Importance of ROI on CPM Advertising

If you use a CPM, or cost per thousand, impression advertising model for your banner or button ad campaigns, it’s important to track your sales with respect to your advertising costs, or your return on investment (ROI). Since you’re paying by the number of impressions, as opposed to the number of actual clicks, the cost can quickly get out of hand, resulting in a net loss if you don’t maintain a tight watch.

 About the CPM Calculator

Developer Shed Network’s CPM Advertising ROI Calculator  is a free tool that makes calculating your ROI simple and quick. By entering the following variables, it instantly provides a snapshot percentage to help keep you on track. It can also be helpful in making projections to better refine your targeted ads to maximize performance.

Figure out the CPM Advertising Return on the Investment

 

Total Monthly Impressions
You can use the number of your last month’s impressions to calculate your ROI for the month. You can also use an estimate of future impressions, or an average, as a prediction of future performance.

 

CPM
Enter your cost per thousand ads for the month to calculate your ROI. To maximize future return, you can adjust the cost number up or down to help determine future bid prices.

 

Clicks
The click through rate (CTR) is the percentage of CTR per total number of ad impressions. For example, if you paid for 1,000 impressions and got 20 click throughs, your CTR is 2%.

 

Conversion Rate
This is the number of visitors who come to a site as the result clicking an ad, and who make a purchase or perform another action requested, like filling out a contact form. Calculating the percentage in the same manner as CTR, it is the number of visitors who “converted”, divided by the total number of visitors who clicked on the ad to go to the site.

 

Profit
This is the dollar amount earned from a sale. If you are an affiliate making $40 for each sale, that is your profit. If you are selling a product for $50 that costs you $15, then your profit is $35.

Results screenshot of finding out the CPM Advertising

Putting this to work, we can see that if we have 3000 monthly impressions at a CPM of $5, with a 2% CTR converting at 2%, and $40 profit per sale, there is a projected monthly profit of $33. This is a 220% ROI. Knowing the ROI can be a valuable guide to adjusting bid price, increasing or broadening the campaign for a higher daily number of impressions, etc.