Online Marketing Math

Using Your Math Every Day: eCPM for a CPC

For campaigns with a CPC rate, the calculation works like this:
you will need to lookup the number of ad impressions over a given period of time
you will also need to lookup the number of clicks on these ads over the same period of time
and finally you will need to know the CPC rate for the campaign
Once you know this input data, the formula is:
multiply the number of clicks by the CPC rate to come up with total revenue
divide the number of impressions by 1,000, giving you the number of blocks of 1,000 impressions delivered
divide the total revenue by the number of blocks of 1,000 impressions to come up with the eCPM value
Lets use the following fictional numbers for an example:
a campaign with a CPC pricing was displayed 2 million times in a period of 1 day
in that same day, the ad server counted 5,000 clicks on the banners of the campaign
the CPC rate for the campaign was set to US$ 0.50
We can now calculate the eCPM of this campaign with a CPC rate:
total revenue was 5,000 clicks times $ 0.50 equals $ 2,500
2 million impressions equals 2,000 blocks of 1,000 impressions
the eCPM is $ 2,500 divided by 2,000, equals an eCPM of $ 1.25
In reality, you will probably never see nice round numbers like these, but if you use the formula explained above, it is simple to compute the
eCPM value of a CPC campaign for any given time frame.

Using Your Math Every Day: eCPM for a CPA

For campaigns with a CPA rate (cost per action, which could be a sale or signup for example), the formula is very similar:
You will need to lookup the number of ad impressions over a given period of time
you will also need to lookup the number of sales or leads (OpenX calls these conversions) over the same period of time
and finally you will need to know the CPA rate for the campaign
Once you know this input data, the formula is:
multiply the number of conversions by the CPA rate to come up with the total revenue
divide the number of impressions by 1,000, giving you the number of blocks of 1,000 impressions delivered
divide the total revenue by the number of blocks of 1,000 impressions to come up with the eCPM value
Lets use the following fictional numbers as an example:
a campaign with CPA pricing was displayed 2 million times in a period of 1 day
in the same day, the ad server measured 100 sales related to the banners that were displayed and clicked
the CPA rate for the campaign was set to $ 30 per sale
We can now calculate the eCPM of this campaign with a CPA rate:
total revenue was 100 sales times $ 30 equals $ 3,000
2 million impressions equals 2,000 blocks of 1,000 impressions
the eCPM is $3,000 divided by 2,000, equals an eCPM of $ 1.50
Like in our previous example, it is highly unlikely that there are nice round numbers like this, but the formula is always the same.

The Magic Formula

$1000 spent on $5 CPM Banner Buy on abc.com (1000M x $5).
It yields 200,000 impressions for the banner (200 x 1000M).
It yields a 3% CTR yields (3% of 200k=6000 clicks).
With 6000 clicks the offer gets 1% conversion ratio on a sale (60 sales).
Each sale has a CPA of $50.
The total revenue is $3000.
The EPC is $.50 ($3000 / 6000 clicks).
The ECPM is $15 ($3000 / 200M).
What if the CTR is 1% vs 3%?
2000 Clicks | 20 sales | $1000 Revenue | EPC=$.50 | ECPM = $5
What if the Conversion Ratio on the click is .50% vs 1%?
2000 Clicks | 10 sales | $500 Revenue | EPC=$.25 | ECPM = $2.50

More Terms to Know

Online Training 101

Confidential

Online Vocabulary (contd)

Above-the-Fold: section of the web page that is immediately available to the user without the necessity of scrolling. Any portion, or
ad, within this section is said to be "above the fold".
Affiliate: (also associate, publisher, partner, webmaster) an individual or company which refers clicks, leads or sales to a merchant
in exchange for commission. This is usually done by means of a website, newsletter or search engine marketing.
Affiliate Marketing: (also partner, pay for performance, performance-based, referral-based or revenue-sharing marketing) a
revenue sharing partnership between a merchant and one or more affiliates, where the affiliate is paid a commission for referring
clicks, leads or sales to the merchant website
Affiliate Network: (also affiliate solution provider)a third party firm, such as ClickPromise.com, who provides software and
services to run an affiliate marketing program; the firm acts as the link between merchant and affiliate.
Affiliate Program: (also associate, partner, referral, reseller, or sponsor programs) any type of revenue sharing agreement where
an affiliate website receives income for delivering sales, leads, or traffic to a merchant website.
Cookie: a small file/code that a website places on a visitor's hard drive for tracking surfing habits, sales or other user-specific data.
Affiliate marketing generally relies on cookie technology to track any leads or sales a visitor generates by clicking on a merchant link.
A cookie is a text file dropped on to a user's computer by a web site the user visits
Cookies store information about what the user does when they are on the website
Cookies uniquely identify users
Cookies tell you if a user returns to the site at a later date to make a purchase
Tracking software puts cookies on visitors computers.
Tracking allows networks to link every pre-defined action a customer completes on the site, and link it back to how the customer
arrived at the web site in the first place
If the user does not complete an action the cookie typical lasts 30- 365 days
About 2% of internet users are not able to accept cookies or have cookies disabled in their web browsers.
2015 High Traffic Academy, LLC. A Limited Liability Corporation, reserve all rights. Duplication without written authorization is not permitted.

High Traffic Academy, LLC

66

Online Training 101

Confidential

Common Forms of Online Advertising

Banner Ads
An advertising image is displayed on a website.
Banner ads come in numerous sizes, such as
468 pixels wide by 60 pixels high.
You can see the most common banner ad sizes
and the accepted nomenclature here:
Very popular are 728 x 90 banner ads, known as
leaderboard banners and square ones,
commonly 300 x 300, 250 x 250 or 336 x 280.
These larger size banners are often used by
advertisers seeking to build their brand rather
than encourage an immediate sale or action.

2015 High Traffic Academy, LLC. A Limited Liability Corporation, reserve all rights. Duplication without written authorization is not permitted.

High Traffic Academy, LLC

67

Online Training 101

Confidential

Online Vocabulary (contd)

EPC or average earnings per hundred clicks: a metric for measuring link effectiveness by calculating
the number of clicks converting into sales. Calculated as the ratio of earnings over a defined time period
to total clicks, multiplied by 100. NOTE: some affiliate networks calculate EPC as earnings per single
click - not hundred clicks; for this reason EPC metrics cannot necessarily be compared across affiliate
networks.
Impression: when a user views a banner, link or page on the Internet.
Javascript: an Internet scripting language used to create dynamic pages on the web that allow for user
interaction. Internet advertising companies use JavaScript to generate what is commonly known as
pop-up or pop-under advertising. Some affiliate networks are also beginning to encourage the use of
Javascript for text links. NOTE: Javascript is different from java which is fully-fledged object-oriented
programming language. Java can be used to create standalone applications and a special type of mini
application, called an applet.
Lead: a potential customer, usually defined by a sign up, download or form submission; example: after
clicking on a merchant banner, a visitor is asked to sign up for a newsletter; upon submitting
information, s/he becomes a lead.
Lead Generation: the manufacture of connections between consumers and target corporate vendors.
Affiliates and publishers gain a commission on the leads they generate or the sales made or a
combination thereof.

2015 High Traffic Academy, LLC. A Limited Liability Corporation, reserve all rights. Duplication without written authorization is not permitted.

High Traffic Academy, LLC

68

Online Training 101

Confidential

Online Vocabulary (contd)

Merchant: (also advertiser, client, e-commerce site, online retailer, partner) a business that sells goods or services
online and pays its affiliates a commission in exchange for impressions, leads or sales.
Pageview: when a web page is requested by somebody through a browser. Pageviews are often used to track the
number of impressions a banner gets.
Run-of-Network: (also RON) ad placed to run on all sites within a given network of sites
Run-of-Site: (also ROS) ad that is placed to rotate on all non-featured ad spaces on a site. CPM rates (see Class 2
for definition) for run-of-site ads are usually less than for rates for specially-placed ads or sponsorships
Referral Program: (also multi-level, two-tier or tiered program): a model where affiliates are allowed to refer new
affiliates to a business and earn a commission on the new affiliates' performance. For example: ExistingAffiliate
refers NewAffiliate to HTA. NewAffiliate signs up with three merchants and earns $XXX in commission.
ExistingAffiliate earns commission, which varies depending on the merchant program, on the commission earned by
NewAffiliate.
Two-Tier: affiliate program or network marketing structure whereby affiliates or agents earn commissions on their
conversions as well as conversions of individuals or businesses they refer to the program.
Unique Visitor: someone with a unique address who is entering a website for the first time that day, or some other
specified period. Thus, a visitor that returns within the same day is not counted twice
User Session: someone with a unique address that enters or reenters a website each day, or some other specified
period. A user session is sometimes determined by counting only those users that haven't reentered the site within
the past 20 minutes or a similar period. User session figures are sometimes used, somewhat incorrectly, to indicate
"visits" or "visitors" per day.
2015 High Traffic Academy, LLC. A Limited Liability Corporation, reserve all rights. Duplication without written authorization is not permitted.

High Traffic Academy, LLC

69

Online Training 101

Confidential

Online Vocabulary (contd)

Text Ads
The simplest method of advertising is via a humble text ad. Copy is usually used to pre-sell a product or service and
then the reader is encouraged to find out more or buy via a text link. When the hyperlink is clicked on, the surfer is
sent to the advertisers website.
Text ads appear in results of many search engines and integrated into the content of many web pages. They are also
popular in newsletters and spam emails.
Many advertising networks display text ads that correspond to the keywords of an internet search or to the content of
the page on which the ad is shown. These ads are believed to have a greater chance of attracting a user, because
they tend to share a similar context as the user's search query. For example, a search query for "book" might return
an advert for an online bookstore.
Although text links used to be created mainly in HTML, some advertising networks have started generating them via
Javascript and other methods. This has been controversial and disliked by some webmasters. One of the reasons is
because Javascript-created text links can be altered by the advertiser without getting the permission of the site
owner. Furthermore, the links dont display if Javascript is turned off in a users browser and other issues can occur.

2015 High Traffic Academy, LLC. A Limited Liability Corporation, reserve all rights. Duplication without written authorization is not permitted.

High Traffic Academy, LLC

70

Online Training 101

Confidential

Common Forms of Online Advertising (contd)

Pop-Up and Pop-Under Ads
Pop-up adverts usually appear automatically when a surfer visits a web page and they come in front of the content. Pop-under adverts appear
below the page the surfer is on and are often discovered when the current browser window is closed.
This form of advertising was prevalent several years ago, but the advent of pop-up blockers has meant most users can stop the ads from
appearing and, as a result, they have significantly declined in popularity.
Floating Ads
The decline of the pop-up gave rise to floating adverts, which cant be removed by most pop-up blockers. These ads float above the content and
sometimes move around the screen. Although surfers often say they are annoying, publishers find them to be a good way to monetize their
websites as the rate of pay tends to be higher than other forms of advertising. Floating ads grab surfers attention and cant be ignored, so
advertisers like to use them.
Interstitial Ads
Some websites display an advert or adverts on a page before the requested content is reached. If used properly, this can be an effective way to
advertise because the advertiser has the full attention of the viewer. However, surfers can find them irritating, particularly if the advertising is not
in line with the content of the website.
Video Ads
Faster internet speeds and increasing bandwidth is encouraging more advertisers to move beyond graphic and rich-media ads and start using
video. These are usually shown in the same sizes as square banner ads.
As web users become blind to the latest forms of advertising and install software to remove them from web pages, advertising agencies are
always trying to stay one step ahead by coming up with more innovative methods of getting their messages across.
While one trend is towards highly-animated Rich Media ads, other advertisers are adopting more subtle methods to sell their products and
services. These include paying bloggers to write about them or coming up with shocking or humorous viral ads which it is hoped will be
distributed around the internet.

2015 High Traffic Academy, LLC. A Limited Liability Corporation, reserve all rights. Duplication without written authorization is not permitted.

High Traffic Academy, LLC

71