There are too many formulas in digital advertising that you need to know in order to be successful in becoming an expert in digital marketing. But let’s assume that you are not aiming to be an internet marketing guru. You’ll still need to know some important online advertising formulas as long as you are directly involved with digital media. No matter who you are – an entrepreneur, an aspiring digital marketing learner, an in-house social media manager, or maybe a newbie online advertiser, you need to know at least the basic online advertising formulas in order to be successful in this field. To better manage your online marketing campaigns and measure their success, keep these formulas handy.

**YOUR CHEAT SHEET FOR DIGITAL MARKETING FORMULAE:**

### 1. Ad Rank

Have you ever wondered why some businesses appear in the top search results on a search engine even if the terms you searched for were too generic? For example, you search for ‘toothpaste’ on google, and you’re instantly shown pages that sell toothpaste on the first page of the search result. This is not a self-occurring phenomenon, but rather a constant work to move up in the search list for better visibility and favorable customer actions.

Your ad rank is determined through two factors-

- Quality Score- this is how well your keywords work for you in search results, the better the quality and relevance of your keywords, the better will be your quality score.
- CPC Bid (cost per click bid)- the more you pay for being shown in the top results, that is bid, the better will be your ad rank.

An Ad Rank is calculated by multiplying both your Quality Score and CPC Bid.

Hence, the formula is **Ad Rank = Quality Score x CPC Bid**

Similarly, you can get-

**Quality Score = Ad Rank/CPC Bid**

### 2. Click to Open Rate

So, you’ve started an email campaign and are wondering if you generated any interest in your target audience or how effective your campaign was. Here, what comes to your rescue is the Click to Open Rate which talks about the number of unique clicks that took place vs the unique opens that took place in your email campaign. This can be easily calculated by dividing the two metrics.

Total Number of Clicks is the cumulative number of clicks that the link inside your email get by the people who have opened the email.

While, Total Number of Opens is the number of times your email got opened.

**Click to Open Rate = (Total Number of Clicks / Total Number of Email Opens) x 100**

Similarly,

**Total Number of Clicks = Total Number of Email Opens x Click to Open Rate**

**Total Number of Email Opens = Total Number of Clicks / Click to Open Rate**

For Instance,

If the total number of clicks are 2 and the total number of opens are 100

Then your Click to Open Rate can be calculated as-

= (2/100) x 100 = 20%

Although, a good Click to Open Rate differs in email campaigns of different industries, still 20% is considered to be a good rate in most campaigns.

### 3. Cost Per Engagement (CPE)

This is another popular model to calculate the money you have invested in every engagement that has occurred on your campaign. An engagement in digital marketing is different from action, as it only refers to the audience’s engagement with your campaign and not converting it into a purchased product or service, as it is stunted to mere views, likes and shares(engagement). Cost Per Engagement can be calculated by dividing the Total Amount Spent by the Total Engagements that Occurred.

Total Engagement- The interaction of consumers with a campaign through likes, clicks, shares and comments

**CPE = Total Amount Spent/ Total Engagements Occurred**

Similarly,

**Total Amount Spent = CPE x Total Engagements Occurred**

**Total Engagements Occurred = Total Amount Spent / CPE**

For Instance, If the total amount you spent on an ad campaign is Rs. 500, and the total engagements you get on that ad are 1000. Then your CPE comes out to be-

=500/1000 = 0.5

### 4. Cost Per Install

If you plan to launch a mobile app for your business, or if your client wants to launch a mobile app, then you must be aware of this pricing model that calculates the total cost an advertiser would incur each time an installation of his mobile application occurs.

**CPI = Total Amount Spent/Total Application Installations**

Similarly,

**Total Amount Spent = CPI x Total Application Installations**

**Total Application Installations = Total Amount Spent / CPI**

For instance, If you spend a total amount of Rs. 500 and get total 10 application installations. Your CPI can be calculated as-

= 500/100 = Rs. 50

### 5. Cost Per Day

A necessary pricing model if you want to calculate the amount you’re spending on your advertisement every day. The model is helpful in understanding your investments against your generated revenues to give you an objective view of your advertisement campaigns.

**CPD = Total Cost/Total number of days (the particular advertisement is run for)**

Similarly,

**Total Cost = CPD x Total Number of Days**

**Total Number of Days = Total Cost / CPD**

Now for instance, if the total cost that you spent on an advertisement is Rs. 30,000 and the ad was run for 10 days then the CPD can be calculated as-

= 30000 / 10 = 3000

Hence, the ad campaign costs 3000 for each day it is run.

### 6. Click Through Rate

You must be familiar with the concept of running ads for promotion. Well, a Click-through Rate (CTR, also called CTA) is calculated as a ratio of number of clicks that an ad gets to the number of times the ad was shown to the audience (impression). The ratio that is obtained is then comfortably converted to percentage for convenience by multiplying it by 100.

**Number of Clicks- The total number of clicks that was received by an ad**

**Number of Impressions- The total number of times the ad was viewed**

CTR = Number of Clicks/ Number of Impressions x 100

Similarly,

**Number of Clicks = CTR x Number of Views**

**Number of Views = Number of Clicks x CTR**

Now suppose, you run an ad that was shown to 792 people, and out of those people, a total of 27 people clicked the ad. Now, the CTR will be calculated as –

27/792 x 100 = 3.40%

Hence, the CTR is 3.40%

### 7. Cost per Click (CPC)

CPC is a sister model of the CPM that calculates your advertising expense for you. The formula also remains the same, however, the only difference is that a Cost per Click is calculated when you only desire to pay for the clicks that you receive on your ad and not for all the impressions/views. A CPC is calculated by dividing the amount of money spent/by the number of clicks on the ad.

Total Number of Clicks- The number of times your ad was clicked by the viewers

CPC = Total Money Spent/ Total Clicks

Similarly,

**Total Money Spent = CPC x Total Number of Clicks**

**Total Number of Clicks = Total Money Spent / CPC**

Now, for instance, if you invested Rs. 1000 in an ad, and the ad got 250 clicks in total. Then the CPC can be calculated as-

=1000/250 =4

Hence, the Cost per Click for your Ad will be Rs. 4

### 8. Conversion Rate

Studying the Conversion Rate of your ad campaigns means that you mean business, as this model analyzes the total profit that your ad campaign generates for you. However, firstly let’s understand what conversion means in terms of marketing. It can be understood as the action that an audience takes after seeing the ad, and their action brings you profit. A CR can be easily calculated by dividing the conversion created through an ad, by the number of clicks on that ad and multiplying the result by 100.

Number of clicks- The number of times your ad was clicked by the viewers

CR = Conversions Created/ Number of Clicks on Ad x 100

Similarly,

Conversions = CR x Number of Clicks

**Number of Clicks = CR / Conversions**

Now, for instance, if an ad has a total of 10000 clicks, while 150 of them got converted. Then your conversion rate shall be-

= 150/10000 x 100 =1.5%

**The conversion rate of that ad will be 1.5%.**

### 9. Cost Per Action/Acquisition (CPA)

CPA is another model that is helpful for measuring the revenue generated after investing a certain amount of money in an ad campaign. Unlike other models, it does not concern whether the ad was clicked or just viewed, rather it straight away sees whether any conversions were created. A CPA thus gives you the cost that every generated conversion has on your pocket. So, a CPA is calculated by dividing the money you have invested in the ad campaign by the number of conversions that the ad has generated.

Conversions- An action by a lead taken towards your business ad that brings you profit

**CPA = Invested Amount / Conversions Created**

Similarly,

**Invested Amount = CPA x Conversion**

**Conversion = Invested Amount / CPA**

Now, for instance, if the amount you invested in an ad campaign is Rs. 1700 and the number of conversions that were generated were 5. Then you can calculate your CPA by-

= 1700/5 = 340

Hence, for each conversion in your ad campaign you paid an amount of Rs. 340.

### 10. Cost per Lead (CPL)-

Cost per Lead is a popular model when the primary aim of your ad campaign is to generate leads. The model calculates the money you had to spend on every generated lead. The formula to calculate CPL is simple and similar to that of CPA. It is begotten after dividing the money spent on the ad (cost to an advertiser) by the number of leads generated.

Leads- The visitors to your ads or website who put requests to connect with you.

CPL = Total Cost / Total Leads Generated

Similarly,

**Total Leads = Total Cost / CPL**

**Total Cost = CPL x Total Leads**

So, for instance, the total cost you invested was Rs. 1232.99 and the number of leads that were generated were 15. Hence, your CPL can be calculated as-

=1232.99/15 = 82.20

Hence, for each lead that you generated, you had to spend Rs. 82.20

### 11. Return On Investment (R.O.I)

You must be faintly acquainted with this term as it has been widely used by every person involved in a business activity today. An ROI actually means the gross profit made against the amount of money invested and is calculated by deducting the total money invested from the total revenue generated and then dividing the result by the total money invested.

Total Revenue- The total money that a business makes owing to its ads that are run on digital media.

Total Cost- The total cost incurred for running ads on digital media.

ROI = (Total Revenue – Total Cost) / Total Cost x 100

Similarly,

Total Revenue = ROI x Total Cost + Total Cost

Total Cost = (Total Revenue – Total Cost) / ROI

Now, for instance, if you incurred a total cost of Rs. 2500 for running ads, and earned a total revenue of Rs. 20,000. Hence, your Return of Investment would be calculated in the following manner-

= 20000 – 2500/ 2500 x 100

= 700

So, your ROI for that particular ad will be 700%

### 12. Cost per Mille (CPM)

Now, whether an entrepreneur or a digital marketer, you need to take account of the money that is being invested in running an online advertisement for your brand. Cost per Mille (CPM) is a model that assists you to measure the money you spend for every 1000 impressions your ad will be receiving. Cost per Mille is calculated by dividing the money spent on an online advertisement, by the number of impressions the ad gets, and multiplying the result by 1000.

Now, what are impressions? Impressions should not be confused with clicks on ads. These are actually the phenomena where an ad is shown to an audience, whether or not the person clicks on it. So, it’s just simple viewing of the ad while scrolling.

Impressions- the mere viewing of an advertisement on an online platform Mille- a word used to denote the figure ‘thousand’

CPM = Amount of Money Spent/Number of Impressions x 1000

Similarly,

Money Spent = CPM x Number of Impressions

Number of Impressions = Money Spent / CPM

So, for instance if your total money spent on an ad is Rs. 1232.99 and the total number of impressions that you get are 8514. Then your CPM can be calculated in the following manner-

=1232.99 / 8514 x 1000

= 150

So, your cost per every thousand impressions for that ad will be Rs. 150.

### 13. Return on ad spend (ROAS)

When discussing models like ROI and effective costs, one cannot choose to deconsider the overall revenue that an ad has generated vs the total money that has been spent on that ad. Calculating the ROAS, lets you know how profitable a particular campaign has been for you.

Total Revenue- The total money that a business makes owing to its ads that are run on digital media.

Total Cost- The total cost incurred for running ads on digital media

ROAS = Total Revenue/Total Cost

Similarly,

Total Revenue = ROAS x Total Cost

Total Cost = Total Revenue / ROAS

For instance, if the total amount you spent on running of a particular ad was Rs. 5500 and the total revenue that ad earned you is Rs. 68000, then your ROAS can be calculated as-

= 68000/5500

= 12.36

Then your Revenue on ad spend will be Rs. 12.36.

### 14. Average Cost of Sale

ROAS and ACOS are the two faces of the same coin. They inform you about your campaign’s performance in monetary terms, however in different ways. ACOS typically gives you the percentage of your revenue that was consumed in running your advertisement. This can be done by dividing the total cost by total revenue.

Total Revenue- The total money that a business makes owing to its ads that are run on digital media

Total Cost- The total cost incurred for running ads on digital media

ACOS = Total Cost/ Total Revenue

Similarly,

Total Cost = ACOS x Total Revenue

Total Revenue = Total Cost / ACOS

For example,

If the total revenue that you earned through an ad campaign is Rs. 87,000, while the total cost that you incurred in running that campaign is Rs. 5500. Then your Average Cost of Sales can be calculated by-

= 5500/87000

= 0.063

Hence, for every Rupee you earn, you spend Rs. 0.063, that’s your Average Cost of Sales.

### 15. Impressions to Conversion (I2C) Percentage

This metric helps you understand the orientation of your advertisement and whether you’re connecting to your target audience in the right way, as it compares the number of times your ad was shown to the number of times conversions took place. This way, it can be really helpful in correcting the way you show your products or services to your target audience.

Conversion- An action by a lead taken towards your business ad that brings you profit

Impressions- The total number of times the ad was viewed by audience

I2C Percentage = Conversions / Impressions x 100

Similarly,

Conversions = I2C Percentage x Impressions

Impressions = Conversion / I2C Percentage

For instance if your total conversions are 1,5000 while total impressions were 252643, then you conversion can be calculated by-

= 150000 / 252643

= 0.60 x 100

= 60%

Hence, your impression to conversion percentage is 60%

### 16. Average order value (AOV)

Another cost metric that informs you about the average cost incurred per conversion. This helps in creating a realisation about your ad campaign designs and their effectiveness in generating revenue for you.

Conversion- An action by a lead taken towards your business ad that brings you profit.

Revenue- The total money that a business makes owing to its ads that are run on digital media

AOV= Total Revenue / Total Conversions

Similarly,

Total Revenue = AOV x Total Conversions

Total Conversions = Total Revenue / AOV

For instance, if your total revenue was Rs. 75000 while your conversions were 15, then your AOV can be calculated by-

= 75000/15

= 5000

Then your AOV is calculated to be Rs. 5000.

### 17. Impression Share

One of the most important aspects of running a successful business is knowing where to sell your products or services. The Impression Share metric comes as an advantage in understanding the same business nuance by comparing the actual number of impressions that were received by you vs the total number of impressions that your ad could have received. The metric is highly beneficial in tailor-selecting the places where more traffic can be obtained.

Impressions- The total number of times the ad was viewed by audience.

Total Eligible Impressions- Total number of impressions that were available including the ones that occurred.

Impression Share = Impressions / Total Eligble Impressions

Similarly,

Impressions = Impression Share x Total Eligible Impressions

Total Eligible Impressions = Impressions / Impression Share

Now, for instance if your total impressions that occurred are 101692, while the total eligible impressions were 252643, then your impression share can be calculated by –

= 101692 / 252643

= 0.40

Hence, your Impression Share comes out to be 0.40.

### 18. Effective Cost Per Click (e-CPC)

Similar to e-CPM, e-CPC is another performance metric that calculates the revenue your company generates from each click on the ad that you have run. It is calculated by dividing the gross revenue generated by the number of clicks on an ad.

Total Clicks- The cumulative number of clicks that your ad received while it was live.

Total Revenue- The total money that a business makes owing to its ads that are run on digital media.

e-CPC = Total Revenue / Total Clicks

Similarly,

Total Revenue = e-CPC x Total Clicks

Total Clicks = Total Revenue / e-CPC

Now, for instance if your total revenue amounts to Rs. 110,000, while the total number of clicks were 1509. Then, your e-CPC can be calculated as Rs. 72.89.

### 19. Effective Cost per Mille

e-CPM is an extension of the traditional CPM model that provides you with the cost incurred for every thousand impressions. While, the e-CPM, is an ad performance metric that provides you with the revenue that your ad campaign generated from those thousand impressions. It is thus called RPM or Revenue per Mille and is calculated by dividing the gross revenue generated by the number of impressions and multiplying the result by 1000.

Total Revenue- The total money that a business makes owing to its ads that are run on digital media.

Total Impressions- The total number of times the ad was viewed by audience.

e-CPM = (Total Revenue / Total Impressions) x 1000

Similarly,

Total Revenue = e-CPM x Total Impressions

Total Impressions = Total Revenue / e-CPM

Now, for instance if the total revenue that you generated through your ad was Rs. 110000, and you received a total impressions of 1,83,668. Then your e-CPM can be calculate as-

= 110000 / 183668

= Rs. 0.59

So, your e-CPM will be Rs. 0.59

### 20. Effective Cost per Action

This metric comprehensively analyses how effective a CPA campaign has been, as it calculates the total revenue generated by an ad campaign from each action that was taken on the website.

Total Revenue- The total money that a business makes owing to its ads that are run on digital media.

Action taken- Any action that was taken on the website by a visitor after viewing the ad run by a company.

e-CPA = Total Revenue / Total Number of Actions Taken

Similarly,

Total Revenue = e-CPA x Total Number of Actions Taken

Total Number of Actions Taken = Total Revenue / e-CPA

Now, say for example if the total revenue that your ad campaign generated is Rs. 1,20,000 while the total number of actions that were taken are 1560. Then you can calculate your e-CPA by-

= 120000 / 1560

= Rs. 77

Hence, your e-CPA is Rs. 77.

### 21. Email Bounce Rate

Email Bounce Rate can be understood as that percentage of emails that failed to be delivered to its recipients out of the total number of emails that you sent. Calculating your bounce rate is also a part of understanding your email marketing effectiveness. Email Bounce Rate can be calculated by dividing the number of bounced emails by the number of total emails sent and multiplying the result by 100.

Bounced Emails- The number of emails that failed were sent by an advertiser but failed to be delivered to the recipient.

Total Emails Sent- The total number of emails that were sent out in an ad campaign by an advertiser

Email Bounce Rate = (Bounced Emails / Total Emails Sent) x 100

Similarly,

Bounced Emails = Email Bounce Rate x Total Emails Sent

Total Emails Sent = Bounced Emails / Email Bounce Rate

Now, for instance, if the total emails that you sent out were 10,000, however 75 of those bounced. Then your email bounce rate can be calculated as –

=75/10000 x 100

=0.75%

Hence, your email bounce rate is 0.75%.

### 22. Engagement Rate

Desperate to know how your ad campaign or social media post is doing? Engagement Rate is a metric that helps you know how people are engaging with your ad or content. It can be calculated by dividing the total number of engagement tracked by total number of followers, and multiplying the result by 100.

Engagement = The interactions that people have with your content or your ad on an online platform. The interactions can be likes, comments, shares, etc.

Followers = The total number of followers of your social media page where you post content or run your ad.

Engagement Rate = Total Engagement / Total Number of Followers

Similarly,

Total Engagement = Engagement Rate x Total Number of Followers

Total Number of Followers = Total Engagement / Engagement Rate

For instance if your total engagement on a Facebook Ad Campaign in the past 7 days looked like this –

Total Likes = 4000

Total Comments = 1500

Total Shares = 1000

And your page has a total number of 30000 followers, then your Facebook Ad’s engagement rate can be calculated as-

= (4000+1500+1000 / 30000) x 100

= 21.6%

Hence, your ad’s engagement rate comes out to be 21.6%.

### 23. Facebook Cost Per Conversions

This metric is similar to Cost per Conversion as discussed above, however it is used exclusively to measure how efficiently you have achieved your ad campaign goals. It can be calculated by dividing the Total Money Spent by Total Number of Conversions or Results.

Conversions- An action by a lead taken towards your business ad that brings you profit.

CPC = Total Amount / Total Conversions

Similarly,

Total Amount = CPR x Total Conversions

Total Conversions = Total Amount / CPR

So, let’s say the total cost you incurred for running an ad was Rs. 832.99, whereas, there were a total of 12 conversions or results. Then, you can calculate your cost per result by

= 832.99 / 12

= 69.41

Hence, your cost per result comes out to be Rs. 69.41

### 24. Follow Ratio

Follow Ratio is an exclusive social media metric and refers to the ratio of the followers on a page to the number of accounts that are followed by that page. It is also referred to as Followers to Following Ratio and represents how good an account is performing. So, higher the ratio, the better the account is performing.

Followers = The number of accounts following your page

Following = The number of accounts that your page is following

FR = Total Followers / Total Following

Similarly,

Total Followers =FR x Total Following

Total Following = Total Followers / FR

For example, your page on Instagram has a total of 2000 followers and you follow 100 accounts. Then your Follow Ratio for Instagram can be calculated as

= 2000/100

= 20

This looks to be a pretty good Follow Ratio. Keep up the great work!

### 25. Instagram-Engagement-Rate

An Instagram-Engagement Rate is calculated to determine the engagement that your instagram content is getting. It can be measured by keeping a track of the likes, comments and shares that your posts receive. The metric helps in both quantitative and qualitative analysis of your instagram content.

Total Engagement- The interaction of audience with instagram content through likes, clicks, shares and comments

Total Impressions- The number of times a content appears on viewer screens

IER = (Total Engagement/Total Impressions) x 100

Similarly,

Total Engagement = IER x Total Impressions

Total Impressions = Total Engagement / IER

Now, say your total engagement on an instagram post was 122 and the total impressions were 806. So, your IER can be calculated as-

IER = (122/806)x100

=15.1%

Hence, your IER comes out to be 15.1%.

### 26. Install-Rate

Install Rate determines the rate at which your mobile applications are downloaded as compared to the number of clicks your application ad receives in a campaign. The metric lets you know the effectiveness of your ad campaign for the particular application.

Total Measured Clicks = The number of clicks that were received on your application ad

Total Measured Installs = The number of application installs that were received from your ad campaign

Install Rate (IR) = (Total Installs / Total Clicks) x 100

Similarly,

Total Installs = Install Rate x Total Clicks

Total Clicks = Total Installs / Install Rate

For example, if the total number of installs that came for your applications after your ad campaign was run are 169, and the total number of clicks that the particular ad received are 1761. Your install rate can be calculated as –

IR = (169/1761)*100

= 9.56%

Hence, your Install Rate after that ad campaign comes out to be 9.56%.

**The Voyage Continues**

As we make a layover in this journey, let’s try to put the present formulae in execution, and that can be done by going through our case studies. In the meanwhile, we’re refueling and will be back with another set of formulae for you. Stay tuned!