When it comes to acronyms, the media industry is as guilty as any other for having its fair share. In the online media planning space, you're probably already familiar with the most common ones: CPM (cost per thousand impressions), CPC (cost per click), CPL (cost per lead), and CPA (cost per action). So, when you see an "e" thrown in front of these acronyms, you might not know what it means or how it works.
The "e" stands for "effective," whereby effective means what it actually cost you to reach your goal, whether that goal is an action, a lead, or a visitor. It also allows you to standardize your goal measurement regardless of the pricing model through which you purchased your media. If you're a performance marketer, the "e" that most often matters to you is eCPA, to get the most bang for your buck; if you're a publisher, you're more inclined to care about eCPM to maximize revenue.
To derive an effective measurement like an eCPA, you simply divide the final total spend by the number of actions (conversions) you generated as a result of your campaign. For example, if you spent $50,000 in online media and the campaign generated 4,000 sales, your eCPA is $12.50. This is the easy calculation.
What's more tricky is when you want to media plan based on a desired eCPA outcome. In this instance, you need to do some reverse calculating and make some presumptions. Depending on the pricing model offered by the publisher and the kind of effective measurement you're striving for, you probably want to obtain or estimate the following:
- The average click-through rate (CTR)
- The average site conversion rate
- Your desired eCPA or eCPL
Let's demonstrate using another example. Say a publisher offers you a $25 CPM and you have a target eCPA/eCPL of $50. The publisher also shares with you that average CTRs for the placements you're considering range from 0.05 percent to 0.10 percent. For the sake of this calculation, you assume an advertiser site conversion rate of 1.5 percent. The calculator to complete the variables of which you can manipulate then looks like this. Follow the calculations in boldface.
| A | Target CPA | $50 |
| B | CPM | $25 |
| C | Impressions purchased | ? |
| D | Assumed CTR | 0.05% |
| E | Clicks achieved | (C x D) |
| F | eCPC | N/A |
| G | Assumed conversion rate | 1.5% |
| H7 | Conversions achieved | (E x G) |
| I | Total cost of impressions | (B x C÷1000) |
| J | eCPA | (I÷H) |
So now let's fill in the blanks to try to determine if this campaign would be viable with your $50 eCPA:
| A | Target CPA | $50 |
| B | CPM | $25 |
| C | Impressions purchased | 1,000,000 |
| D | Assumed CTR | 0.05% |
| E | Clicks achieved
(C x D) | 500 |
| F | eCPC | N/A |
| G | Assumed conversion rate | 1.5% |
| H7 | Conversions achieved
(E x G) | 7.5 |
| I | Total cost of impressions
(B x C÷1000) | $25,000 |
| J | eCPA (I÷H) | $3,333.33 |
You can see by this example that the advertiser's target CPA would be unattainable. If, however, the publisher came down in price (e.g., $15 CPM) and you work to optimize the campaign to the higher CTR (0.10 percent) and/or improved the site conversion process by even one-half percent to 2 percent, your campaign figures could look vastly different...but still not reach your target:
| A | Target CPA | $50 |
| B | CPM | $15 |
| C | Impressions purchased | 1,666,667 |
| D | Assumed CTR | 0.10% |
| E | Clicks achieved
(C x D) | 1,667 |
| F | eCPC | N/A |
| G | Assumed conversion rate | 2.0% |
| H7 | Conversions achieved
(E x G) | 33 |
| I | Total cost of impressions
(B x C÷1000) | $25,000 |
| J | eCPA (I÷H) | $750 |
Working through these calculations ahead of time helps you determine what kind of CPMs and CTRs could work for your campaign. This could help you pare down publishers right out of the gate or go to the publishers with a target CPM in mind. It can also help you bring your advertiser down to reality: if the math doesn't work and they demand performance, then they either cannot expect their ad to run with a certain "wish list" publisher or they need to adjust their expectations.
As you get more experienced buying this way, you'll also realize a few things:
- You can get as granular as tracking eCPAs down to the unique placement and targeting level. This may be valuable if, for example, your advertiser really wants to push certain geography and gives you more eCPA leeway to make this work. If this granular tracking is important, know that you'll have to implement page tags for these geo-targets uniquely too.
- If you're buying for an eCPA, share that information with trusted publishers as they can help determine what might be most effective for you, they might be willing to special negotiate for you, or work to deliver more impressions then you purchased, trying to help you reach your goal.
- Good campaign optimization impacts final eCPA. Don't just calculate your sum total eCPA or do so at the campaign's end. Doing so midway can reveal that a placement with high CTR still might not be yielding you enough actions at the desired eCPA to merit keeping. Don't get lazy!
- Past experience informs future media plans. The more you do eCPA-based media campaigns, the better you'll know what to expect from the variables in the calculator, which then more accurately predicts your likely outcome.
One final word of caution, particularly relevant for advertisers considering eCPA campaigns: if you plan on running campaigns strictly focused on eCPA metrics, you can too easily kill the creative vision your media planner has and eliminate the opportunity to discover other truly valuable learnings besides the mere cost of a sale.
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