1.

CPM (Cost-per-Thousand Impressions)

Formula: CPM= Media Cost / Impressions x 1000

This formula is a performance based pricing model that tracks and

measures cost effectiveness of online impressions, which are sold by
the thousand. The CPM formula is the most common pricing model
used in the media industry.

2. CPC (Cost-per-Click)

Formula: CPC= Media Cost / Clicks

This calculation will help you understand and compute how much you
will pay each time your audiences engage with your media or
advertisement by clicking on it.

3. CPA (Cost-per-Action)

Formula: Media Cost / Number of Defined Acquisitions

This is a pricing model in which payment by your company is based

solely on your audience completing a qualifying action(s) that you
define. Some examples of actions are completing a sign up form, filling
out a survey, or even completing a purchase. In this situation, your KPI
(Key Performance Indicator) will be the “action” that needs to be
completed. For this model, that means whatever you are measuring to
judge the success of your campaign is what you will divide into your
media cost.

The second group of formulas we’re going to cover are performance

metrics. These models are essential to fully comprehending a
campaign’s success.
1. CTR (Click-Through-Rate)

Formula: CTR= (Clicks / Impressions) x 100

The click through rate model is simply a ratio of exactly how many
advertisements are seen by audiences, in comparison to how many
people are actually engaging with your advertisements by clicking on
them. Calculating your click through rate is one way to measure the
effectiveness of your advertisements.

2. Conversion Rate

Formula: Conversation Rate= Number of Desired Actions Taken / Visits

x 100

This formula calculates the percentage of audience members who take

a desired action defined by your company such as purchasing a
product, registering for a membership of some kind, or subscribing to
your company’s newsletter. In order to achieve a high conversion rate,
the interest level of the visitor needs to be high. This can be improved
by making sure your advertisements are reaching the visitor at the right
place at the right time in their path to purchase. Your company will also
need to ensure that the offer is attractive enough for the visitor to
actually complete the desired action. Typically, smaller, less-intensive
actions have higher conversion rates.

3. ROI (Return on Investment)

Formula: ROI= (Revenue – Cost) / Cost x 100

The return on investment model calculates the ratio of profits or losses

to the amount that was originally invested in the advertisement or
media. This metric can be difficult to calculate with the growing number
of channels from display, SEO and pay per click working together in one
advertisement.

All of the metrics mentioned above should be closely monitored

throughout the duration of your campaign. Comparing the
performance over time can help you identify optimization opportunities
to more efficiently spend your budgets.