Return on InvestmentĪlthough CPC and CPM are significant numbers to know when it comes to figuring out the cost of your leads, return on investment is arguably more crucial. If, for instance, your click-through rate is lower than the average of 1.16 percent, then maybe you should be A/B testing different elements to see where and how the ad can be improved to increase performance.ĭownload our A/B Testing Toolkit for some practical help in this area. CTR is an important metric because it tells you how effective your ad is. So if your $250 campaign generated 9,000 impressions and 200 clicks, then your click-through rate would be 2.2 percent.
(Number of Clicks / Number of Impressions) x 100 The CTR tells you how many people see the ad versus how many actually click, and you can calculate it with this formula: The click-through rate is important because it acts as a bridge between your CPC and CPM. In that case, your CPM would be $27.77 (which is slightly higher than the average of $24.74). In the example where you spent $250 on the entire campaign, let’s say the ad was seen by 9,000 people. The purpose of this calculation is to determine how many people are seeing your ad (each view is an impression), and how much it costs to increase your visibility. It also concerns itself with the number of people who see your ad versus the number who click on it. Related Formula: Cost Per Thousand ImpressionsĬost per thousand impressions (CPM, or cost per mille) is similar to CPC, except that it deals in terms of thousands of clicks. That means each of those 200 new (possible) leads only cost you $1.25. Here's the simple formula to determine cost per click:įor example, if you spent $250 on the entire campaign and generated 200 clicks, your cost per click would be $1.25 (which is quite low compared to the average CPC of $2.14). One of the most important calculations you need when it comes to a pay-per-click campaign is cost per click because this will tell you the exact cost of every click. When you delve deeper into the metrics that matter for PPC data, you'll find formulas for things like cost per thousand impressions, click-through rate, cost per acquisition, and conversion rate, all of which will provide you with essential information you need to develop and implement a successful PPC campaign.
Two of the most relevant formulas you need are Cost Per Click (CPC) and Return On Investment (ROI), but within those categories, there are several related formulas that will give you a better understanding of your PPC performance. Pay-per-click advertising is a highly targeted and effective marketing tool, but to understand how it can work for you, there are certain metrics you need to track and formulas you need to know to calculate the true value of your PPC marketing efforts.
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