Decoding CPO, CPL, CPS, ROAS, ROI, and Other Terms

Terms and Formulas for Calculating Costs

When running online advertising, every specialist and entrepreneur needs to analyze the money spent in order to manage the advertising budget effectively.
Here are some important terms:

CTR (Click-Through Rate) – the metric that shows how often people click on ads. It is calculated as the percentage of clicks relative to ad impressions. CTR helps determine the effectiveness of an advertising campaign.
Formula: CTR = (Number of Clicks / Number of Impressions) * 100%

CPC (Cost Per Click) – the amount an advertiser pays for a click on their ad that leads to their website. CPC helps evaluate campaign effectiveness and adjust bids. Factors influencing CPC include the ad itself, its quality score (CTR), region, timing, competitors, and keywords.
Formula: CPC = Advertising Costs / Number of Website Clicks

CPA (Cost Per Action) – the cost of a specific action on the advertiser’s website. The advertiser decides what counts as a valuable action, such as visiting a contact page or submitting a form.
This also includes CPL (Cost Per Lead) – the cost of acquiring a potential customer who has left contact information or contacted the advertiser through other means.
Formula: CPL and CPA = Advertising Costs / Number of Valuable Actions
To track actions accurately, set up goals in Google Analytics or another analytics system. Some services, like K-50 and Roistat, provide automatic CPA calculations.

CPS (Cost Per Sale) – the cost of one paid order from advertising sources. CPS calculation is useful for online stores with direct payments. For others, a full analytics system integrated with a CRM is required. CPS helps optimize budgets and campaign efficiency.

CPO (Cost Per Order) – the cost of one order of a product or service. Unlike CPS, CPO usually includes all orders, even unpaid ones.
Formula: CPS (CPO) = Advertising Costs / Total Orders

CPM (Cost Per Mille) – the cost per 1,000 impressions, useful for advertisers who want to deliver a message without focusing on clicks.
Formula: CPM = Ad Placement Cost / Estimated Contacts * 1,000

CPI (Cost Per Install) – the cost of installing a mobile app. CPI is relevant for advertisers promoting mobile apps.
Formula: CPI = Advertising Costs / Number of Installs

These terms help monitor advertising performance, select the best promotion models, and control and adjust the advertising budget.

Terms and Formulas for Calculating Profit

Once costs are calculated, the next step is profit calculation. Below are formulas and definitions to guide you:

Ad Costs to Sales (A/S) – measures ad efficiency. A/S calculates profit from a promoted product/service minus the costs of supporting it, typically over a year or reporting period.
Formula: A/S = Advertising Budget for Brand A over Period N / Revenue from Brand A over Period N

Return on Ad Spend (ROAS) – shows how much profit was generated from advertising campaigns. For example, if you earned 100,000 RUB from ads and spent 30,000 RUB on them: 100,000 / 30,000 = 3.3 RUB earned per 1 RUB spent.
Formula: ROAS = Profit / Advertising Costs

ROI (Return on Investment) and ROMI (Return on Marketing Investment) – similar to ROAS but account for all marketing expenses, not just ad costs (e.g., website creation, new creative production).
Formula: ROMI (ROI) = Profit / Marketing Expenses

Ad Costs to Margin (A/M) – evaluates profitability relative to net profit (profit minus product/service cost), not just revenue.

EPC (Earnings Per Click) – similar to CPC, but instead of cost per click, it measures profit per 100 or 1,000 clicks.
Formula: EPC = (Profit Earned / Number of Clicks) * 100 (or 1,000)

LTV (Lifetime Value) – the total profit a company earns from one customer over the entire relationship. It shows the return on investment for acquiring a customer.
Formula: LTV = Revenue from 1 Customer Over Entire Relationship – Acquisition and Retention Costs

KPI (Key Performance Indicator) – a metric used to evaluate effectiveness in achieving goals. KPIs are set individually with the specialist and advertiser based on current and target results.