March 20, 2019Marketing
If you’re wondering what is the meaning of the terms CPC, CTR, CPA, CPM, CPV and CPL, then you are in the right place.
These are acronyms of some of the most commonly used terms in marketing and digital advertising that allow us to understand the performance of campaigns in Google AdWords, Facebook Ads or other media.
Some of these terms are also used to describe the rates with which many publishers or websites sell their advertising space in digital (or internet) format.
Many times these terms may seem complex. But don’t worry, with this article you’ll know what each of them consists of.
The 3 key terms
These are the most basic terms that are used on a day-to-day basis and that you should know:
I don’t think this part needs much explanation. These are recorded when a user “clicks” on one of your ads.
Impressions are a metric that is recorded when a user observes an ad. That is, if an ad was shown 100 times, then that campaign generated 100 impressions.
A conversion is all action within a website that represents an important indicator for the advertiser.
Some of the most common conversions are the number of sales on e-commerce sites, the number of registration forms sent or even the number of times someone adds a product to the shopping cart.
Since you are clear about the meaning of the three metrics above, it is easier to understand the following:
CPC (Cost per click)
CPC means “Cost per click”. This is how platforms like Google AdWords or Facebook Ads usually charge their advertisers. When a user clicks on one of the ads it is when the charge is made.
The CPC can be obtained with the following formula:
CPC = total Cost/Number of clicks
For example, if you invested $100 in total and got 50 clicks of that investment then your CPC is $2.
There are various strategies to reduce costs per click that make it possible to improve the benefits of campaigns.
CPM means “Cost per thousand” or “Cost per thousand impressions”.
This is the value that is charged to the advertiser so that his ad is displayed 1,000 times. To get an average CPM of some campaign or group of campaigns you can use the following formula:
CPM = (total Cost / (impressions / 1,000))
For example, if I have a total of 300,000 impression and my campaign generated an expense of $ 20,000, then my CPM, applying the above formula, would be the following:
CPM = ($20,000 / (300,000 / 1,000)) = $66.6
I paid $ 66.6 for every thousand impression generated during my campaign.
Also, there are ad networks that charge you by fixed CPM, where they charge you every time your ad is displayed 1,000 times.
CTR means “Click through rate” or click rate / click percentage. This is a metric that determines the interest or relevance of your ads to the users being shown. The higher your CTR is, the more relevant your campaign is being.
(There is no exact value for determining a good CTR, it all depends on the campaign and many other factors)
To get this data you need to have the number of clicks and the number of prints on hand. The formula for obtaining the CTR is:
CTR= (Number of clicks / Number of impressions) x 100
With this, if you generated 20 clicks and your ad showed up 200 times, then you have a 10% CTR.
CPA / CPL
Cost per action and cost per lead. The term “action” in the world of digital marketing could be a sale, a completed form, or any activity that represents something important to the advertiser.
This metric can also be known as “cost per conversion”.
A lead is a type of action that usually happens when a person has provided their contact details through a registration form within a website. Both action and lead are types of conversions.
This is what an advertiser pays every time one of these actions takes place. The formula for obtaining the CPA or CPL or Cost-per-Conversion is the following:
CPA/CPL = (total Cost / Number of actions, leads or conversions)
Some publishers or affiliate networks charge under this model. Although not as common as the CPC or CPM, this model can be quite attractive to the advertiser as it is only paid when the user performs a major business action. Call it Sale, request terminated, registration, etc.
Conversion rate (%Conv.)
The conversion rate is one of the most important metrics when it comes to digital marketing. This defines the rate or proportion with which a user performs a conversion.
Suppose on my website I’m selling cakes online. For every 100 visitors I get 2 bake sales. So my conversion rate is 2%.
The formula is the following:
Conversion rate = (number of conversions / number of visitors) x 100
The higher your conversion rate, the more likely you are to generate a higher return on your investment in digital advertising.
There are various ways to improve conversion rates but one of the main ways is to show the user exactly what they are looking for after they click on one of your ads.
That is, if you advertise dog croquettes, show them a page showing information about dog croquettes, prices and brands. 🙂
Cost per view. This indicator defines the cost of each view generated from ads in video format.
Due to the boom in online video consumption, many websites charge based on CPV, where normally the advertiser pays when someone watch a video ad for a certain time.
The YouTube video ad platform, known as YouTube TrueView, charges the advertiser when he watches the video for at least 30 seconds. If the user sees the ad only 29 seconds, then the charge is not made.
In Facebook ads, it works similarly, only the minimum duration for this time is 3 seconds.
How do we get this metric?
CPV = (total Cost / number of views)
If we invest $ 20,000 and generate 45,000 video views then our CPV will be $0.44
Video ad viewing costs are very low. This is a format that is important to consider in a digital advertising campaign.
Despite the fact that the ROI (Return on investment) is not an indicator that is used exclusively in the digital advertising, this metric is used to measure the profitability of the efforts made in this area.
A large percentage of campaigns, especially those of the direct response type, are evaluated on the basis of ROI or return on investment. With this we can know if what we are investing is being taken advantage of correctly.
ROI = ((income – total costs) / total costs) x 100
For example, if in a digital marketing campaign you had a total cost of $ 5,000 and generated an amount of $10,000 in revenue, then this would be the result.
ROI = (($10,000 – $5,000) / $5,000)) x 100 = 100%
We would have a 100% return on investment, which means that for every weight we invest we recover that same weight and an extra one.
I hope that this article will now make it clearer to you where they come from and what each of these metrics or indicators means. If you liked the Article share it on social media. 🙂