to convert one person from a visitor to a client for the company.

Action can be different for different campaigns , like for some registration is set as a conversion and for some the buying of any product i.e when a user reaches the 'Thank you page' or may be downloading anything from the client's page.

10. CPE (Cost per Engagement)

A new measure of performance in online advertising. After CPM, CPC and CPA we have this CPE which has no relation with impression but only with the engagement i.e when any user engages with the brand content.
This measure actually differentiates between quantity and quality.
Engagement can be defined as a user interacting with an ad in any number of ways, including viewing, sharing, voting, commenting, reviewing, playing a game , etc.

CPE campaigns are mainly video campaigns as it initiates used to engage with the creative.

11. CPL (Cost per Lead)

A lead is the initiative in an action .
It is usually a free registration or filling of the form on the creative like mobile number , email Id or name , etc.
Once the user fills the detail , a lead is counted !

12. Ad Dimension

The size of a creative measured in pixels. e.g. 728×90 ; 300×250 ; 160×600 etc.

13. Ad Space

The space on a Web page reserved to display advertising.

14. Banner

An online advertisement in the form of a graphic image that typically runs across the top or bottom of a Web page, in the margin, or other space reserved for ads. i.e the Ad Space on the respective web pages.

15. Pop-Under

A window that launches automatically behind the current browser window. It is a type of advertisement like expandable , video Ads are also type of advertisement .

16. Pop-Up

A window that launches automatically in front of the current browser window.

17. Affiliates

A type of advertising system based on the CPA payment method whereby web sites run advertiser’s banners for free but get paid on any sales or registrations that result from visitors that click on the banner.

18. Agency

An organization that provides a variety of ad services for advertisers, including helping them design creative and locate the best place to run their advertising campaign.Today there are number of agencies in market , e.g Exponential , Zedo , Eye Blaster etc..

19. Cookies

Cookies are small files that  are sent from a web server to the local user’s computer to store information unique to that user.Often used by advertisers to keep track of the number  and frequency of advertisements that have been shown to a visitor or by sites to help them determine the number of unique visitors.Cookies can also be used to target  advertising, such as targeting advertising based on an individual’s user profile on a site.

20. Frequency Capping

A term used to describe the number of times the same advertisement is shown to the same visitor during a particular session or time frame.Frequency Capping is a popular method for ensuring that a single user does not see the same ad too often.

21. Geo targeting

Geo targeting is the practice of  targeting ads to web users based on their physical location , e.g. If i want to show to Ad only to US citizen i can target the Geo only to US so no other user at different location can see the Ad .

22. Interstitial

An particular type of advertisement that loads between web pages, requiring a user to look at it before getting to the page they meant to go to.It is one of the closest things on the Internet to television commercials.

23. Post Click Tracking – PCT

This is used to track if a user performs an action after clicking on a banner, such as completing a registration page or purchasing an item. It is done with the use of a cookie placed in the browser that is read by a tracking pixel on a page (such as an order confirmation page or a “thank you for signing up” page).

24. RON

Run of network (RON) means a banner will run on all the network i.e it has the potential  to appear on any page of any site that is part of an ad network.This type of buy is not targeted to any specific choice, it tends to be the least expensive type of advertisement that can be purchased.Custom targeting is quite costly than RON.

25. Leaderboard

Leaderboard is a standard size of an online banner ( advertisement ) of size (w) 729 x (h) 90 (in pixels).

26. MPU ( Mid page Unit )

MPU (Mid Page Unit) or medium rectangle is a banner (advertisement) size of (w) 300 x (h) 250 (in pixels).

27. Skyscraper

Ad Dimension 120×600. Commonly used on the side of pages.

28. ATF – “Above the fold” of a web page.

29. BTF – “Below the fold” of a web page.

30. Insertion Order

It's a formal contract binding between both the buyer and seller of inventory.

31. Ad Tags

HTML code produced by your ad server that displays the corresponding creatives.

32. Pacing

Pacing is how fast the purchased impressions are delivered , like if the pacing is AGGRESSIVE , it means the impressions are to be delivered in a fast pace while if the pacing is GOVERNED , it means the impressions are to be delivered in some pattern and also in slow mode.

33. Out-clause

Out-clause is the amount of time you have to cancel an insertion order.

Basic Formulas in online Advertising : eCPA CALCULATION


eCPA is effective cost per Action which is calculated same as eCPC and eCPM , It is the total spend by the total number of actions(i.e conversions) acquired .

Example : The total spent on the campaign is $2000 and the total number of conversions made is 200 , what will be the eCPA ?

Formula of eCPA ,

eCPA = Total spent / number of conversions or actions

Using the above metrics ,

eCPA = 2000 / 200 = $ 10

Basic Formulas in Online Advertising : eCPC CALCULATION

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 .

Net profit = CPC – eCPC

eCPC = (Total spent or revenue / clicks)

Example : If eCPC needs to be calculated for a single Ad size say 300×250 , we just need to figure out how much the Ad size has spent and how much clicks it has generated , so if it is like $200 has been spent and the clicks generated are 100 with actual CPC set to $3 .

using the formula ,

eCPC = ( 200 / 100 ) = $ 2

So , net profit = ( 3 – 2 ) = $1.

Basic Formulas in online Advertising : eCPM CALCULATION : (Effective cost per mile)

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

Basic Formulas in online Advertising : 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


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

Basic Formulas in online Advertising : CTR CALCULATION and CR 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 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


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


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.