Thursday, November 30, 2006

Online Advertising terminology: Explained

In this post I am explaining various terms used in Online Advertising:

CPM (Cost per thousand)

The basic currency / unit of purchase of Internet ad inventory is “Thousand” impression blocks. Cost per thousand is referred as CPM. (M here stands for ‘Milli’ in Latin which means ‘Thousand’)

CPC (Cost per click)

Whenever a surfer clicks on a Banner Ad, it is recorded as a “Click”. The percentage of number of clicks from number of impressions is measured by Click Though Ratio (CTR). So for Eg if 1,000 impressions lead to 5 clicks then the CTR will be 0.5%.

CPL (Cost per Lead)

A lead is defined as a potential customer who is interested in buying the product advertised and provides his contact information like email id , contact numbers etc. Today a bulk of Online Advertising is happening for generation of leads.

I2L : Impressions to Leads ratio. Number of leads from served Impressions. If we get 1 lead from 1,000 impressions then i2l will be 0.1%.
C2L: Clicks to Leads ratio: Number of leads from clicks. If 5 clicks yield a Lead then the C2L will be 20%.

CPA (Cost per acquisition)

Generally a whole lot of Product Categories need Offline Sales teams to “close the sales loop”. Typically, in such cases the leads generated Online are passed on to the Sales organisation who close the loop by talking to / meeting the prospective customer.

However, for online organizations like a Travel Portal, acquisition will happen when the customer finishes an online transaction like say buying a ticket. Technology easily allows us to monitor the number of people coming to a site from an Online Ad campaign to ascertain how many people who clicked and reached the website actually ended up completing a transaction.

C2A : Clicks to Acquisition ratio. Number of Acquisitions from people who clicked on a particular Banner Ad. If we get 1 transacting customer lead from 100 clicks then the C2A will be 1%.

Metrics stem from objectives

The following illustrations will give a clearer picture of the terminology used and the way Online Advertising campaign objectives and Metrics are juxtaposed & viewed .


Anonymous said...

Can you tell what does one mean by Ad units ?

Om Prakash said...

Very lucid explanation of the on-line advertizing business matrix by Anurag. What is the potential volume of the on-line business in India today? A great deal of emphasis is being laid by the Ministry of Info & Communication on enhancing the internet users ( 40 million users by 2010 - that's the promise by the PM ). When internet and the associated commerce moves to our smaller towns and villages, how can this CPC model be employed for the regional/local advertizing content? Any thoughts ?

Vijay said...

Hi Anurag, A very good blog and valuable information indeed. Do visit my blog and let me have your valuable comments on the same.

Anonymous said...


I would need some advice as I am launching a e-commerce website for jewellery in INdia. Even though my plans are to start a very clean looking visaully appealing user interface, 30 day money back guarantee, live chat, relevant blog. I am trying to understand what would win the Indian consumer confidence online. Please share some insight on that.



shaswati said...

Arrey, mast hai! As you can see am a good & obedient student (checking the blog right away!)
Good, now I'll be doing "e-learning"

Anonymous said...

very pracical in terms of basic understanding
can do a definishions part of inet advertising course
dmitri dobrovolski, moscow russia
m&a partner

mimaratha said...

anurag, online advertising indeed is a promising channel for indian advertisers. i have worked for a client in nyc who is one of top players as far as online advertising and trends and behavioural patterns among netizens.

there is a need of fusion of online and traditional methods at least for few more years in india as far as effective advertising goes. a model which is fit for our subcontinent or i would say entire asia.

keep blogging with valuable information my friend

Anurag Gupta said...

Thanks Shaswati, Om, Vijay, Dmitri & Mimaratha.

Om - IAMAI estimates number of Internet users in India already @ 43 million. There are various estimates of number of users ranging from 25 million to 50 million. I would estimate that it is now close to 35 million.

Internet will move to smaller towns & vilages eventually. the access devices may be different instead of a PC screen it can be a mobile screen for eg.!

Globally Local classifieds & Geo Targetting is already happening. It is surely going to take off in India in a major way.

dinesh gupta said...

very nice explanation but on online advertisement i am also the employee of one of the leadin internet marketing company which outsourcing many marketin services online like search engine optimization in which you have to advertise your website on google ,yahoo, msn and many other search engine when you enter the search term in a tool bar you got the desired results according to the search term now i have seen many indian are doing seo,ppc, affiliate marketing,paid advertisement to get better return of invastment(ROI) people get tremondous traffic on their website and it is expected the online advertisement is increased 10times as present,
anura sir has given a good explanation for more information please visit

dinesh gupta said...

the best search engine marketing strategy is to use cost per click in sensible way take an example Even if you don't sell online, you may be able to attach some monetary value to each of your website goals. Consider how much each lead you gain from your website is worth and use that to determine how much you should be spending for cost-per-click.

If you are a B-to-B site, you may convert your leads into sales offline. If you know that your sales staff closes 5% of your website leads for an average transaction profit of $1,000, you can calculate your break-even benchmark as follows:

Break-even benchmark = website conversion rate x 5% x $1,000

For a keyword that yields a visitor-to-lead conversion rate of 2%, and assuming that you can allocate $1,000 per transaction for cost-per-click, your break-even benchmark will be:

2% x 5% x 1,000 = $1 per click

meena said...

i m meena, interested in starting my own online advertising business of various reputed and stardard products and companies.
can u guide me as how to start and what r the steps which should be taken care of.

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