Making Sense of Marketing Metrics: Getting the Most From Online Advertising Data
written by: Mark Muller•edited by: Aaron R.•updated: 8/4/2011
Interpreting online advertising and online marketing figures can be challenging due to overloaded acronyms and ambiguity. Look inside to find out what CPC, CPM, CTR, RPM and all other online advertising and marketing figures really mean.
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Introduction to Online Advertising and Online Marketing
Online advertising is a very effective means of advertising compared to billboards, print media ads and other traditional advertising methods. The online advertiser can target his audience by criteria including, but not limited to, country, city, language, browser type and traffic source.
The majority of online ads displayed have an associated cost per click, which essentially means that the advertiser only pays when somebody fitting the customer profile has a genuine interest in the advertised product or service and thus clicks the advertisement.
Between the advertiser and the publisher there is usually an advertising network, like Google Adsense, which acts as an intermediary between advertisers seeking to publish their ads and websites owned by webmasters or companies like Bright Hub, called the publishers.
In this article we will interpret online advertising figures, and also shed light on the online marketing figures used in the special advertising business model called affiliate marketing.
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Online Advertising Figures
Online advertising has the great advantage that the effectiveness of advertising campaigns can be measured exactly and audiences may be targeted precisely. Here are the most used online advertising figures:
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CPC – Cost Per Click
The CPC, or Cost Per Click, is the amount of money the advertiser is paying the advertising network whenever a visitor clicks the ad on a publisher’s website. The term CPC is also used by the advertising network to show the publishers the amount of money earned on a click.
Needless to say, the advertisers and publishers don’t see the same CPC - the advertising networks will take its own stake in the middle.
From a publisher’s perspective, CPC is a statistical figure telling the webmaster the average earned by dividing the sum of the earnings by the number of clicks received.
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CTR – Click Through Rate
The CTR, or Click Through Rate, is the percentage of clicks for the number of times an ad has been displayed, yet calculations can slightly vary.
Google Adsense, for instance, uses the term "page view" for web site impressions including one or more Adsense ads. This means that for the Google advertising network, CTR is equal to the percentage of clicks in relations to the number of page views.
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CPM - Cost Per Mille
Advertisers sometimes seek a flat fee for impressions independent of the numbers of clicks, in which case they advertise by means of the CPM, or Cost Per Mille model, by paying a fixed amount of money per thousand impressions.
CPM for publishers is the amount of money they get from the ad network for displaying advertisements to one thousand visitors. If less than a thousand visitors have been shown a particular online ad, then CPM is paid via extrapolation of the data recorded.
It is worth noting that CPM is sometimes capped to one count per individual visitor in a certain period of time, e.g. 24 hours. If the same visitor has the ad displayed more than once from the same web site it doesn’t count as a new impression or page view.
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RPM - Revenue Per Mille
The RPM, or Revenue Per Mille, is a figure that tell the publisher how much to statistically expect from 1000 impressions. Publishers usually display ads from many different advertisers, often with multiple ads on the same page, coordinated by the advertising network.
Revenue Per Mille combines the earnings from the Cost Per Click model and the Cost Per Mille model as websites often display a mix of CPC and CPM ads, especially if the website owners are Adsense publishers.
Adsense publishers using the old interface find RPM labeled Page eCPM (effective cost per thousand impressions). The new Google ad network interface introduced the term page revenue per thousand impressions (RPM) to remove ambiguity.
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Online Marketing Figures
Some companies and webmasters choose an advertising model which is different from the advertiser / publisher model we have just discussed. In affiliate marketing for example, there is no such thing as CPM.
The publisher displays ads of an affiliate product or service, and whenever a predefined action, like a sale, occurs the publisher gets a percentage of the sales price or a fixed commission.
Quite common are also commission for leads, when visitors sign-up, obtain a trial version of a digital product or conduct similar actions of strong interest in the pre-sales phase.
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CR - Conversion Rate
In Pay-Per-Sale online marketing and Pay-Per-Lead online marketing, the Conversion Rate (CR) is the percentage of clicks which convert to a lead or sale.
The online advertising figures CTR and RPM are sometimes used in online marketing to measure the effectiveness of web based marketing campaigns, and to help publishers choose the more lucrative models.
Depending on the niche under consideration, the publisher might get better results displaying ads with a cost-per-click or cost-per-mille basis than earning by means of conversions in affiliate online marketing. Experimenting with both models and reviewing the online marketing figures will tell which one works better.
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Figures Are Often Estimates
Be aware that earnings are often estimates until they are verified. Therefore, you will sometimes encounter online advertising figures like eCPM standing for estimated earnings (publisher) or estimated cost per mille (advertiser). Remember that nothings guaranteed until the advertiser says so.
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What You Should Also Know About Online Advertising and Online Marketing Figures
Please note that advertising and affiliate networks may use the online advertising and online marketing figures with slightly different meanings; it is always recommended that you read the affiliate network's terms and FAQ.