Making the most of your advertising dollars means understanding the ways ads are measured. The formulas below are common metrics used in digital advertising and how they’re calculated. Understanding the inputs and what’s being measured better equips you to make informed decisions about your ad’s effectiveness and budget.
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Click-through rate (CTR)
Clicks / Impressions or Views x 100
The click-through rate measures what share of your audience clicked on your ad. A low CTR (1% is a benchmark) can indicate improvements need to be made, while a high rate may indicate that further investment should be made.
Cost per Click (CPC) and Revenue per Click (RPC)
Cost or Revenue / Clicks
Cost per click and revenue per click measure how much money each individual click costs or brings in, on average. These metrics can show whether a campaign can be expected to be revenue positive, but be careful not to underestimate the revenue attributable to the campaign and otherwise discount a successful effort.
Conversion Rate (CR)
Number of unique actions taken / unique visits x 100
The conversion rate is the percentage of your audience who follows through on the action you want them to take. For example, if you have a Facebook lead ad, the conversion rate would be [People who completed the form] / [Unique reach of that ad] x 100.
Cost per Acquisition (CPA)
Total campaign cost / Number of desired results
The cost per acquisition is how much it costs to get a user to take your desired action, such as completing a lead form. CPA can be used to compare campaigns, channels, or strategies to one another or to track the same campaign over time.
Return on Investment (ROI)
(Revenue – Cost) / Cost x 100
To evaluate your marketing plan or any aspect of it, you need to know if the return is greater than the cost. ROI calculates the ratio of profit or loss to the original costs.