CPA, CPM, CPC, AND OTHER PRICING MODELS

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Convert4 is always at service in giving quality information for your digital marketing needs, and revenue calculation is part of that. This article will find the most accurate ad revenue calculation formulas to estimate how much money your company makes.

Marketing KPI Definitions

  • CPM (cost per million impressions) – cost to view an ad a thousand times. The cost basis is per thousand impressions.

    Formula: CPM = 1,000 * Cost / Impressions
  • CPC (cost per click) – average price you pay for users to click on your ad, generally used for direct response campaigns.

    Formula: CPC = Ad Cost / Total Number of Clicks
  • CPA (cost per acquisition) – the cost of obtaining a completed transaction.

    Formula: Ad Cost / Number of Conversions
  • CTR (Click-Through-Rate) – While CPC, CPA, and CPM measure how much you spend on an advertisement, CTR displays how well your ads perform. A high Click-Through Rate (CTR) is when a significant number of people performs a click-action after seeing your advertisement. CTR is the total number of clicks made on an ad divided by the total number of impressions it received during its display time.

    Formula: CTR = Covered Monitored Clicks / Covered Ad Impressions * 100
  • CVR (Conversion Rate) – We measure conversion rate by the ratio of people who convert from your advertisement to those who click on it. Determine what a conversion means to you and your business. A conversion could be someone completing a lead-form or could be someone purchasing a product from your website.

    Formula: CVR= (Successful Conversions / Total Clicks Received) * 100
  • CPI (Cost Per Install) – CPI campaigns are explicitly executed for mobile app installations. Advertisers will use these types of campaigns to make sure that they can advertise their product to the most people possible while only paying when someone downloads the app.

    Formula: CPI = Ad Cost / Total Number of Installs
  • CPL (Cost Per Lead) – The cost of acquiring a potential customers information in the form of a lead ad. These forms typically collect, name, email, phone number, and other personalized questions depending on the businesses needs.

    Formula: CPL = Ad Cost / Total New Leads
  • CPV (Cost Per View) – Total number of views a video ad receives.

    Formula: CPV = Ad Cost / Total Number of Views

PRICING MODEL FACEOFF

CPC vs. CPA

You know your campaign’s been successful when it starts producing results, and the data can tell you how much each conversion costs on average. Ideally, those costs should reflect well against the lifetime value of customers from that campaign; but if they don’t, you might need to rethink things.

CPC costs are important to monitor because these values:

  1. Determine early predicted CPA costs.
  2. Evaluate how expensive it is to reach one person in each target platform or audience.
  3. Predict market competition and rising advertising costs based off competitor budgets.
  4. Show creative and ad fatigue signs so you can update your creative or copy to keep CPA costs down.

While CPA measures conversions are coming from marketing efforts over time, CPC tracks how many people clicked our ads and at what price in each period.

Does an increasing CPC always lead to an increase CPA? In most cases yes, but there are times where this does not occur if audience targeting has changed.

CTR vs. CPA

CTR and CPA are two very different things.

CTR measures the effectiveness of your ability to stop users from scrolling and take an action on your ad while CPA counts everything from start to finish.

CPA is the result of all marketing efforts and KPI’s whereas CTR is just one lever pulled during the buyer journey.

Measuring CPA will provide a more accurate prediction than CTR when trying to assess the return on investment for your advertising efforts. For example, if two campaigns have identical CTR but one has higher conversion rates, one could conclude that CTR is less indicative of campaign success.

CPC vs. CTR

A high CTR is important for advertisers because this information tells marketers that the messaging, creative, and offer being promoted is resonating well with the audience. CPC just measures the price you

pay per click, so it is essential to take the cost and value of what you are advertising when deciding how much you should be paying per click.

CTR takes a detailed look at the effectiveness of an advertising campaign. It helps you evaluate your call-to-action ad copy, analyze potential conversions, determine success against competitors, and compare campaigns for an enhanced quality score to improve CPC and return on investment.

A successful campaign will try to reach a balance of both metrics. For example, if you want lots of conversions at low costs, you aim for high CTR and low CPC. Although these two metrics don’t definitively create conversions, they’re great signs for improving conversion rates in most cases.

CPM vs. CPC

Choosing between CPC and CPM can be challenging because they are so fundamentally different from one another.

CPC bidding works best for people who want to generate leads or website visitors down to the click, whereas CPM works best for those trying to engage potential customers or generate awareness. The effectiveness depends on which platform you’re running ads on and it typically works best when you test out different bidding systems yourself.

CPM is traditionally considered through paid email promotions of renting or leveraging another email list that you do not own.

It often has to do with the campaign type – since you may choose between a search network (which offers pay-per-click) versus a display network (where you’re paying based on how many times you have shown an ad). Choosing the right strategy largely depends on which type of goal you’re looking for, so it falls on a matter of testing and most platforms offer both, you just need to test and find what works best for your product or service.

If you stuck around to the end of this article, we like you, you enjoy in-depth research. Feel free to check out some of the other topics we’ve covered surrounding paid media as well by visiting the links below.