## Different ways to calculate your CPA

Dear media buyers,

Hello again!

I hope both you and your campaigns are doing amazing 🚀

Today I’d like to talk with you about math - **don’t worry**!

It’s not the mathematics from high school, but the different ways to **calculate** your **Ad revenue formulas** that will help you to better understand what you’re doing and to increase your profit.

Are you ready?

**CPA formula** (Cost per acquisition/action)

Firstly, let’s see how to calculate the **CPA**.

It can be found out by dividing the cost of the ad by the total number of actions received on the ad. Here’s 2 ways for doing it - you will need:

· Your offer’s cost

· The nº of impressions

· Your offer’s CTR

· Your offer’s Conversion Rate

I know this is not the funniest article ever, that’s why I’m going to show you with a live example that they’re the same.

*Example:** imagine you’re promoting a dating offer in Germany and the payout is $3. You see that your ad had 250.000 impressions, 3.500 clicks and 90 conversions. Your budget for testing this campaign is 300€. *

*You can easily calculate your **CTR **by dividing the nº of clicks by the nº of impressions, which is 3.500/250.000 = 1,4%. *

*Also, the **Conversion Rate** is the result of dividing the 90 conversions between the 3500 clicks, which makes a CR of 2,57%. *

*We can observe that both the CTR and the CR have good values. Now let’s try it with both formulas: *

*Unfortunately in this case, we’ll have a negative ROI, as the cost that we are paying for each conversion obtained (3,33€) surpasses the payout of this offer (which is 3€). *

**Then - what can you do? **

You don’t have to lose your motivation because of this situation - it’s actually common especially if you’re starting. Instead, you can try to handle it:

1. By asking for a **payout bump**

2. By **increasing your CTR** (try improving your creatives, optimizing them, creating new and more attractive campaigns texts, etc)

3. By **increasing your conversion rate **(**optimize** your campaign, keep the zones/sources that give you a CPA under your payout and blacklist those which have a higher CPA). **Optimize by all the dimensions possible**. In our panel, you can find all of them in “campaign stats” - supply ID, site ID, user freshness, creativities, carrier, browser, device, OS, etc

And, because you’re a media buyer God/Goddess, you achieved all of them!

You asked your advertiser for a payout bump and you got a new one, which is now 3,15€!

You’ve also optimised your creativities and landing page, and for the next 250.000 impressions you got 3.900 clicks and 110 conversions.

Your budget is again 300€.

**CTR**: 3.900 clicks / 250.000 deliveries = 1,56%

**Conversion Rate (CR)** = 110 conversions / 3.900 clicks = 2,82%

Again:

Congratulations! 🎉 You made it now.

With a 2,72€/conversion CPA, your campaign is now **profitable **and your **ROI will be positive**!

Here’s a **quick summary** to remember here: **

*The CPA number is an indicator of how good your campaign is doing. If the offer’s CPA is lower than the offer’s payout, your campaign is profitable and you’ll be making money! *

*If the opposite is happening, don’t panic - stop your campaign, analyse the problem and try to optimise it.*

Let’s now continue with other useful metrics.

**CPM formula** (Cost per Mille)

The **Cost per Mille **it’s basically the** cost per 1000 impressions**. It’s one of the most common pricing models in the industry and there are many networks working at CPM price, so it’s good to know how to calculate it.

In **Pushground **we work on **CPC pricing** with all our formats, but knowledge is always welcome! Unlike the CPC model, where you’ll be charged only for the clicks that your ads receive, here you’ll be charged for each impression your ads receive.

*Example: imagine that you’ve spent 100€ in pop traffic and the total amount of impressions is 120.000 - in this case, the CPM will be*

*In this case, 0,83€ is the price you’ll be paying for 1000 impressions, so it’s 0,83€ CPM. In case you know the CPM price and you wonder what your budget should be for 120.000 pops, this is the formula you’ll need to use: *

**

Cost = 99,6€ (approx 100€).

**eCPM formula** (effective Cost per Mille)

You can also calculate the **eCPM** metric, which is the **effective cost per Mille **and shows the performance of your ad campaigns.

*Example: imagine you’re running a campaign in Italy, dating vertical. The total profit has been 1.480€ and the total impressions received from this campaign have been 21 million. *

*This number means that, for every 1.000 impressions that I bought, my earnings were approx 0.07€. *

**And why is it important to calculate the eCPM?**

Let me give you a couple of reasons:

1. You’ll know the **performance that you can expect **from this network next time you start a similar campaign in that GEO

2. You’ll be able to **compare the performance with other networks** and choose the best for you

**CPC formula** (Cost per Click)

Do you need to calculate the CPC price instead of the CPM? No problem, this one is easy.

In this model, you only **pay for clicks **(it’s the model we use in Pushground!). It doesn’t matter how many times the ads are being seen by the visitors, we record it but we do not charge for it.

*Example: imagine you are testing a new sweepstake offer in Spain and your budget is 150€. You have received a total of 2.360 clicks and the profit you got from this campaign is 248€. *

*That’s the price you’re paying for each click in this campaign. You can reverse the formula like this: *

This is the total amount of clicks that you’re able to receive with this budget and this pricing model (0,0635€/click). You can use this formula when telling your affiliate manager how many clicks they can expect from you on a daily or weekly basis.

Of course, in real life numbers are not that easy and there are a lot of variables taking place here, like the level of competition, the type of offer, etc.

And of course there is a way to calculate the **effective CPC**.

**eCPC formula** (effective Cost per Click)

It’s quite similar to the eCPM but instead of impressions, it takes the total nº of clicks.

This means that for every click you’re buying, you’re receiving a profit of 10 cents. Good deal. It indicates the maximum CPC you could bid for while being profitable.

**ROI formula **(Return on investment)

Yes, I know your tracker is calculating it automatically.

But it’s always good knowing how to do it yourself.

Probably you’ll be familiar with this term if you’ve been into the affiliate marketing industry already. Just in case, it means **Return on Investment** and it basically shows the success of your ad campaign. It’s one of the **most important metrics in this industry** and it tells the overall profit or loss gained from a campaign.

Sometimes marketers also refer to it as **ROAS (Return on Ad Spend)**.

*Example: suppose the same information from the CPC formula. You are testing a new sweepstake offer in Spain and your budget is 150€. You have received a total of 2.360 clicks and the profit you got from this campaign is 248€. *

**

This means, for every 1€ spent on this campaign, your net earnings (after removing the costs) are 0,65€.

Now, you have all the formulas needed to make money with affiliate marketing and media buying.

It might look a bit complicated in the beginning, I know it from my experience. But it’s not so hard once you start, you have my word!

My personal tip is to make an **excel or google sheets page**, in which you can enter all these formulas and constantly update them from your campaigns. If you do this, you’ll have a lot of data and therefore a **good advantage towards your competitors**!

This is all for today. Wish you good luck with your campaigns and only high converting offers! 💪🏼