Author: Jim Peters
"With a slight side trip into CPM, CTR, and CR"
Internet jargon can sometimes be very confusing, even for the most experienced marketing professional. One such example is the difference between, what are called Ad impressions and click-throughs.
An Ad impression is simply the number of times your Ad, be it banner, button, or text link, has been or will be exposed to a potential viewer. Simply put it is the number of times that image appeared on any computer screen anywhere in the world. As an advertiser this is the least advantageous way to purchase
advertising. Yes, it may be the least expensive, but when we look at the facts, is it really?
A click-through is the actual number of times someone has taken their curser and placed it on your advertising image and used their mouse to click on that image and be taken to your site. This is the most advantageous way to purchase advertising for the advertiser, because it really takes all the guess work out of the equation. You'll know exactly how many visitors will visit your site relative to the ad purchase and then it's your job to make the sale, or increase your CR ( more about CR as we get further into the article.)
CPM, "Cost per thousand" is one of the yardsticks used by the sellers of advertising space to price ad sales for impressions. Those that are selling the advertising will sell the advertiser a specific number of impressions (number of times that image appears on any computer screen anywhere in the world and presumably is seen by your visitors.) A CPM rate of $25 is probably about average for larger agencies, while a CPM of $10 or below, is normal for the smaller entrepreneurial operations.
With a CPM of $25' a purchase of 100,000 impressions will cost $2,500 ( $25 x 100 ), while with a CPM OF $10 those same impressions will cost $1,000 ( $10 x 100 ) The first thing you think here, is that a CPM of $10 is the best deal. That's not even close to being true. In actuality the CPM of $25 could produce hundreds of more sales than the CPM of $10 thereby bringing in thousands of dollars more in revenue.
"How can that be you ask?" Well there are a number of other factors that must be computed before you can see the whole Impressions Vs. Click-Throughs picture. One of those is the CTR ( click-through rate). The CTR is the actual percentage of online visitors who clicked on the ad to arrive at the destination site via one of those "IMPRESSIONS", be it banner, button, or text link. Click-throughs are much more reliable and give a more accurate idea of the
performance of an Ad. For a click-through to register, a user must click on the Ad.
For example, if you divide 2,900 clicks by 100,000 impressions, you get a click-through rate of 0.029, or 2.9%. This means that almost 3 banners were clicked for every 100 impressions. It also means that to get 10,000 visitors to your site using this method you'll need to purchase around 500,000 impressions.
The current industry average click-through rate is being reported as anywhere from 0.020% to 0.050%, and that can be drastically higher or lower based on the advertisers ad content and how well he has selected the sites that his ad message will be seen on. Example your ads for buggy whips are being delivered on a site catering to NASCAR enthusiasts your CTR will probably be 0.000%. While conversely your ad for autographed photos of Rusty Wallace displayed on that site would have a CTR well above the industry average.
Your probably starting to get the picture now, impressions, and CPM do not necessarily translate into click-throughs, sales or income.
Let's look at the thing from a different angle then. How about instead of impressions the advertising people sell you click- throughs? That makes sense to me. Now though we are faced with another acronym CR, or conversion rate (Told ya we'd get to it.) Actually this comes into play even with the scenario on impressions described above, but in this example we have a two step process (CTR, CR, )to arrive at the sale rather than a 3 step process ( impression, CTR, CR )
As more is learned through trial and error as well as better tracking tools we are finding that merely getting visitors to a site no longer has the same value as when Web site traffic was generally accepted as a measure of success. The trend towards profitability, along with the above mentioned, better tracking tools, has resulted in much less attention being paid to click-through rates and more attention being paid to CR's (conversion rates).
The CTR then can be seen as a measure of "immediate response" to an
ad, but not the overall response to an ad. The exception involves ads that display identifiable information ( sometimes referred to as "branded" ) about the destination site, and can be arrived at
without clicking on the ad and not recording a "click-through" in these cases the click rate will vary from the overall rate.
Contrary to what you might think a high click-through rate does not necessarily assure you a good CR ( conversion rate,) and the two rates may even have an inverse relationship. An ad geared towards curiosity clicks such as those that actually trick the viewer into clicking on them will result in a great deal fewer sales, than an advertisement geared to receive qualified clicks.
Let's sum all that up. Impressions vs. Click Throughs -
An impression is counted each time the banner is called from the server. Some browsers may cache data causing impressions to be an inaccurate measurement.
Impressions are sold in groups of 1000 which is called CPM or Cost Per Thousand ( I'll go out on a limb here and say that the M is for the Roman numeral that indicates 1000 .) 1000 impressions, based on the industry average will bring you something between 20 and 50 site
Impressions do not mean you'll have visitors to your site. A Click-Through is the act of someone somewhere actually clicking on a graphic image or text link and arriving at your web site.
Purchasing advertising by Click-throughs means that you only pay for people that actually visit your website. This means you don't need to purchase thousands of impressions to get 10 visitors. You purchase as many click-throughs as you want visitors. This is a much more exact science, but is in direct relation to your ability to create a high CR, conversion ratio.
How do you do that? Easy, just have a product that is in high demand, present it to groups that are interested, at a price that is lower than anyone else yet allows you to make a profit. Place your
ad on a tracking system like this one, notice the above average CR.
Now just book that flight to the BAHAMAS!!
"Your Success Is Our Success"
About the Author
specializes in custom website design, promotion, maintenance,
site and graphic design, as well as e-commerce packages for small to medium sized companies.