How To Calculate If Your Campaigns Will Make Money

CTR! CVR! CPM! CPC! CPA! EPC!

Affiliate marketing is a game of thrones – you win or you die.

No, wait, that’s wrong. Thankfully.

Affiliate marketing is a game of numbers. If the numbers don’t work, you don’t make money.

Most of us understand what each of the individual metrics for affiliate marketing mean: CTR means Clickthrough Rate, CVR means Conversion Rate, and so on.

But the hidden stumbling block can be putting them all together.

That’s what this article is here to do – give you clear-cut relationships between common metrics that you can use in spreadsheets to understand what it will take to make your campaign profitable.

Note: this article just focuses on ads, offers and financials. I’ll look at landing pages and how they factor in in a follow-up article.

Ad Math

Most traffic sources will either charge in CPC or CPM. You wouldn’t bother recalcuating those, but it can be useful to be able to calculate your CPC from a CPM traffic source, or your CPM from a CPC traffic source.

CPM (Cost Per Mille) is the cost to display an ad 1,000 times to website visitors.

CPM = CPC x CTR x 10

If your CPC is $0.50 and your CTR is 1%, your CPM =
= $0.5 x 1 x 10
= $5

CPC (Cost Per Click) is the cost to get a single visitor to click on an ad.

CPC = CPM / ( CTR *10 )

If your CPM is $5 and your CTR is 1%, your CPC =
= $5 / (1*10)
= $5 / 10
= $0.50.

CTR (Clickthrough Rate) is the number of website visitors who click on an ad, expressed as a percentage.

CTR = 100 x number of clicks / number of views.

If you had 10 clicks and 10,000 views, your CTR
= 100 x10 /10,000
= 1000 / 10,000
= 0.1%

CTR = CPM / ( CPC*10 )

If your CPM is $5 and your CPC is $0.5, your CTR
= $5 / ($.5 x 10)
= $5 / $5
= 1%

Offer Math

CVR (Conversion Rate) is the percentage of people who clicked onto the offer who subsequently convert (take an action, like downloading an app)

CVR = (Number of conversions / number of visitors) x 100.

If you had 5 conversions and 100 visitors, your CVR
= (5/100) x 100
= 0.05 x 100
= 5%.

EPC (Earnings Per Click) is the amount you earn per click on an ad.

EPC = Payout x CVR / 100

If your payout is $2 and your CVR is 5%, your EPC
= $2 x $5 /100
= $10 / 100
= $0.10

CPA (Cost Per Action) is the amount that it costs to get a user to perform an action, such as download.

CPA = CPC x 100 / CVR

If your CPC is $0.20 and your CVR is 5%, your CPA
= $0.20 x 100 / 5
= $20 / 5
= $4

eCPM (Effective Cost Per Mille) is the amount you earn per thousand views of an ad.

eCPM = CTR x CVR x payout / 10

If your CTR is 1%, your CVR is 5%, and your payout is $2, your eCPM is
= 1 x 5 x $2 /10
= $10 / 10
= $1

Profitability Math

Profit / Loss is the amount of money you make from a given ad or campaign. If positive, it’s called “profit”, if negative, it’s called “loss”.

This is the most important metric in this entire article!

Profit = ( EPC – CPC ) x total spend on ads / CPC

If you spend $100 on a campaign whose EPC is $0.10 and whose CPC is $0.20, your profit/loss
= ( $0.10 – $0.20 ) x $100 / $0.20
= -$0.10 x $100 / $0.20
= -$10 / $0.20
= -$50

In other words, you will lose $50.

Profit = (eCPM – CPM) x total spend on ads / CPM.

If you spend $100 on a campaign whose eCPM is $10 and whose CPM is $5, your profit will be
= ( $10 – $5 ) x $100 / $5
= $5 x $100 / $5
= $100 .

In other words, you will make $100.

Profit = (payout – CPA) x total spend on ads / CPA.

If you spend $100 on a campaign whose payout is $2 and whose CPA is $1, your profit will be
= ( $2 – $1 ) x $100 / $1
= $1 x $100 / $1
= $100 .

In other words, you will make $100.

Profit = ROI x Spend /100

If you have a campaign which has 300% ROI but a maximum spend of $5 a day, you will make
= 300 x 5 /100
= $15

a day from it.

ROI (Return On Investment) is the percentage of your initial spend you expect to see as profit.

Important: high ROI is not valuable on its own. Only if high ROI can be paired with enough spend to create a good profit is it valuable.

ROI = ( EPC – CPC ) x 100 / CPC

If your EPC is $0.10 and your CPC is $0.20, your ROI
= ($0.10 – $0.20) x 100 / $0.20
= -10 / 0.2
= -50%.

In other words, you will lose half the money you invest in this campaign.

ROI = (eCPM – CPM) x 100 / CPM.

If your eCPM is $10 and your CPM is $5, your ROI
= (10-5) x 100 / 5
= 500 / 5
= 100%.

In other words, you will make as much money again as you put into this campaign.

ROI = (payout – CPA) x 100 / CPA.

If your payout is $2 and your CPA is $1, your ROI
= (2-1)x100/1
= 1×100
= 100%

In other words, you will make as much money again as you put into this campaign.

Discussions are open here