Below there are the Formulas that will help you understand how Google Adwords costs are calculated and measured:
1. How to Calculate Pay per click
Ans. Pay per click = Advertising cost /Number of ad clicks
2. How to Calculate Ad Rank
Ans: Ad Rank = max CPC bid * Quality Score
Quality Score should be average 6 or above. Once your Quality Score and Ad Rank have been calculated,
Google uses this data to determine how much you’ll pay each time someone clicks on one of your ads. How does Ad rank impact Cost-Per-Click:
CPM = Cost to an Advertiser x 1000 / Impressions
CPM = CTR x CPC x 1000
4. How to Calculate Impressions
Ans. Impressions are calculated when dividing the total cost of the campaign by the result of CPM divided by 1000, or dividing the number of clicks by the CTR. This is the formula to calculate impressions:
Impressions= Cost / CPM / 1000
Impressions = Clicks / CTR*100
Ex: Clicks-15, CTR-0.40% Impressions = 15/0.40%=3750
5. How to Calculate CTR (Click-Through Rate)
Ans. Click-through Rate (CTR) is calculated dividing clicks by impressions, or dividing CPM by 1000, and then dividing its result by CPC. This is the formula to calculate CTR:
CTR = Clicks / Impressions * 100
CTR = CPM / 1000 / CPC
EX: Clicks-281 Impression-15000 CTR=743/15000=1.87%
6. How to Calculate the Budget or Cost of a CPC, CPA or CPM Campaign
Ans. The total budget/cost of a campaign is calculated multiplying Cost per Action (CPA) by conversions, Cost per Click (CPC) by clicks, or dividing CPM by 1000 and multiplying it by impressions. This is the formula to calculate the budget/cost of a campaign:
Budget = CPA x Conversions
Budget = CPC x Clicks
Budget = CPM x Impressions / 1000
or,
Cost = CPA x Conversions
Cost = CPC x Clicks
Cost = CPM x Impressions / 1000
Ex: Clicks-15 CPC-$2.5 Cost/Budget=$2.5*15=$37.5
7. How to Calculate CPC
Ans. Cost per Click (CPC) is calculated dividing Cost by number of Clicks, multiplying Conversion Rate by Cost per Acquisition (CPA) or Cost per Lead (CPL), or dividing CPM by 1000, and then dividing its result by Click-through-Rate (CTR). This is the formula to calculate CPC:
CPC = Cost / Clicks
CPC = Conversion Rate x CPA
CPC = CPM / 1000 / CTR
Ex: Clicks-250 , Total Cost-$1000 CPC=$1000/250= $4
Cost per conversion = Cost / Conversions
Cost per conversion = CPC / Conversion Rate
Conversion Rate = Conversions / Clicks
Lead-2 clicks-13 lead rate=2/13=15.38%
l1. How to Calculate Clicks
Ans: Clicks are calculated by dividing conversions by Conversion Rate, dividing cost by Cost per Click (CPC), or multiplying impressions by Click-Through-Rate (CTR). This is the formula to calculate clicks:
Clicks = Conversions / Conversion Rate
Clicks = Cost / CPC
Clicks = Impressions x CTR
Ex: Impression-20000 CTR-1.25% Clicks=20000*1.25%=160
12. How to Calculate CPA (Cost per Acquisition)
Ex: Clicks: 15 Average cost per click: $2.5 Total Cost = 15* $2.5 = $37.5
Ex: Revenue per leads = $20 leads= 5 Total Revenue = $20*5 = $100
Ans: Return on Ad Spend (ROAS) = Profit from ad campaign / Cost of ad campaign
Ex.
Revenue: $10,000
___________________ ROAS = $5 OR 5:1
Cost: $2000
Ans: ROI = (Revenue – Cost of goods sold) / Cost of goods sold
CPV = Cost / Views
