Contextual advertising is a type of advertising that is displayed in the content that the user is viewing. That is why such advertising does not cause irritation among users, but on the contrary, helps to solve their need. The user himself decides to interact with advertisements or not, so the traffic from contextual advertising is of high quality. Arbitrageurs often prescribe marketing strategies based on contextual advertising. They present to the customer, get approval, launch, get leads, but do not count the effectiveness of channels and creatives. In order to understand which strategies and hypotheses bring the most traffic, and which give a minus, you need to comprehensively evaluate a contextual advertising campaign. With the correct setting of advertising in combination with good ads and a landing page, you will get the highest quality of traffic at the lowest price. The basic principle of contextual advertising is Pay Per Click.
Earlier in the field of Internet advertising, another principle was common – payment for impressions (or CPV). However, now it is used much less often and you pay only for real transitions to the site. The exact cost of a click depends on many factors, among them the level of competition in the topic, the position of the ad in the search results (from the top of the first page – the most expensive transitions, but there will be more from there). The position of the ad in the issue is determined on the basis of the auction – the one who pays more is the one who is higher. A high-quality contextual advertising campaign uses content of various formats, and the content itself is structured depending on targeting by user audiences and by target and thematic factors. And whatever format is chosen, the ad is shown based on specific target relevance to the content on the advertiser’s site. This is the main advantage of any type of contextual advertising. You spend your budget effectively and get practically ready-made leads with minimal costs for impressions or clicks. Because the users who clicked on the ad are, in fact, already warm customers.
Conversion Rate shows how much targeted traffic came from different channels. It is calculated according to the formula:
CR = Number of targeted actions * 100% / Number of conversions from the ad
Needed to compare the efficiency of different sources. For example, through the online store there were 50 conversions to the site and 5 purchases, and through partner advertising there were 40 conversions and 20 purchases. In the first case, the CR is equal to 10%, and in the second case, it is 50%. This means that the affiliate brings more targeted traffic with fewer conversions — so you need to direct your budget there. CR tells about traffic quality and profitability of different strategies. The value of the indicator can range from 0% to 100%, but the higher it is, the better. A target action can be anything: the number of purchases, items in the cart, conversions to the site, downloads or registrations.
Click-Through Rate is an indicator of the clickability of advertising campaigns, which is calculated according to the formula:
CTR = (number of clicks/number of impressions)*100%
CTR shows how many users clicked on an ad compared to those who saw it at all. The value shows how correctly the offer is made, or the correct promotion channel is chosen, or the UTP closes the pain of the audience. For example, in the first month the ad was shown 1000 times and clicked 400 times, in the second month it was shown 1500 times and clicked 500 times. Then:
CTR of the first month: 400/1000*100%= 40%
CTR of the second month: 500/1500*100% = 33.33%
CTR for two months: (400+500)/(1000+1500)*100%= 36.%
A figure of 5 to 10% is considered good, depending on the niche. With the help of CTR, you can understand the effectiveness of various creatives, calculate the profitability of the landing page, determine what the audience really likes and what the audience does not like, in order to take this into account in the next creatives. You can also control the cost of advertising by CTR: the lower the CTR, the higher the cost of a click. So, it’s time to change something in the campaign.
Cost Per Action – the cost of a target action or the cost of attracting one buyer.
CPA = Advertising Costs / Number of Targeted Actions or Acquired Buyers
Any indicator can be hidden under CPA, depending on the niche:
CPL (Cost Per Lead) – the cost of a lead.
It is used if the target action is sending an application or filling out a form. It is most often useful if the sales gap is long and the buyer moves slowly along it: first he will fill out the form, then he will consult with the manager and then he will be ready to buy. Usually these are financial, construction, legal niches, advertising agencies.
CPV (Cost Per Visitor) – prices per view.
The indicator is useful for increasing brand recognition and increasing loyalty. Through the video, you can talk about discount promotions, advertise new products, and leave a jump button. The more users watch the video to the end, the more people will be ready to take the targeted action in the future.
CPI (Cost Per Install) is the cost of installing the program.
An important indicator in the field of game development to attract traffic to a new program. Used for both desktop and mobile versions.
CPO (Cost Per Order) is the cost of a completed order.
It is important not to be confused with CPL, because a completed order means that the buyer has paid, and the ice means that they are close to making a purchase. CPOs are used by online stores, marketplaces, and ordering sites. If the company accepts applications not only online, but also by phone, it is important to take this traffic into account in the calculations.
CPM (Cost Per Mile) is the cost of 1,000 ad impressions.
The CPM format is launched in social networks, search engines, and teaser networks. It does not work for the number of sales, but for reaching and increasing awareness. For example, a popular brand wants to talk about a new promotion, product or tariff, present a new partner or simply remind about itself. Then the marketing department buys banners and sets a CPM of 1000 per week.
For example, 2000 users were brought to the site, each click cost 3 hryvnias. The CR (conversion rate) averages 5%, so that leaves 2000 * 0.05 = 100 applications. The total price of the advertising campaign was 3*2000=6000 hryvnias. Then one application cost the company 6000/100 = 60 hryvnias. Whether this is a good indicator must be judged depending on the niche and the average check. If you sell yachts for 2 million, then ice can cost 100,000, and for inexpensive pillows for 1,000 hryvnias, the maximum price is 150 hryvnias. CTR gives a more complete understanding of the effectiveness of an advertising campaign, since, unlike CR, it also takes into account the cost of placement. The disadvantage of the indicator is that it can be used when there is some kind of database.
Cost Per Click – the cost of a click. It is used in contextual advertising, in search results, in PMI, in targeted, in teaser advertising. In all these formats, it is important how many users click on the link in the banner, teaser or advertising record – this is how you can understand the effectiveness of the advertising offer.
CPC = ad cost / number of clicks
CPC cannot be considered as the only factor in the effectiveness of an advertising campaign, because it does not provide any data about the number of leads and traffic. It is important only in comparison with the general situation on the market. For example, a neighboring ad in a niche costs half as much. Why? Maybe you should make the CTA button brighter, change the creative or add an understandable character there. The value of the indicator depends on the niche and the place of placement.
Return On Investment – investment return coefficient. It shows the ratio of the received profit to the spent investments and is calculated according to the formula:
ROI = (profit – investment in advertising) * 100% / investment in advertising
It is important to consider ROI in order to understand whether the investment has paid off and whether there is a profit for the project. Estimating the value is easy: if it is less than 0%, then the campaign has only losses, if it is equal to 0%, then there is no profit or loss, if it is more than 0%, that is, income. ROI can and should be calculated for different advertising channels, for products, formats and regions. It is best to do this once a month in order to optimize the budget in time and understand the efficiency. For example, if channel A gives an ROI of 90% and channel B 140%, it is better to reallocate the budget in favor of channel B. Channel A needs to be further analyzed, find the reason for the failure, change the strategy and start again, recalculating the ROI after the changes. In order to increase ROI, you need to accurately hit the audience’s request and satisfy their pain points in the UTP. It is important to select keywords in order to increase the number of conversions, to prepare a landing page with quality and to think through the user’s path. It is also important to direct the visitor to the site he expects to see based on the advertisement.
The share of advertising expenses shows the ratio of advertising expenses to sales revenue:
CRB = ad spend/ad revenue * 100%
This is one of the subtypes of ROI, a Russian analogue that allows you to determine the company’s profit from advertising. With the help of ChRB, it is convenient to compare the effectiveness of different channels and products. CRB must be lower than 100%, otherwise more will be spent on advertising than earned from it. There are cases where a CRV of more than 100% can be profitable. This is the case if the business intends to work with one customer for a long time: to bring him back to purchase through a post-sales surge or to offer long-term subscriptions for several years. Then the cost of attracting only the first month is taken into account, and the PRV can be more than 1000%. Therefore, if the Life-Time Value (LTV) is high, then the CRV can be high. with the help of Excel, and it is possible automatically in marketing systems.