Everyone talks about CTR, Page Impressions, Conversion rate and ROI in Pay-per-click. But, how many of us actually know what each term stands for and how are they helpful in significantly increasing the monetary value of your business?

Let us learn what each term stands for in PPC and how are they calculated.

1. Campaign
2. Adgroup
3. Page Impression
4. Clicks
5. CTR (Click through Ratio)
6. Total Cost
7. CPC (Cost per Click)
8. Conversions
9. Conversion Rate
10. CPA (Cost per Acquisition)
11. ROI (Return on Investment)
12. CPM (Cost per thousand Impressions)

1. Campaign: A campaign is a collection of related Ads or offers. An advertiser can have many campaigns and a campaign consists of 1 or more Ad groups. A PPC campaign lets you decide who exactly comes to your website. E.g. a real estate campaign.

2. Adgroup: An adgroup contains 1 or more ads targeting 1 set of keywords. Here, you set the maximum price you want to pay for an adgroup keyword list or for individual keywords within the Adgroup.

3. Page Impression: Page Impression is the number of times an Ad is displayed. It is the search count. If the person only sees your link, but does not click through, this is called a page impression. You should not pay for page impressions. A Page Impression is recorded irrelevant to the placement of your Ad.

4. Clicks: Clicks is the number of times your ad is clicked. It is the number of users who visit your site.

5. CTR(Click through ratio): CTR is the ratio between the clicks and the impressions. The higher the CTR, your ad is that important. That is, your Click through ratio is having a positive impact.

Formula for calculating CTR:

Clicks --------* 100 Page Impressions

If the CTR is more than 5% it is good for the Ad Industry.

6. Total cost: Total cost is what you pay and how to pay the amount to the search engines. The more the number of clicks on your Ad, the more you pay. In google, the total cost is based on the CTR. If your CTR is below 0.5%, google does not show your ad in the search engine.

7. CPC(Cost per Click): CPC is the calculated by dividing the total cost with the number of clicks.

Formula for calculating CPC:

Total Cost -------------------- Number of Clicks

8. Conversion: Conversion is when the user enters into any transaction within your website. This includes even the signup page.

9. Conversion Rate: It is the ratio between the conversion and the clicks.

Formula for calculating Conversion Rate:

Conversion --------------*100 Clicks

10. CPA (Cost per Acquisition): CPA or Cost per acquisition is how much are you spending for each conversion. You must earn more than what you spend. It is calculated by dividing the total cost with the number of conversions.

Formula for calculating CPA:

Total Cost --------------------------- Number of Conversions

11. ROI (Return on Investment): Any business would mainly focus on how much returns are coming back to them vis-à-vis their investment made. So, ROI is calculated as:

ROI= The amount of earnings made - The amount actually spent.

12. CPM (Cost per 1000 Impressions): Here 'M' stands for 1000. CPM is used by Internet marketers to price ad banners. The number of times an ad banner is downloaded and presumably seen by visitors. Sites that sell advertising will guarantee an advertiser a certain number of impressions then set a rate based on that guarantee times the CPM rate.

So what are you waiting for? Start applying the PPC terms above to see a significant increase in the productive search engine traffic and thus monetize your website.

About the Author

Hari Qumar is a management graduate from a UK university and owns Begonia Infosys. He is actively involved in promoting SEO in India and works for an Affiliate marketing website as well.