How To Calculate CPC and CTR – Digital Formulas
There are many 3 letter acronyms in digital advertising calculations. To be a master of the programmatic ecosystem, you need to know them all and when to use each calculation! Clicks and engagement are what drive the online advertising model. Understanding the calculations behind clicks is essential for your knowledge base.
Calculate CPC (Cost Per Click)
CPC stands for Cost Per Click and is an important metric for marketers to understand when analyzing the performance of their digital campaigns and arbitraging opportunities. The formula to calculate cost per click is the cost to the advertiser divided by the amount of clicks.
If a campaign cost an advertiser $100 and they received 32 clicks, the CPC would be $3.125 (100/32 = #.125) If you are a publisher levering a demand source to earn revenue and your inventory has a CPC of $3.25, you are in the high end of the spectrum. Some CPC’s on certain advertisements can range anywhere from $.01 – $4.00 on average. It is import to understand this metric to see if a programmatic ad campaign is performing.
Calculate CTR (Click Through Ratio
CTR stands for Click Through Rate and is a measure of how effective a create is based upon how many people have clicked. Average to high click through rates are usually around .50 but can go much higher if the ad placement is prime and creative is very relevant to the user.
If a campaign ran 50,000 impressions and generates 4765 clicks, the CTR would be .09. Publishers should be very aware of what their CTR is on each placement to determine if optimizations should be made to increase the CTR and generate more revenue. Minor tweaks to ad placement can go a long way.
Learn More Digital Advertising Basics:
- Digital Advertising Basics: What is CPM, eCPM, and rCPM?
- Top Videos That Define Digital Advertising
- The Evolution of Online Display Advertising
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