Understanding Metrics Used in Online Advertisement Campaigns such as Click Through Ratio, Cost Per Click, Conversion rates, Ad Impressions, Cost Per Sale, etc.

You have probably come across many metrics used in online advertising like the ones shown below.

Online Metrics
Values
Ad Impression
Media Cost
Click-Through-Rate (CTR)
Cost-Per-Thousand (CPM/CPT)
Clicks
Cost-Per-Click
Conversion Rate
Opportunity Response
Cost-Per-Opportunity
Conversion Rate
Sales
Cost Per Sale

Online advertisement is a good way to increase site traffic and hopefully brings about more business. There are many online metrics used by the online advertising industry such as Ad impression, Click-Through-Rate, Cost-Per-Click, and Conversion Rate, etc. Understanding these online metrics will help you better understand your advertisement dollar effectiveness. What exactly do these metrics mean? This post attempts to explain with the help of a spreadsheet, such as Microsoft Excel. Open your Microsoft Excel and type the following:

Understanding Online Advertisement Metrics Using Microsoft Excel

Let’s say you have spent $100K on a particular online advertising campaign, e.g. Google Adwords. Type $100,000 into cell B2 in your Excel spreadsheet.

Media Cost

Let us now fill in the Ad Impression B1 cell onto the Excel spreadsheet.
 Open up your Google Adwords Control Panel as shown below.
 ​ Each time your ad appears on Google Search Page Results or on Google Display Network, it is counted as one impression. You cannot have Clicks without Impressions. Users need to see your Ads before they can decide whether to click on them.

In this example, you have spent $100,000 to get 10,250,000 ad impressions.

Ad Impressions

Understanding Online Advertising Metrics Using Microsoft Excel

Next, check out the number of interactions under your Google Adwords control panel. An interaction is the main user associated with an Ad format. “Clicks” for Text and Shopping Ads, “Views” for Video Ads, and so on. The interaction column counts different user actions depending on Ad formats, Regardless of formats, this column indicates how well your Ads are meeting your advertising goals.

Click Interactions

Fill in 27,560 under Clicks in cell A6 in your Excel Spreadsheet.

Understanding Online Advertising Metrics Using Microsoft Excel

Next, we are going to fill in the Opportunity response which is also known as ‘Conversion’. A Conversion happens when someone clicks your ad, and then takes an action which you define as valuable to your business such as subscribing to your company’s newsletters. Conversion Tracking is a free tool in Google Adwords that show you what happens after someone clicks on your ad, whether they purchase your product, sign up for your newsletters, call your business or downloaded your app. When someone completes an action which you define as valuable, these actions are defined as conversions.

For information on how to set up conversion tracking, click below resource.

Conversion tracking is a free tool that shows you what happens after a customer clicks on your ads — whether they purchased a product, signed up for your newsletter, called your business, or downloaded your app. When a customer completes an action that you’ve defined as valuable, these customer actions are called conversions.

Retrieve the number of conversions from your Google Adwords Conversion Tracking dashboard as shown below and fill in the number in your Excel Spreadsheet.

Google Adwords Conversion Tracking Dashboard

Understanding Online Advertising Metrics Using Microsoft Excel

Now that you have entered the four basic information into the Excel Spreadsheet, let us now proceed to work on the rest.

Click-Through-Rate (CTR) is the ratio of users who click on the Advertisement link to the number of Ad Impressions.
 Hence, type the formula =B6/B1 into Cell B3. You should get 0.27% for CTR.

Understanding Online Advertising Metrics Using Microsoft Excel

Cost-Per-Thousand is a marketing term used to denote the price of 1000 advertisement impressions.
 Type the formula =B2/B1 * 1000 into Cell B4. You should get $9.76 for CPM.

Understanding Online Advertising Metrics Using Microsoft Excel

Cost-Per-Click (CPC) refers to the actual price you pay for each click in your online advertisement.
 Type the formula =B2/B6 into Cell B7. You should get $3.63 for CPC.

Understanding Online Advertising Metrics Using Microsoft Excel

Conversion Rate is the average number of conversions per Ad click, shown as a percentage. Conversion Rate is computed by simply taking the number of conversions and dividing that by the total number of Ad clicks.
 Type the formula =B10/B6 into Cell B8. You should get 51.89% for Conversion Rate.

Understanding Online Advertising Metrics Using Microsoft Excel

To find out the Cost Per Opportunity,
 Type the formula =B2/B10 into Cell B11. You should get $6.99 for Cost-Per-Opportunity.

Understanding Online Advertising Metrics Using Microsoft Excel

Assuming you made a total 1,235 sales after spending $100,000 in online advertisement campaigns, let us now calculate the Conversion Rate for your Sales. Conversion Rate for Sales is calculated by taking Sales divided by total number of conversions.

Type the formula =B14/B10 into Cell B12. You should get 8.64% for Conversion Rate.

Understanding Online Advertising Metrics Using Microsoft Excel

To find out Cost-Per-Sales, simply
 Type the formula =B2/B14 into Cell B15. You should get $80.97 for CPS.

Understanding Online Advertising Metrics Using Microsoft Excel

To watch a video about this post, please click below

https://www.youtube.com/watch?v=elgJNF71auE&t=72s

Let us summarise the following key metrics with the help of a Sales Funnel diagram as shown below.

Sales Funnel

Originally published at digimy.weebly.com.