Advertising Online, Take it to a Professional Level

Published: 07th April 2011
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Understanding Banner Ad Metrics
Advertising on the Internet continues to grow and the most popular ad form today is the banner ad placed by a marketer/advertiser on websites, often on "CPA networks," that link back to the marketer's web page(s). The marketer generally pays for this traffic on a straight commission basis.
The banner ad metrics names or nomenclature include CPM, CPV, CPA, LCV, eCPA, EPC, eCPC, and eCPM and understanding them is necessary to determine whether an Internet advertising campaigns is cost effective.

Of course, it all begins with the number of views or impressions provided by a website displaying the banner ad.
• CPM (cost per thousand) = (Total Views / 1000) X CPM paid to the publisher.
• CPV (cost per view) is deceiving because quotes of pennies per view appear inexpensive; however, a penny per view equals a CPM of $10 that is more expensive than typical banner CPM prices.
• CPA (cost per action) or CPC (cost per click) is the amount paid for each new visitor to the marketer's website.
• LCV (Lifetime customer value) represents a customer's total value including repeat and new purchases recorded by the marketer. This serves as a guideline to help identify the most reasonable amount to spend to acquire a new customer.
• eCPA (effective cost per action) = Total spent / Total Conversions and is very useful when buying media because it represents the cost of a new customer from that specific traffic source, even if paying on a CPM, CPC, or CPV basis. If $100 of views has generated five sales, the eCPA is $20.00 for conversions necessary to obtain five new sales.
• EPC (earnings per click) = Total Revenue of Site / Total Visitors. For example, total sales of $25K per month and 20K visitors in that month yields an EPC of $1.25. This metric means an average of $1.25 for every click whether or not a purchase results. This is a key metric for testing and optimizing sales for a website.
• eCPC (effective cost per click) = Total spent to date / Total Visitors to date. Using the example above, the marketer can compare this number with the eCPC of $1.25 to determine if a banner ad is cost effective. Comparing eCPC with overall EPC gives an immediate indication of whether a banner ad's traffic pool is going to be profitable.
• eCPM (earnings per thousand) = (Total Revenue/Total Impressions) X 1000.

Impressions. This is a metric very important when testing new banner ads and/or new traffic pools to determine what is the highest, if any, CPM that can be cost effective for the traffic generated.
Publishers, of course, also use metrics to compare the performance of ad campaigns. The publisher's goal is to make as much money as possible for the traffic they provide. For a banner ad with high metrics, a CPA network is more likely to place that banner ad on their best websites.
Finally, a major CPA network or AdServer will often provide sophisticated tracking systems. Alternatively, a marketer can invest in traffic monitoring tools like Clicktracks or OneStat.
That’s a brief outline to make you a little more familiar with online advertising terminology. It can be a little daunting at first but you’ll soon become familiar as you use them, and discover how very useful the information they convey actually is.

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